<SUBMISSION>
<ACCESSION-NUMBER>0001035398-01-500023
<TYPE>424B3
<PUBLIC-DOCUMENT-COUNT>1
<FILING-DATE>20010725
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>USURF AMERICA INC
<CIK>0001035398
<ASSIGNED-SIC>4841
<IRS-NUMBER>721346591
<STATE-OF-INCORPORATION>NV
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>424B3
<ACT>33
<FILE-NUMBER>333-63846
<FILM-NUMBER>1688929
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>8748 QUARTERS LAKE RD
<CITY>BATON ROUGE
<STATE>LA
<ZIP>70809
<PHONE>2259227744
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>8748 QUARTERS LAKE RD
<CITY>BATON ROGUE
<STATE>LA
<ZIP>70809
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>INTERNET MEDIA CORP
<DATE-CHANGED>19980729
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>MEDIA ENTERTAINMENT INC
<DATE-CHANGED>19980729
</FORMER-COMPANY>
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<TYPE>424B3
<SEQUENCE>1
<FILENAME>prospect424b3.htm
<TEXT>

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<body>
<p>PROSPECTUS</p>
<p style="text-align: right">Filed Pursuant to Rule 424(b)(3)</p>
<p style="text-align: right">Registration No. 333-63846</p>
<br>
<br>
<p style="text-align: center">Up to 8,056,250 Shares</p>
<p style="text-align: center">USURF America, Inc.</p>
<p style="text-align: center">Common Stock</p>
<p style="text-align: center">$.0001 par value</p>
<br>
<br>
<p>This prospectus relates to the resale of up to 7,445,000 shares of our common stock, which we
have issued or may sell to Fusion Capital Fund II, LLC under a common stock purchase
agreement.  This prospectus also relates to the resale of up to 611,250 shares of our common
stock which we have issued or may issue to Gruntal &amp; Co., L.L.C.</p>
<br>
<p>Our common stock is traded on the American Stock Exchange under the symbol &#8220;UAX&#8221;.  On
July 19, 2001, the last reported sale price of our common stock, as reported by AMEX, was $.39
per share.  We have applied to have the shares of common stock offered pursuant to this
prospectus approved for trading on the AMEX.</p>
<br>
<p>Investing in our common stock involves risk. Please see &#8220;Risk Factors&#8221;, beginning on page 5, for
an explanation of some of these risks.</p>
<br>
<p>Fusion Capital is a selling shareholder and is an &#8220;underwriter&#8221; within the meaning of the
Securities Act of 1933, as amended.</p>
<br>
<p>Neither the Securities and Exchange Commission nor any state securities regulator has approved
or disapproved these securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.</p>
<br>
<br>
<p style="text-align: center">The date of this Prospectus is July 20, 2001</p>
<br>
<p>&lt;PAGE&gt;</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;You should rely only on the information contained in this prospectus.  We have not
authorized anyone to provide you with information different from that contained in this
prospectus.  The information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale of our common
stock.</p>
<br>
<p style="text-align: center">TABLE OF CONTENTS</p>
<p style="text-align: right">Page</p>
<p>SUMMARY 2</p>
<p>THE OFFERING 3</p>
<p>SUMMARY FINANCIAL DATA 4</p>
<p>RISK FACTORS 5</p>
<p>CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 13</p>
<p>DILUTION 13</p>
<p>USE OF PROCEEDS 13</p>
<p>TRADING AND MARKET PRICES 14</p>
<p>DIVIDENDS 15</p>
<p>CAPITALIZATION 15</p>
<p>SELECTED FINANCIAL DATA 15</p>
<p>CHANGE OF INDEPENDENT AUDITOR 16</p>
<p>MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL</p>
<p>&#160;CONDITION AND RESULTS OF OPERATIONS 16</p>
<p>REGULATION 32</p>
<p>BUSINESS 33</p>
<p>THE FUSION CAPITAL TRANSACTION 40</p>
<p>MANAGEMENT 44</p>
<p>CERTAIN TRANSACTIONS 49</p>
<p>PRINCIPAL SHAREHOLDERS 54</p>
<p>LITIGATION 56</p>
<p>PLAN OF DISTRIBUTION 57</p>
<p>SELLING SHAREHOLDERS 59</p>
<p>DESCRIPTION OF SECURITIES 59</p>
<p>LEGAL MATTERS 60</p>
<p>EXPERTS 60</p>
<p>ABOUT THIS PROSPECTUS 60</p>
<p>WHERE YOU CAN FIND MORE INFORMATION 61</p>
<p>INDEX TO FINANCIAL STATEMENTS 61</p>
<br>
<p style="text-align: center">SUMMARY</p>
<br>
<p>Our Business</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We own a proprietary wireless Internet access system, known as &#8220;Quick-Cell<sup>TM</sup>&#8221;, that
permits us to operate as an Internet service provider.  Our Quick-Cell system operates in
unlicensed spectra, does not require right-of-way permission from local municipalities and
eliminates the need for our customers to have a telephone line connection to the Internet.  A
single Quick-Cell cell can operate as a stand-alone system for a 3.5 mile radius coverage, or any
number of Quick-Cell cells can be interfaced to serve a broader geographic area.  We charge our
customers a monthly fee for wireless Internet access.  To date, however, our wireless Internet
business has generated a very limited amount of revenues.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In the middle of 2000, we sold three Quick-Cell systems to two independent telephone
companies and another telecommunications company.  Due to a lack of capital, we have
suspended this marketing effort.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We intend to commit all available resources to the development of our Quick-Cell
wireless Internet access products.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In September 2000, our CyberHighway subsidiary, a provider of dial-up Internet access,
was forced into involuntary bankruptcy.  As of the end of February 2001, CyberHighway had lost
nearly all of its customers.  We do not intend to commit any capital to restore CyberHighway&#8217;s
business.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have had substantial losses since our inception in 1996.  At December 31, 2000, our
accumulated deficit was $34,502,160, our net loss for 2000 was $21,885,330 and we used
$1,038,262 in cash for all of 2000.  We have a limited operating history upon which to evaluate
our prospects.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our independent auditor has, in its opinion, expressed substantial doubt about our ability
to continue as a going concern, which means that our independent auditor cannot be certain that
we will be in business on December 31, 2001.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;You should read the risk factors, beginning on page 5, before you buy our common stock.</p>
<br>
<p>Our Market and Strategy</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We designed our Quick-Cell wireless Internet access products to provide high-speed,
high-quality wireless Internet access at prices below local market prices for comparable hard-wire Internet access.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have recently contracted with Wireless WebConnect!, Inc., a national wireless
Internet service reseller, to resell our Quick-Cell products.  The selection of the first city to be
exploited by the reseller will be chosen in the very near future.  It is the stated intention of the
reseller to establish Quick-Cell systems in multiple cities during the remainder of 2001.  We
continue to pursue other resellers for our Quick-Cell service.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;When marketing company-owned Quick-Cell systems, we intend to offer free customer-premises modems, free installation and free first-month&#8217;s service.  To date, we have
established a
company-owned Quick-Cell system only in Santa Fe, New Mexico, which serves approximately
120 customers.  A lack of capital has prevented us from further activities in Santa Fe, as well as
prevented us from establishing Quick-Cell systems in other cities</p>
<br>
<p>Fusion Capital Agreement</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On May 9, 2001, we executed an amended and restated common stock purchase
agreement with Fusion Capital Fund II, LLC, which replaced a similar agreement dated October
9, 2000.  Under this agreement, Fusion Capital may purchase up to $10 million of our common
stock over a period of up to 25 months.  Please see &#8220;The Fusion Capital Transaction&#8221; below for a
detailed description of this agreement.</p>
<br>
<p>Our Address</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;USURF America was organized as a Nevada corporation in November 1996, under the
name &#8220;Media Entertainment, Inc.&#8221;  In 1998, we changed our name to &#8220;Internet Media
Corporation&#8221;, then to our current name in June 1999.  Our principal office is located at 8748
Quarters Lake Road, Baton Rouge, Louisiana 70809.  Our telephone number is (225) 922-7744;
our fax number is (225) 922-9123.  Our web site is located at www.usurf.com.  Information
contained on our web site is not to be considered a part of this prospectus.</p>
<br>
<p style="text-align: center">THE OFFERING</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The selling shareholders are offering for sale their respective shares of selling shareholder
stock, as described under &#8220;Plan of Distribution&#8221; and &#8220;Selling Shareholders&#8221;, beginning on pages
58 and 60, respectively.</p>
<br>
<p>Common Stock offered by Selling Shareholders: Up to 8,056,250 shares(1)</p>
<p>Common Stock Outstanding Prior to this Offering: 20,146,770 shares</p>
<p>Common Stock Outstanding After this Offering: 29,594,497 shares(2)</p>
<p>American Stock Exchange Trading Symbol: UAX</p>
<p>___________</p>
<p>(1) Up to 6,000,000 of these shares are issuable under the Fusion Capital agreement; an
additional 800,000 have been issued to Fusion Capital as part of its commitment fee; 645,000 of
these shares may be purchased from us by Fusion Capital upon the exercise of warrants issued to
Fusion Capital as part of its commitment fee; 450,000 of these shares have been issued to
Gruntal &amp; Co. for services rendered on our behalf; and 161,250 of these shares may be purchased
from us by Gruntal &amp; Co. upon the exercise of warrants issued to Gruntal &amp; Co. as a finder&#8217;s fee.</p>
<p>(2) Assumes: (A) the issuance of an additional 6,000,000 shares to Fusion Capital under the
Fusion Capital agreement and (B) the exercise of all 3,447,727 outstanding warrants.</p>
<br>
<p style="text-align: center">SUMMARY FINANCIAL DATA</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Set forth below is our summary consolidated statements of operations data for the years
ended December 31, 1998, 1999 and 2000, as well as for the three months ended March 31, 2001
and 2000.  Also set forth below is our summary balance sheet data as of December 31, 1999 and
2000, and as of March 31, 2001.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;This summary financial information should be read in conjunction with the consolidated
financial statements appearing elsewhere in this prospectus.</p>
<br>
<p>STATEMENT OF OPERATIONS DATA:</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table1column1" width="17%" valign="middle"><p>&#160;</p>
</td>
<td class="table1column2" width="17%" valign="middle"><p>Year Ended
December
31, 2000</p>
</td>
<td class="table1column3" width="17%" valign="middle"><p>Year Ended
December
31, 1999</p>
</td>
<td class="table1column4" width="17%" valign="middle"><p>Year Ended
December
31, 1998</p>
</td>
<td class="table1column5" width="17%" valign="middle"><p>Three
Months
Ended March
31, 2001</p>
</td>
<td class="table1column6" width="15%" valign="middle"><p>Three
Months
Ended March
31, 2000</p>
</td>
</tr>
<tr>
<td class="table1column1" width="17%" valign="middle"><p>&#160;</p>
</td>
<td class="table1column2" width="17%" valign="middle"><p>&#160;</p>
</td>
<td class="table1column3" width="17%" valign="middle"><p>&#160;</p>
</td>
<td class="table1column4" width="17%" valign="middle"><p>&#160;</p>
</td>
<td class="table1column5" width="17%" valign="middle"><p>(unaudited)</p>
</td>
<td class="table1column6" width="15%" valign="middle"><p>(unaudited)</p>
</td>
</tr>
<tr>
<td class="table1column1" width="17%" valign="middle"><p>Revenues</p>
</td>
<td class="table1column2" width="17%" valign="middle"><p>$ 1,872,629</p>
</td>
<td class="table1column3" width="17%" valign="middle"><p>$ 2,547,225</p>
</td>
<td class="table1column4" width="17%" valign="middle"><p>$5,440</p>
</td>
<td class="table1column5" width="17%" valign="middle"><p>$384</p>
</td>
<td class="table1column6" width="15%" valign="middle"><p>$597,392</p>
</td>
</tr>
<tr>
<td class="table1column1" width="17%" valign="middle"><p>Internet
access costs
and cost of
goods sold</p>
</td>
<td class="table1column2" width="17%" valign="middle"><p>2,145,955</p>
</td>
<td class="table1column3" width="17%" valign="middle"><p>1,152,721</p>
</td>
<td class="table1column4" width="17%" valign="middle"><p>0</p>
</td>
<td class="table1column5" width="17%" valign="middle"><p>0</p>
</td>
<td class="table1column6" width="15%" valign="middle"><p>269,136</p>
</td>
</tr>
<tr>
<td class="table1column1" width="17%" valign="middle"><p>Operating
expenses</p>
</td>
<td class="table1column2" width="17%" valign="middle"><p>14,975,583</p>
</td>
<td class="table1column3" width="17%" valign="middle"><p>11,860,758</p>
</td>
<td class="table1column4" width="17%" valign="middle"><p>1,034,464</p>
</td>
<td class="table1column5" width="17%" valign="middle"><p>901,643</p>
</td>
<td class="table1column6" width="15%" valign="middle"><p>3,354,219</p>
</td>
</tr>
<tr>
<td class="table1column1" width="17%" valign="middle"><p>Net loss</p>
</td>
<td class="table1column2" width="17%" valign="middle"><p>21,885,330</p>
</td>
<td class="table1column3" width="17%" valign="middle"><p>10,930,163</p>
</td>
<td class="table1column4" width="17%" valign="middle"><p>1,037,626</p>
</td>
<td class="table1column5" width="17%" valign="middle"><p>901,259</p>
</td>
<td class="table1column6" width="15%" valign="middle"><p>2,557,596</p>
</td>
</tr>
<tr>
<td class="table1column1" width="17%" valign="middle"><p>Loss per
share</p>
</td>
<td class="table1column2" width="17%" valign="middle"><p>(1.68)</p>
</td>
<td class="table1column3" width="17%" valign="middle"><p>(0.96)</p>
</td>
<td class="table1column4" width="17%" valign="middle"><p>(0.14)</p>
</td>
<td class="table1column5" width="17%" valign="middle"><p>(0.06)</p>
</td>
<td class="table1column6" width="15%" valign="middle"><p>(0.20)</p>
</td>
</tr>
<tr>
<td class="table1column1" width="17%" valign="middle"><p>Weighted
average
number of
shares
outstanding</p>
</td>
<td class="table1column2" width="17%" valign="middle"><p>13,000,391</p>
</td>
<td class="table1column3" width="17%" valign="middle"><p>11,419,641</p>
</td>
<td class="table1column4" width="17%" valign="middle"><p>7,361,275</p>
</td>
<td class="table1column5" width="17%" valign="middle"><p>13,934,118</p>
</td>
<td class="table1column6" width="15%" valign="middle"><p>12,937,499</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p>BALANCE SHEET DATA:</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table2column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table2column2" width="25%" valign="middle"><p>Year Ended
December 31, 2000</p>
</td>
<td class="table2column3" width="25%" valign="middle"><p>Year Ended
December 31, 1999</p>
</td>
<td class="table2column4" width="25%" valign="middle"><p>March 31, 2001 </p>
</td>
</tr>
<tr>
<td class="table2column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table2column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table2column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table2column4" width="25%" valign="middle"><p>(unaudited)</p>
</td>
</tr>
<tr>
<td class="table2column1" width="25%" valign="middle"><p>Working Capital
(Deficit)</p>
</td>
<td class="table2column2" width="25%" valign="middle"><p>$(1,517,164)</p>
</td>
<td class="table2column3" width="25%" valign="middle"><p>$(694,937)</p>
</td>
<td class="table2column4" width="25%" valign="middle"><p>$(1,472,144)</p>
</td>
</tr>
<tr>
<td class="table2column1" width="25%" valign="middle"><p>Total Assets</p>
</td>
<td class="table2column2" width="25%" valign="middle"><p>410,316</p>
</td>
<td class="table2column3" width="25%" valign="middle"><p>19,545,169</p>
</td>
<td class="table2column4" width="25%" valign="middle"><p>523,526</p>
</td>
</tr>
<tr>
<td class="table2column1" width="25%" valign="middle"><p>Total Current
Liabilities</p>
</td>
<td class="table2column2" width="25%" valign="middle"><p>1,764,973</p>
</td>
<td class="table2column3" width="25%" valign="middle"><p>1,221,650</p>
</td>
<td class="table2column4" width="25%" valign="middle"><p>1,844,743</p>
</td>
</tr>
<tr>
<td class="table2column1" width="25%" valign="middle"><p>Total Liabilities</p>
</td>
<td class="table2column2" width="25%" valign="middle"><p>1,764,973</p>
</td>
<td class="table2column3" width="25%" valign="middle"><p>5,104,860</p>
</td>
<td class="table2column4" width="25%" valign="middle"><p>1,844,743</p>
</td>
</tr>
<tr>
<td class="table2column1" width="25%" valign="middle"><p>Total Redeemable
Common Stock</p>
<p>Shareholders' Equity
(Deficit)</p>
</td>
<td class="table2column2" width="25%" valign="middle"><p>3,323,552</p>
<p>(4,678,209)</p>
</td>
<td class="table2column3" width="25%" valign="middle"><p>0</p>
<p>14,440,309</p>
</td>
<td class="table2column4" width="25%" valign="middle"><p>4,869,255</p>
<p>(6,190,472)</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p style="text-align: center">RISK FACTORS</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;You should carefully consider the risks described below before you decide to buy our
common stock.  If any of the following risks actually occur, our business, financial condition or
results of operations would likely suffer.  In such case, the trading price of our common stock
could decline, and you could lose all or part of your investment.</p>
<br>
<p>BECAUSE WE HAVE A SHORT OPERATING HISTORY, THERE IS A LIMITED
AMOUNT OF INFORMATION ABOUT US UPON WHICH YOU CAN EVALUATE OUR
BUSINESS AND POTENTIAL FOR FUTURE SUCCESS.</p>
<br>

can evaluate our business and prospects.  You must consider the risks and uncertainties
frequently encountered by early stage companies in new and rapidly evolving markets, such as
the market for wireless Internet access services.  Some of these risks and uncertainties relate to
our ability to:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;gain access to sufficient capital with which to support anticipated growth;
</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;achieve customer acceptance of our Quick-Cell wireless Internet access products;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;expand our wireless Internet access subscriber base and subscriber-related
revenues;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;compete successfully in a highly competitive market; and</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;recruit and train qualified employees.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We cannot assure you that we will successfully address any of these risks and
uncertainties.</p>
<br>
<p>OUR INDEPENDENT AUDITOR EXPRESSED SUBSTANTIAL DOUBT ABOUT OUR
ABILITY TO CONTINUE AS A GOING CONCERN.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In its opinion on our financial statements for the year ended December 31, 2000, our
independent auditor, Postlethwaite &amp; Netterville, expressed substantial doubt about our ability to
continue as a going concern.  This means that, given our current lack of capital, our independent
auditor has substantial doubt that we will be in business on December 31, 2001.  Please review
the Independent Auditor&#8217;s Report and Note 18 to the consolidated financial statements appearing
elsewhere in this prospectus.</p>
<br>
<p>UNLESS WE OBTAIN $300,000 IN NEW CAPITAL, WE WILL BE UNABLE TO REMAIN
IN BUSINESS.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;During the next twelve months, we will need approximately $300,000 just to continue our
operations at their current levels.  Absent this amount of funding, we will be unable to continue
our operations.</p>
<br>
<p>SOME OF OUR SHAREHOLDERS MAY HAVE RIGHTS OF RESCISSION, DUE TO
POTENTIAL VIOLATIONS BY US OF SECTION 5 OF THE SECURITIES ACT.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Since January 2000, a total of 4,881,985 shares of our common stock with an aggregate
assigned value of $5,081,255 may have been issued in violation of Section 5 of the Securities
Act.  4,751,985 of these shares were issued in payment of services or as bonuses to employees
and 130,000 of these shares were issued for cash or underlie currently exercisable warrants,
which were sold or will be sold for at total of $650,000 in cash.  At December 31, 2000, a total of
2,767,823 of these shares valued at $3,897,552 had been issued and at March 31, 2001, a total of
4,381,985 of these shares valued at $4,869,255 had been issued, with an additional 500,000
shares valued at $212,000 having been issued since March 31, 2001.  It is possible that each of
the issuees of these shares has a potential claim for rescission of their respective issuance
transactions.  We do not possess capital with which to pay any such claims, if asserted.</p>
<br>
<p>WE HAD AN ACCUMULATED DEFICIT OF $34,502,160 AS OF DECEMBER 31, 2000,
AND AN ACCUMULATED DEFICIT OF $35,403,419 (UNAUDITED) AS OF MARCH 31,
2001, AND WE EXPECT TO CONTINUE TO INCUR LOSSES FOR THE FORESEEABLE
FUTURE.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have had substantial losses since our inception and our operating losses may continue
in the future.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We had an operating loss of $901,259 (unaudited) for the three months ended March 31,
2001.  As a result, at March 31, 2001, we had an accumulated deficit of $35,403,419 (unaudited).
Our gross revenues for the three month period were $384 (unaudited), with a loss from
operations and a net loss of $901,259 (unaudited).</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have incurred annual operating losses since our inception. As a result, at December
31, 2000, we had an accumulated deficit of $34,502,160.  Our gross revenues for the years ended
December 31, 2000, 1999 and 1998, were $1,872,629, $2,547,225, and $5,440, respectively, with
losses from operations of $15,248,909, $10,466,254 and $1,029,024, respectively.  Our net losses
for the years ended December 31, 2000, 1999 and 1998, were $21,885,330, $10,930,163 and
$1,037,626, respectively.  We cannot assure you that we will experience revenue growth, or that
we will be profitable in the future.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As we pursue full-scale sales and installation of our Quick-Cell wireless Internet
products, we expect our operating expenses to increase significantly, especially in the areas of
sales and marketing.  As a result of these expected cost increases, we will need to generate
increased revenues to become profitable.  Accordingly, we cannot assure you that we will ever
become or remain profitable.  If our revenues fail to grow at anticipated rates or our operating
expenses increase without a commensurate increase in our revenues, our financial condition will
be adversely affected.  Our inability to become profitable on a quarterly or annual basis would
have a materially adverse effect on our business and financial condition.  Also, the market price
for our stock could fall.</p>
<br>
<p>YOU WILL SUFFER SUBSTANTIAL DILUTION IN THE NET TANGIBLE BOOK VALUE
OF THE COMMON STOCK YOU PURCHASE.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Because the selling shareholders expect to sell their shares of our common stock at
market-level prices, you will suffer substantial and immediate dilution, due to the lower book
value per share of our common stock compared to the purchase price per share of our common
stock.  We cannot predict your actual dilution, because dilution will depend on the price at which
our common stock is sold by the selling shareholders.</p>
<br>
<p>THE MARKET PRICE OF OUR COMMON STOCK WILL CONTINUE TO BE
EXTREMELY VOLATILE, AND IT MAY DROP UNEXPECTEDLY.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The market price of our common stock has fluctuated significantly in the past and we
expect this volatility to continue in the future.  Since January 2000, trading prices for our
common stock have ranged from $.1875 per share to $11.00 per share.  The closing price of our
common stock on July 19, 2001, was $.39.  It is possible that the market price of our common
stock could fall below the price you paid for your shares of our common stock. </p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The stock prices for many high technology companies, especially those that base their
businesses on the Internet, recently have experienced wide fluctuations and extreme volatility.
This volatility has often been unrelated to the operating performance of such companies, so our
stock price could decline even if our wireless Internet access business is successful.  Also,
following periods of volatility in the market price of a company&#8217;s securities, securities class
action claims frequently are brought against the subject company.  To the extent that the market
price of our shares falls dramatically in any period of time, shareholders may bring claims, with
or without merit, against us.  Such litigation would be expensive to defend and would divert
management attention and resources regardless of outcome.</p>
<br>
<p>WE MAY NOT OBTAIN ENOUGH FUNDS UNDER THE FUSION CAPITAL AGREEMENT
TO ACHIEVE TWO OF OUR BUSINESS OBJECTIVES.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We must obtain approximately $2.0 million under the Fusion Capital agreement, in order
to achieve the first two objectives of our business plan:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;placing at least 20,000 customers on our Quick-Cell systems during the
next year;
and</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;proving the commercial viability of our Quick-Cell wireless Internet access

service.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Because of the current low price of our common stock, it is a distinct possibility that we
will not obtain even the $2.0 million amount we need to achieve these objectives.  Should this
occur, it is possible that we would not be able to develop successfully our wireless Internet
access business.</p>
<br>
<p>OUR COMMON STOCK COULD BE DELISTED FROM THE AMERICAN STOCK
EXCHANGE.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Currently, we are not in compliance with the continued listing guidelines of AMEX.
AMEX recently inquired with respect to our plan for achieving compliance with its continued
listing guidelines.  Our response to AMEX included an explanation of our anticipated future
funding under the Fusion Capital agreement and the positive effects this funding would likely
have on our business and financial condition, particularly in increasing our total assets and
shareholders&#8217; equity.  We have not received further communication from AMEX in this matter.
Should our common stock be delisted from AMEX, it is very likely that the market price for our
stock could drop dramatically.  We cannot assure you that we will be able to maintain our listing
on AMEX.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In addition, should our stock be delisted from AMEX, we would be in default under the
Fusion Capital agreement and unable to obtain funding thereunder.  In this circumstance, it is
likely that we would not have access to capital necessary to sustain our operations.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If we are unable to maintain our AMEX listing, our common stock would likely begin to
trade on the NASD&#8217;s OTC Bulletin Board and become a &#8220;penny stock&#8221;, as long as it trades below
$5.00 per share.  Broker-dealer practices in connection with transactions in penny stocks are
regulated by penny stock rules adopted by the SEC.  The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure statement prepared by the SEC that provides information about
penny stocks and the nature and level of risks in the penny stock market.  The broker-dealer also
must provide the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction, as well as the monthly
account statements showing the market value of each penny stock held in the customer&#8217;s account.
In addition, the penny stock rules require that, prior to a transaction in a penny stock not
otherwise exempt from such rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the purchaser&#8217;s written
agreement to the transaction.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;These disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny stock rules.
Should our common stock return to trading on the OTC Bulletin Board, it can be expected that
investors in our common stock may find it more difficult to profit on their investments in our
stock.</p>
<br>
<p>THE RESALE OF SHARES PURCHASED BY FUSION CAPITAL COULD CAUSE THE
PRICE OF OUR COMMON STOCK TO DECLINE, WHICH COULD IMPAIR OUR ABILITY
TO OBTAIN NEEDED CAPITAL IN THE FUTURE.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;All of the shares of our common stock offered in this offering will be freely tradable,
except that Fusion Capital has agreed that it will not sell or otherwise transfer 800,000 shares
issued to it as part of its commitment fee until the earlier of the termination of the Fusion Capital
agreement, our default under that agreement and a date that is approximately 25 months from the
date of this prospectus.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Fusion Capital may sell none, some or all of the shares of common stock purchased from
us at any time and from time to time.  We expect that the shares registered in this offering will be
offered by the selling shareholders over a period of up to 25 months from the date of this
prospectus.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Depending upon the market liquidity for our common stock at the time, a sale of shares
under this offering at any given time could cause the trading price of our common stock to
decline.  In addition, the sale of a substantial number of shares of our common stock under this
offering, or the anticipation of such sales, could make it more difficult for us to sell equity or
equity-related securities in the future at a time and at a price that we might otherwise desire to
effect sales.  This circumstance could impair our ability to accomplish our Quick-Cell-related
business objectives, due to a potential lack of capital.</p>
<br>
<p>WE ARE UNABLE TO CALCULATE THE EXACT NUMBER OF SHARES THAT WE
WILL ISSUE UNDER THE FUSION CAPITAL AGREEMENT, BUT YOU CAN EXPECT
SIGNIFICANT DILUTION IN YOUR OWNERSHIP INTEREST AS A RESULT OF THE
FUSION CAPITAL AGREEMENT.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;This prospectus relates to up to 6,000,000 shares of our common stock that may be issued
under the Fusion Capital agreement.  However, due to the fact that the number of shares to be
issued under the Fusion Capital agreement depends on future market prices of our stock, we are
unable to calculate the exact number of shares that we will issue under that agreement.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If Fusion Capital purchased the full amount of shares purchasable under the Fusion
Capital agreement on the date of this prospectus, the purchase price would have been $.39 per
share and Fusion Capital would have been able to purchase all 6,000,000 shares of our common
stock reserved for issuance under the Fusion Capital agreement.  Assuming Fusion Capital&#8217;s
purchase under the Fusion Capital agreement on the date of this prospectus, these shares, along
with the 800,000 shares issued to Fusion Capital as part of its commitment fee and the 645,000
shares underlying the warrants issued to Fusion Capital as part of its commitment fee, would
represent, on a fully-diluted basis, approximately 25% of our outstanding common stock as of
July 19, 2001.  This would result in significant dilution to the ownership interests of other
holders of our common stock.  Such dilution could be more significant if the trading price of our
common stock is lower than the current trading price of our common stock at the time Fusion
Capital purchases shares of our common stock under the Fusion Capital agreement, as a lower
trading price would cause more shares of our common stock to be issuable to Fusion Capital.
The purchase under the Fusion Capital agreement of a significant percentage of our outstanding
common stock may result in substantial dilution to the ownership interests of other holders of our
common stock.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Although we have the right to prohibit Fusion Capital's purchases under the Fusion
Capital agreement, we may still elect to require Fusion Capital's purchase of shares under the
agreement. We can require Fusion Capital to purchase additional shares if the closing sale price
is above $5.00 for five trading days.  In the event that we decide to issue a number of shares that
represents greater than 20% of our outstanding shares of common stock, we would first seek
shareholder approval.  The purchase under the Fusion Capital agreement of a significant
percentage of our outstanding stock may result in substantial dilution to the ownership interests
of other holders of our common stock. Since we only plan to sell up to 6,000,000 shares to
Fusion Capital under the Fusion Capital agreement, the price at which we sell our common stock
to Fusion Capital will need to average at least $1.67 per share for us to receive the maximum
proceeds of $10 million under the Fusion Capital agreement. Assuming a purchase price of $.39
per share, the closing sale price of the common stock on July 19, 2001, and the purchase by
Fusion Capital of 6,000,000 shares under the Fusion Capital agreement, proceeds to us would
only be $2,340,000, unless we choose to issue more than 6,000,000 shares, which we have the
right, but not the obligation, to do.</p>
<br>
<p>THE LOWER OUR STOCK PRICE AT THE TIME FUSION CAPITAL MAKES A
PURCHASE, THE MORE SHARES OF STOCK FUSION CAPITAL WILL RECEIVE.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Fusion Capital will receive more shares at the time it makes a purchase, the lower the
price of our stock, since the shares covered under the Fusion Capital agreement are issuable at a
floating rate based on our stock price. The following table sets forth the number of shares
issuable to Fusion Capital at varying purchase prices:</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table3column1" width="25%" valign="middle"><p>Assumed Per Share
Purchase Price</p>
</td>
<td class="table3column2" width="25%" valign="middle"><p>Total Shares Issuable
Upon a Full Purchase
Under the Fusion
Capital Agreement
(1)</p>
</td>
<td class="table3column3" width="25%" valign="middle"><p>Gross Proceeds</p>
</td>
<td class="table3column4" width="25%" valign="middle"><p>Percent of Our
Common Stock
Outstanding After
Giving Effect to the
Issuance to Fusion
Capital</p>
</td>
</tr>
<tr>
<td class="table3column1" width="25%" valign="middle"><p>$.39(2)</p>
</td>
<td class="table3column2" width="25%" valign="middle"><p>6,000,000</p>
</td>
<td class="table3column3" width="25%" valign="middle"><p>$2,340,000</p>
</td>
<td class="table3column4" width="25%" valign="middle"><p>22.94%</p>
</td>
</tr>
<tr>
<td class="table3column1" width="25%" valign="middle"><p>$1.50</p>
</td>
<td class="table3column2" width="25%" valign="middle"><p>6,000,000</p>
</td>
<td class="table3column3" width="25%" valign="middle"><p>$9,000,000</p>
</td>
<td class="table3column4" width="25%" valign="middle"><p>22.94%</p>
</td>
</tr>
<tr>
<td class="table3column1" width="25%" valign="middle"><p>$2.00</p>
</td>
<td class="table3column2" width="25%" valign="middle"><p>5,000,000</p>
</td>
<td class="table3column3" width="25%" valign="middle"><p>$10,000,000</p>
</td>
<td class="table3column4" width="25%" valign="middle"><p>19.88%</p>
</td>
</tr>
<tr>
<td class="table3column1" width="25%" valign="middle"><p>$5.00</p>
</td>
<td class="table3column2" width="25%" valign="middle"><p>2,000,000</p>
</td>
<td class="table3column3" width="25%" valign="middle"><p>$10,000,000</p>
</td>
<td class="table3column4" width="25%" valign="middle"><p>9.03%</p>
</td>
</tr>
<tr>
<td class="table3column1" width="25%" valign="middle"><p>$10.00</p>
</td>
<td class="table3column2" width="25%" valign="middle"><p>1,000,000</p>
</td>
<td class="table3column3" width="25%" valign="middle"><p>$10,000,000</p>
</td>
<td class="table3column4" width="25%" valign="middle"><p>4.72%</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p>____________</p>
<p>(1) Closing price on July 19, 2001, as reported by AMEX.</p>
<br>
<p>FUSION CAPITAL MAY PURCHASE MORE THAN 9.9% OF OUR COMMON STOCK.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Even though the Fusion Capital agreement restricts Fusion Capital from owning any more
than 9.9% of our stock at any one time, this restriction does not prevent Fusion Capital from
selling a portion of its holdings and later purchasing additional shares.  Thus, it is possible that
the total number of shares purchased by Fusion Capital would be greater than 9.9% of the then-outstanding common stock.</p>
<br>
<p>THE EXISTENCE OF OUR AGREEMENT WITH FUSION CAPITAL COULD CAUSE
DOWNWARD PRESSURE ON THE MARKET PRICE OF OUR COMMON STOCK.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Simply the existence of the Fusion Capital agreement could cause holders of our common
stock to sell their shares, which could cause the market price of our common stock to decline.
Also, prospective investors anticipating future downward pressure on the price of our common
stock due to the shares that may be available for sale by Fusion Capital could refrain from
purchases or effect sales in anticipation of a decline of the market price.</p>
<br>
<p>WE MAY BE UNABLE TO OBTAIN SUFFICIENT CAPITAL TO SUSTAIN OUR
BUSINESS OR PURSUE OUR GROWTH STRATEGY.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Currently, we do not have sufficient financial resources to implement our business plan or
grow our operations. Therefore, excluding any funding that we might receive from Fusion
Capital in the future, we will need additional funds to continue our operations and to grow our
business.  Assuming we do not receive any funding from Fusion Capital, there is no assurance
that we will be able to generate revenues that are sufficient to sustain our operations and we
would require additional sources of financing in order to satisfy our working capital needs.
Should needed financing be unavailable or prohibitively expensive when we require it, it is
possible that we would be forced to cease operations.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have designed a very aggressive growth strategy for the commercial exploitation of
our Quick-Cell wireless Internet access products.  This strategy is expected to place a significant
strain on our managerial, operational and financial resources.  In particular, our planned wireless
Internet expansion will require significant capital with which to purchase equipment necessary
for the construction and implementation of systems.  If we are unable to secure enough capital,
we will be unable to achieve our growth objectives.  We cannot assure you that we will be able to
obtain enough capital for our growth needs.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Even if we are able to access funds under the Fusion Capital agreement, we will need
additional capital to implement fully our growth plans.</p>
<br>
<p>WE MAY NOT BE ABLE TO SECURE ENOUGH QUICK-CELL CUSTOMER
INSTALLATION PERSONNEL TO KEEP UP WITH DEMAND.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;It is possible that we will be unable to secure Quick-Cell installation crews, either
through independent contractors or directly hiring personnel, in large enough numbers that will
allow us to install new Quick-Cell customers in a timely manner.  Any unreasonable delays in
installation can cause customers to cancel their orders.  We may not be able to overcome this
potential barrier to market penetration.  Our failure to do so would restrict our growth in revenues
and severely impair our ability to earn a profit.</p>
<br>
<p>OUR FUTURE OPERATING RESULTS MAY VARY FROM PERIOD TO PERIOD, AND,
AS A RESULT, WE MAY FAIL TO MEET THE EXPECTATIONS OF OUR INVESTORS
AND ANALYSTS, WHICH COULD CAUSE OUR STOCK PRICE TO FLUCTUATE OR
DECLINE AND INHIBIT OUR ABILITY TO OBTAIN FUNDS UNDER THE FUSION
CAPITAL AGREEMENT OR OTHERWISE.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our revenues and results of operations have fluctuated in the past and can be expected to
fluctuate significantly in the future, as we make financial commitments to facilitate expected
growth.  The following factors will influence our operating results:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;access to funds for expansion-related capital expenditures, including
Quick-Cell
equipment purchases;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;market acceptance of our Quick-Cell wireless Internet access products;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;the rates of new wireless Internet access subscriber acquisition and
retention;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;changes in our pricing policies or those of our competitors; and</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;potential competition from large, well-funded national telecommunications
companies.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our future personnel costs, marketing programs and overhead cannot be adjusted quickly
and are, therefore, relatively fixed in the short term.  To the extent, if ever, that we begin to
derive funding pursuant to the Fusion Capital agreement, our operating expense levels will be
based, in part, on our expectations of future revenue.  If actual revenues are below our
expectations, our results of operations will suffer and we could be forced to cease operations.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Period-to-period comparisons of our results of operations will likely not provide reliable
indications of our future performance.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Price fluctuations of our common stock could negatively impact our ability to obtain
needed capital.</p>
<br>
<p>BECAUSE WE DEPEND HEAVILY ON OUTSIDE SUPPLIERS, OUR BUSINESS MAY
SUFFER, SHOULD OUR SUPPLIERS FAIL TO PERFORM IN A TIMELY MANNER.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We depend on third-party suppliers of hardware components and telecommunications
carriers to provide equipment and communications capacity.  The failure of one or more of our
suppliers to perform in a timely manner could cause a significant disruption in our business.  In
particular, should our manufacturer of Quick-Cell modem circuit boards fail to deliver circuit
boards when needed, it is possible that we would be forced to suspend our wireless Internet
business for an indeterminate period of time.</p>
<br>
<p>OUR FAILURE TO MANAGE FUTURE GROWTH WOULD HINDER OUR EFFORTS IN
EARNING A PROFIT.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Without additional capital, we will be unable to expand significantly our operations.
However, should we ever begin to obtain funds under the Fusion Capital agreement, we will
begin to serve new geographic markets.  This expected expansion will place a significant strain
on our management and operating systems.  In order to accommodate this sort of growth, we will
need to hire and retain appropriate management personnel.  We may not be able to hire and retain
enough qualified managers.  This circumstance would likely hinder our growth and reduce our
chance of earning a profit.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If and when we experience our anticipated rapid growth, we may encounter difficulties in
developing and implementing needed internal systems, including our recruiting and management
systems.  Our failure to do so will reduce the likelihood that we will earn a profit.</p>
<br>
<p>OUR FUTURE SUCCESS WILL DEPEND ON OUR ABILITY TO KEEP PACE WITH THE
INTERNET&#8217;S RAPID TECHNOLOGICAL CHANGES, EVOLVING INDUSTRY
STANDARDS AND CHANGING CUSTOMER NEEDS.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Internet access market is constantly evolving, due primarily to technological
innovations, as well as evolving industry standards, changes in subscriber needs and frequent
new service and product introductions.  New services and products based on new technologies or
new industry standards expose us to risks of equipment obsolescence.  We must use leading
technologies effectively, continue to develop our technical expertise and enhance our existing
services on a timely basis to remain competitive in this industry.  We cannot assure you that we
will be able to do so.</p>
<p>&#160;</p>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our ability to compete successfully in our markets also depends on the continued
compatibility of our services with products and systems utilized and sold by various third parties.
Our failure to do so could cause us to lose a competitive position in our markets, thereby causing
us to operate less profitably.</p>
<br>
<p>OUR GROWTH PLANS DEPEND ON THE CONTINUED GROWTH IN THE DEMAND
FOR HIGH-SPEED INTERNET ACCESS.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As Internet usage has become a common part of Americans&#8217; lives, a growing number of
consumers have begun to demand higher Internet-access speed than can be provided by hard wire
dial-up methods.  If our wireless Internet access products are unable to address changes in
consumers&#8217; preferences, we would become less likely ever to earn a profit.</p>
<br>
<p>OUR QUICK-CELL WIRELESS INTERNET ACCESS PRODUCTS ARE NEW AND
CONSUMER ACCEPTANCE MAY NOT BE ACHIEVED.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our Quick-Cell wireless Internet access products are new and do not enjoy wide-spread
name recognition among consumers.  If we are unable to achieve consumer acceptance of our
products, it is unlikely that we would be able to earn a profit.</p>
<br>
<p>WE COULD FAIL TO OVERCOME THE SEVERE COMPETITION FOR INTERNET
ACCESS CUSTOMERS, WHICH WOULD IMPAIR OUR ABILITY TO EARN A PROFIT
AND CAUSE OUR OVERALL FINANCIAL CONDITION TO DETERIORATE.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The market for Internet access services is extremely competitive and highly fragmented.
As there are no significant barriers to entry, we expect that competition will intensify over time.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our competitors include many large, nationally-known companies, such as America
Online and Earthlink.  These and other companies possess greater resources, particularly access
to capital sources, market presence and brand name recognition than do we.  In addition, we will
face competition from other wireless Internet access providers, such as Metricom, and larger,
national cellular telephone service providers.  If we are unable to overcome this severe
competition, we do not expect that we would earn a profit and our overall financial condition
would decline.</p>
<br>
<p>WE DEPEND ON OUR KEY PERSONNEL; THE LOSS OF ANY KEY PERSONNEL
COULD DISRUPT OUR OPERATIONS, ADVERSELY AFFECT OUR BUSINESS AND
RESULT IN REDUCED REVENUES.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our future success will depend on the continued services and on the performance of our
senior management and other key employees.  In particular, we depend on our president, David
M. Loflin.  While we have entered into an employment agreement with Mr. Loflin, the loss of his
services for any reason could seriously impair our ability to execute our business plan, which
could reduce our revenues and have a materially adverse effect on our business and results of
operations.  We have not purchased any key-man life insurance.</p>
<br>
<p>OUR DIRECTORS AND EXECUTIVE OFFICERS OWN ENOUGH OF OUR COMMON
STOCK EFFECTIVELY TO CONTROL DIRECTORS&#8217; ELECTIONS AND THEREBY
CONTROL OUR MANAGEMENT POLICIES.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our directors and executive officers own approximately 20% of our currently outstanding
common stock.  Two of our directors, as well as three other persons, have entered into a voting
agreement relating to the voting in elections of directors.  Currently, approximately 21% of our
outstanding shares of common stock are subject to this voting agreement.  These shareholders
may be able effectively to control the outcome of corporate actions requiring shareholder
approval by majority action.  Their stock ownership may have the effect of delaying, deferring or
preventing a change in control of USURF America.  A more complete description of this voting
agreement may be found under the heading &#8220;Certain Transactions&#8221;, page 49.</p>
<br>
<p>OUR BUSINESS PLAN IS NOT BASED ON INDEPENDENT MARKET STUDIES, SO WE
CANNOT ASSURE YOU THAT OUR STRATEGY WILL BE SUCCESSFUL.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have not commissioned any independent market studies concerning the extent to
which customers will utilize our services and products.  Rather, our plans for implementing our
business strategy and achieving profitability are based on the experience, judgment and
assumptions of our key management personnel, and upon other available information concerning
the communications industry.  If our management&#8217;s assumptions prove to be incorrect, we will
not be successful in establishing our wireless Internet access business.</p>
<br>
<p>WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS,
WHICH COULD DRAMATICALLY REDUCE OUR ABILITY TO EARN A PROFIT.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We currently rely on common law principles for the protection of our copyrights and
trademarks and trade secret laws to protect our proprietary intellectual property rights.  We do
not intend to file patent applications relating to our Quick-Cell wireless Internet access products,
until completion of future generations of the products.  We have not filed trademark applications
relating to the &#8220;Quick-Cell&#8221; and &#8220;USURF Wireless Internet&#8221; brand names.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Without patent or trademark protection, the existing trade secret and copyright laws
afford us only limited protection.  Third parties may attempt to disclose, obtain or use our
technologies.  Others may independently develop and obtain patents or copyrights for
technologies that are similar or superior to our technologies.  If that happens, we may need to
license these technologies and we may not be able to obtain licenses on reasonable terms, if at
all, thereby causing great harm to our business.</p>
<br>
<p>NEARLY ALL OF OUR SHARES ARE ELIGIBLE FOR FUTURE SALE, WHICH COULD
CAUSE THE MARKET PRICE FOR OUR COMMON STOCK TO DECLINE.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;With the registration of the shares of stock included in this prospectus, nearly all of the
outstanding shares of our common stock owned by non-affiliates will be eligible for resale to the
public.  This amount of common stock represents a significant overhang on the market for our
common stock.  The sale of a significant amount of these shares at any given time could cause
the trading price of our common stock to decline and to be highly volatile.</p>
<br>
<p style="text-align: center">CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;This prospectus contains forward-looking statements that involve risks and uncertainties.
Discussions containing forward-looking statements may be found in the material set forth under
&#8220;Risk Factors&#8221;, &#8220;Management&#8217;s Discussion and Analysis of Financial Condition and Results of
Operations&#8221; and &#8220;Business&#8221;, as well as in the prospectus generally.  We generally use words such
as &#8220;believes&#8221;, &#8220;intends&#8221;, &#8220;expects&#8221;, &#8220;anticipates&#8221;, &#8220;plans&#8221; and similar expressions to identify
forward-looking statements. You should not place undue reliance on these forward-looking
statements.  Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described above and elsewhere in this
prospectus.</p>
<br>
<p style="text-align: center">DILUTION</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As of  March 31, 2001, we had a total of 18,172,770 shares of common stock
outstanding, of which 4,381,985 are subject to potential rescission claims, and a net tangible
book value of negative $(.45) per share.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;A purchase of our common stock will result in substantial and immediate dilution in your
investment.  Dilution is the reduction of a purchaser&#8217;s investment measured by the difference
between the price paid per share of common stock and the net tangible book value per share at
the time of purchase.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The following table depicts the potential dilution to purchasers of our common stock,
without taking into account any other changes in our net tangible book value since March 31,
2001, other than to assume all outstanding warrants are exercised and to assume various purchase
prices:</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table4column1" width="33%" valign="middle"><p>Public Offering Price Per
Share</p>
</td>
<td class="table4column2" width="33%" valign="middle"><p>Net Tangible Book Value Per
Share at Time of Offering</p>
</td>
<td class="table4column3" width="34%" valign="middle"><p>Dilution Per Share to
Purchasers</p>
</td>
</tr>
<tr>
<td class="table4column1" width="33%" valign="middle"><p>$.50</p>
</td>
<td class="table4column2" width="33%" valign="middle"><p>$(0.21)</p>
</td>
<td class="table4column3" width="34%" valign="middle"><p>$.71</p>
</td>
</tr>
<tr>
<td class="table4column1" width="33%" valign="middle"><p>$1.50</p>
</td>
<td class="table4column2" width="33%" valign="middle"><p>$(0.21)</p>
</td>
<td class="table4column3" width="34%" valign="middle"><p>$1.71</p>
</td>
</tr>
<tr>
<td class="table4column1" width="33%" valign="middle"><p>$2.00</p>
</td>
<td class="table4column2" width="33%" valign="middle"><p>$(0.21)</p>
</td>
<td class="table4column3" width="34%" valign="middle"><p>$2.21</p>
</td>
</tr>
<tr>
<td class="table4column1" width="33%" valign="middle"><p>$5.00</p>
</td>
<td class="table4column2" width="33%" valign="middle"><p>$(0.21)</p>
</td>
<td class="table4column3" width="34%" valign="middle"><p>$5.21</p>
</td>
</tr>
<tr>
<td class="table4column1" width="33%" valign="middle"><p>$10.00</p>
</td>
<td class="table4column2" width="33%" valign="middle"><p>$(0.21)</p>
</td>
<td class="table4column3" width="34%" valign="middle"><p>$10.21</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;You will incur substantial dilution when you purchase our common stock.  However,
because the market price of our common stock fluctuates, we cannot predict the actual dilution
you will incur.</p>
<br>
<p style="text-align: center">USE OF PROCEEDS</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We will not receive any of the proceeds of sales of stock by the selling shareholders.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;However, we may receive up to $10 million under the Fusion Capital agreement.
Assuming we receive this amount of funds, we anticipate that we will apply these funds as
follows:</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table5column1" width="50%" valign="middle"><p>Purchase of Quick-Cell Equipment</p>
</td>
<td class="table5column2" width="50%" valign="middle"><p>$6,000,000</p>
</td>
</tr>
<tr>
<td class="table5column1" width="50%" valign="middle"><p>Construction of Quick-Cell Systems</p>
</td>
<td class="table5column2" width="50%" valign="middle"><p>1,300,000</p>
</td>
</tr>
<tr>
<td class="table5column1" width="50%" valign="middle"><p>Marketing</p>
</td>
<td class="table5column2" width="50%" valign="middle"><p>1,000,000</p>
</td>
</tr>
<tr>
<td class="table5column1" width="50%" valign="middle"><p>General and Administrative Expenses</p>
</td>
<td class="table5column2" width="50%" valign="middle"><p>200,000</p>
</td>
</tr>
<tr>
<td class="table5column1" width="50%" valign="middle"><p>Finder's Fee</p>
</td>
<td class="table5column2" width="50%" valign="middle"><p>800,000</p>
</td>
</tr>
<tr>
<td class="table5column1" width="50%" valign="middle"><p>Working Capital</p>
</td>
<td class="table5column2" width="50%" valign="middle"><p>700,000</p>
</td>
</tr>
<tr>
<td class="table5column1" width="50%" valign="middle"><p>Total</p>
</td>
<td class="table5column2" width="50%" valign="middle"><p>$10,000,000</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Should all of our outstanding warrants be exercised, we would receive cash proceeds of
approximately $2,540,000.  The funds received from the exercise of warrants would be used as
follows:</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table6column1" width="50%" valign="middle"><p>Purchase of Quick-Cell Equipment</p>
</td>
<td class="table6column2" width="50%" valign="middle"><p>$1,600,000</p>
</td>
</tr>
<tr>
<td class="table6column1" width="50%" valign="middle"><p>Construction of Quick-Cell Systems</p>
</td>
<td class="table6column2" width="50%" valign="middle"><p>350,000</p>
</td>
</tr>
<tr>
<td class="table6column1" width="50%" valign="middle"><p>Marketing</p>
</td>
<td class="table6column2" width="50%" valign="middle"><p>275,000</p>
</td>
</tr>
<tr>
<td class="table6column1" width="50%" valign="middle"><p>General and Administrative Expenses</p>
</td>
<td class="table6column2" width="50%" valign="middle"><p>50,000</p>
</td>
</tr>
<tr>
<td class="table6column1" width="50%" valign="middle"><p>Working Capital</p>
</td>
<td class="table6column2" width="50%" valign="middle"><p>265,000</p>
</td>
</tr>
<tr>
<td class="table6column1" width="50%" valign="middle"><p>Total</p>
</td>
<td class="table6column2" width="50%" valign="middle"><p>$2,540,000</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p style="text-align: center">TRADING AND MARKET PRICES</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;From 1997 through October 14, 1999, our common stock was traded on the NASD&#8217;s
OTC Bulletin Board, first under the symbol &#8220;MEME&#8221;, then under the symbol &#8220;USRF&#8221;.  The
table below sets forth, for the periods indicated, the high and low bid and asked prices for our
common stock, as reported by the OTCBB:</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table7column1" width="20%" valign="middle"><p>Quarter/Period
Ended</p>
</td>
<td class="table7column2" width="20%" valign="middle"><p>High Bid</p>
</td>
<td class="table7column3" width="20%" valign="middle"><p>High Ask</p>
</td>
<td class="table7column4" width="20%" valign="middle"><p>Low Bid</p>
</td>
<td class="table7column5" width="20%" valign="middle"><p>Low Ask</p>
</td>
</tr>
</TABLE>
</div>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table8column1" width="20%" valign="middle"><p>December 31,
1997</p>
</td>
<td class="table8column2" width="20%" valign="middle"><p>$.75</p>
</td>
<td class="table8column3" width="20%" valign="middle"><p>$1.625</p>
</td>
<td class="table8column4" width="20%" valign="middle"><p>$.0625</p>
</td>
<td class="table8column5" width="20%" valign="middle"><p>$.21875</p>
</td>
</tr>
<tr>
<td class="table8column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table8column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table8column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table8column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table8column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table8column1" width="20%" valign="middle"><p>March 31, 1998</p>
</td>
<td class="table8column2" width="20%" valign="middle"><p>$2.00</p>
</td>
<td class="table8column3" width="20%" valign="middle"><p>$3.00</p>
</td>
<td class="table8column4" width="20%" valign="middle"><p>$.03125</p>
</td>
<td class="table8column5" width="20%" valign="middle"><p>$.08</p>
</td>
</tr>
<tr>
<td class="table8column1" width="20%" valign="middle"><p>June 30, 1998</p>
</td>
<td class="table8column2" width="20%" valign="middle"><p>$2.00</p>
</td>
<td class="table8column3" width="20%" valign="middle"><p>$2.0625</p>
</td>
<td class="table8column4" width="20%" valign="middle"><p>$.8175</p>
</td>
<td class="table8column5" width="20%" valign="middle"><p>$.875</p>
</td>
</tr>
<tr>
<td class="table8column1" width="20%" valign="middle"><p>September 30,
1998</p>
</td>
<td class="table8column2" width="20%" valign="middle"><p>$1.50</p>
</td>
<td class="table8column3" width="20%" valign="middle"><p>$1.625</p>
</td>
<td class="table8column4" width="20%" valign="middle"><p>$.75</p>
</td>
<td class="table8column5" width="20%" valign="middle"><p>$.84375</p>
</td>
</tr>
<tr>
<td class="table8column1" width="20%" valign="middle"><p>December 31,
1998</p>
</td>
<td class="table8column2" width="20%" valign="middle"><p>$5.3125</p>
</td>
<td class="table8column3" width="20%" valign="middle"><p>$5.50</p>
</td>
<td class="table8column4" width="20%" valign="middle"><p>$.50</p>
</td>
<td class="table8column5" width="20%" valign="middle"><p>$.53125</p>
</td>
</tr>
<tr>
<td class="table8column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table8column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table8column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table8column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table8column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table8column1" width="20%" valign="middle"><p>March 31, 1999</p>
</td>
<td class="table8column2" width="20%" valign="middle"><p>$13.50</p>
</td>
<td class="table8column3" width="20%" valign="middle"><p>$13.75</p>
</td>
<td class="table8column4" width="20%" valign="middle"><p>$3.34375</p>
</td>
<td class="table8column5" width="20%" valign="middle"><p>$2.00</p>
</td>
</tr>
<tr>
<td class="table8column1" width="20%" valign="middle"><p>June 30, 1999</p>
</td>
<td class="table8column2" width="20%" valign="middle"><p>$7.375</p>
</td>
<td class="table8column3" width="20%" valign="middle"><p>$5.6875</p>
</td>
<td class="table8column4" width="20%" valign="middle"><p>$3.5625</p>
</td>
<td class="table8column5" width="20%" valign="middle"><p>$3.60</p>
</td>
</tr>
<tr>
<td class="table8column1" width="20%" valign="middle"><p>September 30,
1999</p>
</td>
<td class="table8column2" width="20%" valign="middle"><p>$8.8125</p>
</td>
<td class="table8column3" width="20%" valign="middle"><p>$8.875</p>
</td>
<td class="table8column4" width="20%" valign="middle"><p>$3.28125</p>
</td>
<td class="table8column5" width="20%" valign="middle"><p>$3.4375</p>
</td>
</tr>
<tr>
<td class="table8column1" width="20%" valign="middle"><p>10/1/99 thru
10/14/99</p>
</td>
<td class="table8column2" width="20%" valign="middle"><p>$3.8125</p>
</td>
<td class="table8column3" width="20%" valign="middle"><p>$3.9375</p>
</td>
<td class="table8column4" width="20%" valign="middle"><p>$2.875</p>
</td>
<td class="table8column5" width="20%" valign="middle"><p>$3.00</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;These prices represented quotations between dealers without adjustment for retail mark-ups, mark-downs or commissions, and may not have necessarily represented actual transactions.
</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Beginning on October 15, 1999, our common stock began to be traded on the American
Stock Exchange, under the symbol &#8220;UAX&#8221;.  The table below sets forth, for the period indicated,
the high and low sales prices for our common stock, as reported by the American Stock
Exchange:</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table9column1" width="33%" valign="middle"><p>Quarter/Period Ended:</p>
</td>
<td class="table9column2" width="33%" valign="middle"><p>High</p>
</td>
<td class="table9column3" width="34%" valign="middle"><p>Low</p>
</td>
</tr>
</TABLE>
</div>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table10column1" width="33%" valign="middle"><p>10/15/99 thru 12/31/99</p>
</td>
<td class="table10column2" width="33%" valign="middle"><p>$5.875</p>
</td>
<td class="table10column3" width="34%" valign="middle"><p>$2.50</p>
</td>
</tr>
<tr>
<td class="table10column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table10column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table10column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table10column1" width="33%" valign="middle"><p>March 31, 2000</p>
</td>
<td class="table10column2" width="33%" valign="middle"><p>$11.00</p>
</td>
<td class="table10column3" width="34%" valign="middle"><p>$3.625</p>
</td>
</tr>
<tr>
<td class="table10column1" width="33%" valign="middle"><p>June 30, 2000</p>
</td>
<td class="table10column2" width="33%" valign="middle"><p>$6.00</p>
</td>
<td class="table10column3" width="34%" valign="middle"><p>$2.25</p>
</td>
</tr>
<tr>
<td class="table10column1" width="33%" valign="middle"><p>September 30, 2000</p>
</td>
<td class="table10column2" width="33%" valign="middle"><p>$2.50</p>
</td>
<td class="table10column3" width="34%" valign="middle"><p>$.875</p>
</td>
</tr>
<tr>
<td class="table10column1" width="33%" valign="middle"><p>December 31, 2000</p>
</td>
<td class="table10column2" width="33%" valign="middle"><p>$1.25</p>
</td>
<td class="table10column3" width="34%" valign="middle"><p>$.1875</p>
</td>
</tr>
<tr>
<td class="table10column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table10column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table10column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table10column1" width="33%" valign="middle"><p>March 31, 2001</p>
</td>
<td class="table10column2" width="33%" valign="middle"><p>$.80</p>
</td>
<td class="table10column3" width="34%" valign="middle"><p>$.22</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;You should note that our common stock, like many newly-traded stocks, has experienced
significant fluctuations in its price and trading volume.  We cannot predict the future trading
patterns of our common stock.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On July 19, 2001, the number of record holders of our common stock, excluding
nominees and brokers, was 1,121, holding 20,086,770 shares.</p>
<br>
<p style="text-align: center">DIVIDENDS</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have never paid cash dividends on our common stock.  We intend to re-invest any
future earnings for the foreseeable future.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our board of directors has declared property dividends comprised of common stock of
three private companies acquired by us.  These dividends of stock are: 1,500,000 shares of New
Wave Media Corp., in exchange for all of our community-television-related assets; 400,000
shares of Argo Petroleum Corporation, in exchange for 10,000 shares of our common stock; and
800,000 shares of Woodcomm International, Inc., in exchange for 7,500 shares of our common
stock.  The combined value of these dividends is $43,750.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;None of the three dividend distributions will occur unless and until a registration
statement relating to each distribution transaction has been declared effective by the SEC.</p>
<br>
<p style="text-align: center">CAPITALIZATION</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The following table sets forth our capitalization as of March 31, 2001.  This table should
be read in conjunction with our consolidated financial statements included elsewhere in this
prospectus.</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table11column1" width="50%" valign="middle"><p>&#160;</p>
</td>
<td class="table11column2" width="50%" valign="middle"><p>As of</p>
</td>
</tr>
<tr>
<td class="table11column1" width="50%" valign="middle"><p>&#160;</p>
</td>
<td class="table11column2" width="50%" valign="middle"><p>3/31/01</p>
</td>
</tr>
<tr>
<td class="table11column1" width="50%" valign="middle"><p>&#160;</p>
</td>
<td class="table11column2" width="50%" valign="middle"><p>(unaudited)</p>
</td>
</tr>
<tr>
<td class="table11column1" width="50%" valign="middle"><p>&#160;</p>
</td>
<td class="table11column2" width="50%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table11column1" width="50%" valign="middle"><p>Long-Term Liabilities</p>
</td>
<td class="table11column2" width="50%" valign="middle"><p>$0</p>
</td>
</tr>
<tr>
<td class="table11column1" width="50%" valign="middle"><p>Shareholders' Equity:</p>
</td>
<td class="table11column2" width="50%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table11column1" width="50%" valign="middle"><p>Common Stock - $.0001 par value; 100,000,000
shares authorized, 13,7670,985 shares issued</p>
</td>
<td class="table11column2" width="50%" valign="middle"><p>1,367</p>
</td>
</tr>
<tr>
<td class="table11column1" width="50%" valign="middle"><p>Additional Paid-in Capital</p>
</td>
<td class="table11column2" width="50%" valign="middle"><p>30,262,522</p>
</td>
</tr>
<tr>
<td class="table11column1" width="50%" valign="middle"><p>Accumulated Deficit</p>
</td>
<td class="table11column2" width="50%" valign="middle"><p>(35,403,419)</p>
</td>
</tr>
<tr>
<td class="table11column1" width="50%" valign="middle"><p>Stock Subscriptions</p>
</td>
<td class="table11column2" width="50%" valign="middle"><p>313,000</p>
</td>
</tr>
<tr>
<td class="table11column1" width="50%" valign="middle"><p>Deferred Consulting</p>
</td>
<td class="table11column2" width="50%" valign="middle"><p>(1,363,942)</p>
</td>
</tr>
<tr>
<td class="table11column1" width="50%" valign="middle"><p>&#160;</p>
</td>
<td class="table11column2" width="50%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table11column1" width="50%" valign="middle"><p>Total Capitalization</p>
</td>
<td class="table11column2" width="50%" valign="middle"><p>(6,190,472)</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p style="text-align: center">SELECTED FINANCIAL DATA</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The following selected financial data have been derived from our consolidated financial
statements, which appear elsewhere in this prospectus.  The selected financial data set forth
below should be read in conjunction with our financial statements, related notes and other
financial information included elsewhere in this prospectus.</p>
<br>
<p>STATEMENT OF OPERATIONS DATA:</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table12column1" width="17%" valign="middle"><p>&#160;</p>
</td>
<td class="table12column2" width="17%" valign="middle"><p>Year Ended
December
31, 2000</p>
</td>
<td class="table12column3" width="17%" valign="middle"><p>Year Ended
December
31, 1999</p>
</td>
<td class="table12column4" width="17%" valign="middle"><p>Year Ended
December
31, 1998</p>
</td>
<td class="table12column5" width="17%" valign="middle"><p>Three
Months
Ended March
31, 2001</p>
</td>
<td class="table12column6" width="15%" valign="middle"><p>Three
Months
Ended March
31, 2000</p>
</td>
</tr>
<tr>
<td class="table12column1" width="17%" valign="middle"><p>&#160;</p>
</td>
<td class="table12column2" width="17%" valign="middle"><p>&#160;</p>
</td>
<td class="table12column3" width="17%" valign="middle"><p>&#160;</p>
</td>
<td class="table12column4" width="17%" valign="middle"><p>&#160;</p>
</td>
<td class="table12column5" width="17%" valign="middle"><p>(unaudited)</p>
</td>
<td class="table12column6" width="15%" valign="middle"><p>(unaudited)</p>
</td>
</tr>
<tr>
<td class="table12column1" width="17%" valign="middle"><p>Revenues</p>
</td>
<td class="table12column2" width="17%" valign="middle"><p>$ 1,872,629</p>
</td>
<td class="table12column3" width="17%" valign="middle"><p>$ 2,547,225</p>
</td>
<td class="table12column4" width="17%" valign="middle"><p>$5,440</p>
</td>
<td class="table12column5" width="17%" valign="middle"><p>$384</p>
</td>
<td class="table12column6" width="15%" valign="middle"><p>$597,392</p>
</td>
</tr>
<tr>
<td class="table12column1" width="17%" valign="middle"><p>Internet
access costs
and cost of
goods sold</p>
</td>
<td class="table12column2" width="17%" valign="middle"><p>2,145,955</p>
</td>
<td class="table12column3" width="17%" valign="middle"><p>1,152,721</p>
</td>
<td class="table12column4" width="17%" valign="middle"><p>0</p>
</td>
<td class="table12column5" width="17%" valign="middle"><p>0</p>
</td>
<td class="table12column6" width="15%" valign="middle"><p>269,136</p>
</td>
</tr>
<tr>
<td class="table12column1" width="17%" valign="middle"><p>Operating
expenses</p>
</td>
<td class="table12column2" width="17%" valign="middle"><p>14,975,583</p>
</td>
<td class="table12column3" width="17%" valign="middle"><p>11,860,758</p>
</td>
<td class="table12column4" width="17%" valign="middle"><p>1,034,464</p>
</td>
<td class="table12column5" width="17%" valign="middle"><p>901,643</p>
</td>
<td class="table12column6" width="15%" valign="middle"><p>3,354,219</p>
</td>
</tr>
<tr>
<td class="table12column1" width="17%" valign="middle"><p>Net loss</p>
</td>
<td class="table12column2" width="17%" valign="middle"><p>21,885,330</p>
</td>
<td class="table12column3" width="17%" valign="middle"><p>10,930,163</p>
</td>
<td class="table12column4" width="17%" valign="middle"><p>1,037,626</p>
</td>
<td class="table12column5" width="17%" valign="middle"><p>901,259</p>
</td>
<td class="table12column6" width="15%" valign="middle"><p>2,557,596</p>
</td>
</tr>
<tr>
<td class="table12column1" width="17%" valign="middle"><p>Loss per
share</p>
</td>
<td class="table12column2" width="17%" valign="middle"><p>(1.68)</p>
</td>
<td class="table12column3" width="17%" valign="middle"><p>(0.96)</p>
</td>
<td class="table12column4" width="17%" valign="middle"><p>(0.14)</p>
</td>
<td class="table12column5" width="17%" valign="middle"><p>(0.06)</p>
</td>
<td class="table12column6" width="15%" valign="middle"><p>(0.20)</p>
</td>
</tr>
<tr>
<td class="table12column1" width="17%" valign="middle"><p>Weighted
average
number of
shares
outstanding</p>
</td>
<td class="table12column2" width="17%" valign="middle"><p>13,000,391</p>
</td>
<td class="table12column3" width="17%" valign="middle"><p>11,419,641</p>
</td>
<td class="table12column4" width="17%" valign="middle"><p>7,361,275</p>
</td>
<td class="table12column5" width="17%" valign="middle"><p>13,934,118</p>
</td>
<td class="table12column6" width="15%" valign="middle"><p>12,937,499</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p>BALANCE SHEET DATA:</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table13column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table13column2" width="25%" valign="middle"><p>Year Ended
December 31, 2000</p>
</td>
<td class="table13column3" width="25%" valign="middle"><p>Year Ended
December 31, 1999</p>
</td>
<td class="table13column4" width="25%" valign="middle"><p>March 31, 2001 </p>
</td>
</tr>
<tr>
<td class="table13column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table13column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table13column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table13column4" width="25%" valign="middle"><p>(unaudited)</p>
</td>
</tr>
<tr>
<td class="table13column1" width="25%" valign="middle"><p>Working Capital
(Deficit)</p>
</td>
<td class="table13column2" width="25%" valign="middle"><p>$(1,517,164)</p>
</td>
<td class="table13column3" width="25%" valign="middle"><p>$(694,937)</p>
</td>
<td class="table13column4" width="25%" valign="middle"><p>$(1,472,144)</p>
</td>
</tr>
<tr>
<td class="table13column1" width="25%" valign="middle"><p>Total Assets</p>
</td>
<td class="table13column2" width="25%" valign="middle"><p>410,316</p>
</td>
<td class="table13column3" width="25%" valign="middle"><p>19,545,169</p>
</td>
<td class="table13column4" width="25%" valign="middle"><p>523,526</p>
</td>
</tr>
<tr>
<td class="table13column1" width="25%" valign="middle"><p>Total Current
Liabilities</p>
</td>
<td class="table13column2" width="25%" valign="middle"><p>1,764,973</p>
</td>
<td class="table13column3" width="25%" valign="middle"><p>1,221,650</p>
</td>
<td class="table13column4" width="25%" valign="middle"><p>1,844,743</p>
</td>
</tr>
<tr>
<td class="table13column1" width="25%" valign="middle"><p>Total Liabilities</p>
</td>
<td class="table13column2" width="25%" valign="middle"><p>1,764,973</p>
</td>
<td class="table13column3" width="25%" valign="middle"><p>5,104,860</p>
</td>
<td class="table13column4" width="25%" valign="middle"><p>1,844,743</p>
</td>
</tr>
<tr>
<td class="table13column1" width="25%" valign="middle"><p>Total Redeemable
Common Stock</p>
<p>Shareholders' Equity
(Deficit)</p>
</td>
<td class="table13column2" width="25%" valign="middle"><p>3,323,552</p>
<p>(4,678,209)</p>
</td>
<td class="table13column3" width="25%" valign="middle"><p>0</p>
<p>14,440,309</p>
</td>
<td class="table13column4" width="25%" valign="middle"><p>4,869,255</p>
<p>(6,190,472)</p>
</td>
</tr>
</TABLE>
</div>
<br>
<br>
<p style="text-align: center">CHANGE OF INDEPENDENT AUDITOR</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On January 11, 2000, we dismissed Weaver and Tidwell, L.L.P. as our independent
auditor.  At the time of the dismissal, there was no disagreement with respect to any matter of
accounting principles or practices, financial statement disclosure or auditing scope or procedure.
On January 24, 2000, we engaged Postlethwaite &amp; Netterville as our new independent auditor,
which firm audited our financial statements for the years ended December 31, 1999 and  2000.
The audit committee of our board of directors recommended this change in auditors and the full
board approved the change.</p>
<br>
<p style="text-align: center">MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF</p>
<p style="text-align: center">FINANCIAL CONDITION AND RESULTS OF OPERATIONS</p>
<br>
<p>Background</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have determined to commit all of our available resources to the exploitation of our
Quick-Cell wireless Internet access products.  We currently lack the capital necessary to do so.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We were organized to operate in the wireless cable and community (low power)
television industries.  Due to existing market conditions, we have abandoned our wireless cable
business.  Because our Quick-Cell wireless Internet access system can be adapted for use on the
wireless cable frequencies, we believe our frequencies possess future value.  However, these
frequencies will not be of value to us, unless and until the FCC approves two-way
communications on them.  Due to this circumstance, our wireless-cable-related assets have
become impaired and their $188,091 book value written off.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Effective July 1, 1999, we assigned all of our television-related assets to New Wave
Media Corp., in exchange for a 15% ownership interest in New Wave common stock.  This
business segment was discontinued as of that date and, since then, has not, and will not, generate
any revenues.  Our board of directors has declared a dividend with respect to all of the New
Wave shares.  These shares will be distributed to our shareholders, upon New Wave&#8217;s
completion of a Securities Act registration of the distribution transaction.  This registration
proceeding has not been commenced by New Wave, due to a lack of funds necessary to pay
related professional expenses.  New Wave has advised us that it is making its best efforts to
obtain capital for this purpose, but cannot provide an exact time by which this will occur.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Since 1998, we have acquired seven dial-up Internet service providers, including
CyberHighway, the business of www.e-tail.com and a web design firm, none of which was an
affiliated company nor were any  acquired from an affiliate.  All but one of these acquisitions
were made for shares of our stock.  In making these acquisitions, we issued a total of 2,587,063
shares, which were valued at $18,759,500, in the aggregate.  All of these acquisitions were
accounted for as a purchase, which means that we did not include past operations of the acquired
businesses in our historical statements of operations.  Also in connection with these acquisitions,
we recorded large amounts of amortizable customer base and goodwill values, approximately
$25,764,000, as a result of the acquisitions&#8217; valuations exceeding the values of the tangible net
assets.  At December 31, 2000, all of these values were written off, due to the demise of
CyberHighway&#8217;s business.  Please see the discussion under &#8220;CyberHighway Bankruptcy&#8221; below.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;All of the customers of the acquired Internet access providers were assimilated into the
dial-up operations of our CyberHighway subsidiary, which has few remaining customers &#8211; please
see the discussion under &#8220;CyberHighway Bankruptcy&#8221; below.</p>
<br>
<p>Current Overview</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our management has committed all available current and future capital and other
resources to the commercial exploitation of our Quick-Cell wireless Internet access products.  It
is these products upon which our future is based.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As CyberHighway&#8217;s business has dwindled to near nothing while in bankruptcy, we have
determined not to attempt to revive our dial-up Internet access business and, for the foreseeable
future, we have abandoned development of our e-commerce business.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In May 2001, we entered into an amended and restated common stock purchase
agreement with Fusion Capital Fund II, LLC, which replaced a similar agreement entered into in
October 2000.  Pursuant to the agreement,  Fusion Capital may purchase up to $10 million of our
common stock.  This prospectus relates to the shares issuable to Fusion Capital under the Fusion
Capital agreement.  Please see the discussion under the heading &#8220;Management&#8217;s Plans Relating
to Future Liquidity&#8221;, for a more thorough explanation of the impact this agreement could have on
our business.  Should we obtain this funding, we would be able to begin to pursue our wireless
Internet business plan.  We provide wireless Internet access in one market and we have
commenced marketing of our Quick-Cell service through a reseller.  We will need more capital
thereafter, as we continue to expand our wireless Internet business.  We may never possess
enough capital to permit us to earn a profit.</p>
<br>
<p>CyberHighway Bankruptcy</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On September 29, 2000, an involuntary bankruptcy petition was filed against
CyberHighway in the Idaho Federal Bankruptcy Court, styled In Re: CyberHighway, Inc., Case
No. 00-02454, by ProPeople Staffing, CTC Telecom, Inc. and Hawkins-Smith.  In December
2000, CyberHighway and the petitioning creditors filed a joint motion to dismiss this proceeding.
The joint motion to dismiss requires the approval of CyberHighway&#8217;s creditors. However, some
of CyberHighway&#8217;s creditors have objected to the dismissal of the proceeding.  The basis of the
creditors&#8217; objection is their belief that CyberHighway&#8217;s as-yet unasserted damage claims against
the original petitioning creditors and their law firm and a claim against Dialup USA, Inc.
represent CyberHighway&#8217;s most valuable assets.  These as-yet unasserted claims include claims
for bad faith filing of the original bankruptcy petition as to the original petitioning creditors and
their law firm, as well as a claim for tortious interference with beneficial business relationships
as to Dialup USA, Inc.  The objecting creditors desire that these claims be adjudicated in the
bankruptcy court.  It is likely that, at some time in the future, a final order of bankruptcy will be
entered with respect to CyberHighway.  No prediction of the timing of such an order can be
made, although we believe that such an order would come only after the final adjudication of the
claims described above.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The January 1999 acquisition of CyberHighway fundamentally altered our company.  Our
annual revenues went from nearly zero to about $2.5 million.  Beginning in the last half of 1999,
operating losses at CyberHighway, primarily personnel costs and leased telephone-line charges,
steadily increased, while revenues began to decrease slightly each quarter.  This trend continued
through 2000, until September 2000.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As a means to achieve immediate cost savings at CyberHighway, in September 2000, the
following actions were taken:</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;CyberHighway sold its affiliate-ISP business for $40,500, in cash; and</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;CyberHighway contracted with Dialup USA for all &#8220;backroom&#8221; and
customer
support services, which took effect at the end of October 2000.</p>
<br>
<p>These actions did reduce monthly operating costs by approximately $50,000.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;However, the involuntary bankruptcy proceeding started the demise of CyberHighway&#8217;s
business, in effect rendering our September 2000 actions meaningless.  Since that time,
CyberHighway&#8217;s company-owned dial-up customer base has gone from approximately 8,500 to
nearly none.  The filing of the involuntary bankruptcy and CyberHighway&#8217;s switch-over to the
network of Dialup USA were the primary causes of CyberHighway&#8217;s customer base demise.  We
will not apply any available future capital to the revitalization of our dial-up Internet access
business.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;This sudden and permanent demise of CyberHighway&#8217;s customer base has rendered our
intangible assets relating to those customers to become worthless.  The write-off of these
intangible assets totalled $4,814,272, net of deferred taxes, as reflected in our December 31,
2000, financial statements.  Due to this change in operating environment, monthly revenues have
decreased substantially, and, accordingly, goodwill has been impaired.  The write-down of
goodwill totalled $4,425,037, as reflected in our December 31, 2000, financial statements.
Please see the discussion below under the heading &#8220;Liquidity and Capital Resources&#8221; for more
information on this topic.</p>
<br>
<p>Shareholder Loans - Conversion to Equity</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In August 2000, our president, David M. Loflin, converted all loan amounts owed to him,
including accrued interest, into a total of 774,162 shares of our common stock.  The total amount
of indebtedness converted to common stock was $967,703.  Since August 2000, Mr. Loflin has
made small loans to us to ease periods of restricted cash flow.  At March 31, 2001, we owed Mr.
Loflin $32,728.</p>
<br>
<p>Results of Operations</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;General.  By the end of February 2001, CyberHighway had lost nearly all of its dial-up
Internet access customers and we do not foresee the revitalization of CyberHighway&#8217;s business.
You should not purchase our common stock expecting that CyberHighway&#8217;s business will assist
in making us profitable.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Until the involuntary bankruptcy was filed against CyberHighway in September 2000, our
revenues for 2000 were approximately 10% below 1999's nine-month results.  Our revenues for
the last three months of 2000 diminished rapidly month to month.  During the first quarter of
2001 and currently, we derive no revenue from CyberHighway&#8217;s business.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;For the first quarter of 2001, our small amount of revenues were derived from the
operations of our Quick-Cell wireless Internet access system in Santa Fe, New Mexico. With the
demise of CyberHighway, any future revenues will be derived from sales of our Quick-Cell
wireless Internet access service.  We currently lack the capital necessary to pursue our Quick-Cell business plan, and we may never possess enough capital with which to exploit fully our
Quick-Cell products.  In this circumstance, it is likely that we would never earn a profit.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Prior to 1999, nearly all of our revenues were generated by our now-defunct community
television segment.  During 1999 and 2000, all of our revenues were generated by our Internet
segment.  Before the demise of CyberHighway, our revenues were derived primarily from
monthly customer payments for dial-up access and from per-customer royalty payments from our
CyberHighway affiliate-ISPs.  Now, all revenues are derived from monthly customer payments
for wireless Internet access, which payments average about $30.00 per customer.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Beginning in March 2000, we began initial Quick-Cell wireless Internet access operations
in Santa Fe, New Mexico.  Currently, we have approximately 120 Quick-Cell customers.
Throughout 2000, these customers were in their one-year &#8220;free-use&#8221; period.  Beginning in March
2001, we began to receive small monthly payments from the customers who had completed their
one-year of free use.  The lack of growth of our wireless Internet access business during 2000 is
due to the fact that our available monies were applied to CyberHighway expenses and corporate
overhead.  We had no available capital to apply to the expansion of the Santa Fe market.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In the middle of 2000, we began marketing our Quick-Cell systems to local exchange
telephone companies, independent telephone companies, digital subscriber line resellers and
Internet service providers.  We sold three Quick-Cell systems in a short time, and received
approximately 200 additional indications of interest via e-mail and telephone from other
telecommunications companies and others, 25% of which our management considered to be of a
serious nature.  Due to a lack of capital, however, this marketing effort was suspended before we
investigated the nature of the other inquiring companies.  No paying customers use these
systems, due to circumstances involving these companies that are beyond our control.  During
2001, we do not expect to derive significant revenues from customer modem sales to these
Quick-Cell purchasers.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In cities in which we construct company-owned Quick-Cell systems, we intend to employ
telephone marketing as the initial means for acquiring customers and, later, mass media.  We will
employ a sales force that will focus primarily on potential business customers.  This focus on
business customers is based on our management&#8217;s informal study of Internet usage by businesses
versus home users that revealed businesses&#8217; higher demand for high-speed Internet access.  Our
management&#8217;s decision may prove to have been incorrect, which would significantly impair our
ability to earn a profit.  Our management believes, based on its collective business experience,
that effective marketing techniques can overcome Quick-Cell&#8217;s lack of name recognition,
although this belief may also prove to have been incorrect.  Our Quick-Cell business will not be
able to succeed without additional capital.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In cities where a Quick-Cell reseller operates, we will not have final approval of the
reseller&#8217;s marketing strategies.  Our resellers will be permitted to market our Quick-Cell service
in any commercially reasonable manner. We cannot, therefore, assure you that any of our
resellers will ever achieve high enough sales levels that would permit us to earn a profit.</p>
<br>
<p style="line-height: 0.229165in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Under our Quick-Cell reseller agreement with WebConnect, we expect to derive revenues
as follows:</p>
<p style="line-height: 0.229165in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.229165in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;WebConnect&#8217;s purchase of each Quick-Cell
cell site;</p>
<p style="line-height: 0.229165in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.229165in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;WebConnect&#8217;s purchase of all customer modems;
</p>
<p style="line-height: 0.229165in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.229165in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Charges for installation services on behalf of
every customer acquired by
WebConnect; and</p>
<p style="line-height: 0.229165in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.229165in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Monthly per-Quick-Cell-customer royalties &#8211;
while we anticipate that this
monthly per-customer royalty will average approximately $12.00, we cannot
assure you that the monthly per-customer will be that high; in any event, given the
number of customers that can use a single Quick-Cell cell site, approximately
2,000, the lowest monthly per-customer royalty to be paid by WebConnect will be
about $9.00.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The results of operations for 1999 and 2000, when compared to those expected for 2001,
will not be similar.  We expect our revenues for 2001 to be significantly below those of 1999 and
2000, since we no longer will derive revenues from the operations of CyberHighway.  In 2001,
we will produce significant revenues only if:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;our Quick-Cell reseller is as successful selling our wireless Internet access

products as it has been in the past in reselling a competing wireless Internet access
service; or</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;we are able to obtain at least $2,000,000 under the Fusion Capital agreement
 .</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our reseller may not be successful enough for us to make a profit, nor can we assure you
that funding under the Fusion Capital agreement will permit us to make a profit.</p>
<br>
<p>#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Potential Rescission Claims.  Since January 2000, a total of 4,881,985 shares of our
common stock with an aggregate assigned value of $5,081,255 may have been issued in violation
of Section 5 of the Securities Act.  4,751,985 of these shares were issued in payment of services
or as bonuses to employees and 130,000 of these shares were issued for cash or underlie currently
exercisable warrants, which were sold or will be sold for at total of $650,000 in cash.  At
December 31, 2000, a total of 2,767,823 of these shares valued at $3,897,552 had been issued
and at March 31, 2001, a total of 4,381,985 of these shares valued at $4,869,255 had been issued,
with an additional 500,000 shares valued at $212,000 having been issued since March 31, 2001.
It is possible that each of the issuees of these shares has a potential claim for rescission of their
respective issuance transactions. We do not possess capital with which to pay any such claims, if
asserted, and, if such claims are asserted, it is possible that our then-available capital would
become impaired and our future operating results would likely suffer.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Three Months Ended March 31, 2001, versus Three Months Ended March 31, 2000.
During the 2000 period, all of our revenues were generated by CyberHighway&#8217;s dial-up Internet
access operations.  We derived our revenues from monthly customer payments for dial-up
Internet access, which averaged approximately $18.00 per customer.  We also derived revenue
from per-customer royalty payments from our CyberHighway affiliate-ISPs, which averaged
approximately $1.75 per customer.  This affiliate-ISP business was sold in September 2000.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;During the 2001 period, we had only small revenues from our wireless Internet access
business.  We derived no revenues from CyberHighway&#8217;s operations.  Whether or not we obtain
capital, our existing operations in Santa Fe will increase slightly from month to month, as our
customers end their free-use periods and begin to pay for our wireless Internet access services.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our revenues for all of 2001 can be expected to be significantly below our revenue levels
of 2000.  However, due to uncertainties relating to the timing of receipt of expected funds under
the Fusion Capital agreement, we can make no prediction of our actual revenues.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our operating results for the first quarters of 2001 and 2000 are summarized in the
following table:</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table14column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table14column2" width="33%" valign="middle"><p>First Quarter</p>
</td>
<td class="table14column3" width="34%" valign="middle"><p>First Quarter</p>
</td>
</tr>
<tr>
<td class="table14column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table14column2" width="33%" valign="middle"><p>2001</p>
</td>
<td class="table14column3" width="34%" valign="middle"><p>2000</p>
</td>
</tr>
<tr>
<td class="table14column1" width="33%" valign="middle"><p>Revenues</p>
</td>
<td class="table14column2" width="33%" valign="middle"><p>$384</p>
</td>
<td class="table14column3" width="34%" valign="middle"><p>$ 597,392</p>
</td>
</tr>
<tr>
<td class="table14column1" width="33%" valign="middle"><p>Internet access costs and cost of
goods sold</p>
</td>
<td class="table14column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table14column3" width="34%" valign="middle"><p>269,136</p>
</td>
</tr>
<tr>
<td class="table14column1" width="33%" valign="middle"><p>Gross profit</p>
</td>
<td class="table14column2" width="33%" valign="middle"><p>384</p>
</td>
<td class="table14column3" width="34%" valign="middle"><p>328,256</p>
</td>
</tr>
<tr>
<td class="table14column1" width="33%" valign="middle"><p>Operating expenses</p>
</td>
<td class="table14column2" width="33%" valign="middle"><p>901,643</p>
</td>
<td class="table14column3" width="34%" valign="middle"><p>3,354,219</p>
</td>
</tr>
<tr>
<td class="table14column1" width="33%" valign="middle"><p>Loss from operations</p>
</td>
<td class="table14column2" width="33%" valign="middle"><p>901,259</p>
</td>
<td class="table14column3" width="34%" valign="middle"><p>3,025,963</p>
</td>
</tr>
<tr>
<td class="table14column1" width="33%" valign="middle"><p>Net loss</p>
</td>
<td class="table14column2" width="33%" valign="middle"><p>901,259</p>
</td>
<td class="table14column3" width="34%" valign="middle"><p>2,557,596</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our net loss of $901,259 for the first quarter of 2001 was significantly less than our net
loss for the 2000 period of $2,557,596.  This reduced net loss is attributable primarily to:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Depreciation and amortization decreasing from $2,238,544 for the 2000
period to
$11,580 for the 2001 period.  This reduction is due to the demise of
CyberHighway&#8217;s business and the write-off of all of our intangible assets
associated with that business, which occurred during December 2000.  We no
longer amortize those intangible assets.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Professional fees increased from $390,038 in the 2000 period to $707,288
in the
2001 period.  This increase is due to the issuance of 800,000 shares as a
commitment fee under a common stock purchase agreement, which shares were
valued at $248,000, as well as the monthly amortization of various consulting
agreements under which we issued stock for services during 2000 and 2001.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Salary and commissions fell from $399,358 in 2000 to $160,746 in 2001.  Our
lower salary and commissions during 2001 is attributable to CyberHighway&#8217;s
demise, its personnel having been reduced from about 30 during the first quarter
of 2000 to none, now.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Rent expense decreased from $61,570 during the first quarter of 2000 to
$5,361
during the 2001 period.  This large decrease is the result of our abandoning all
leased premises of CyberHighway, following the filing of the involuntary
bankruptcy proceeding.  Our monthly lease expense for the remainder of 2001
will be higher, due to our recent leasing of a small assembly facility in Baton
Rouge, Louisiana.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Other expenses fell from $249,530 in 2000 to $16,668 in 2001.  The
reduction in
this line item is attributable to the demise of CyberHighway&#8217;s business, as well as
our severe lack of capital during the last half of 2000 and most of the first quarter
of 2001.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our statements of operations reflect an income tax benefit of $471,519 for the 2000
period and no such benefit for the 2001 period.  This income tax benefit was attributable to the
difference in the bases of our acquired customer bases for book versus tax purposes.  Since our
intangible assets were completely written-off as of December 31, 2000, we no longer derive any
similar income tax benefit.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We expect that our results of operations for the second quarter of 2001 will be similar to
those of the first quarter of 2001.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;During the first quarter of 2001, we issued 320,000 shares of common stock under two
consulting agreements; these shares were valued for financial accounting purposes at $99,200, in
the aggregate.  This amount will be expensed in equal monthly amounts during 2001.
Subsequent to March 31, 2001, we issued 300,000 shares under a consulting agreement; these
shares have been valued for financial accounting purposes at $150,000, in the aggregate, and will
be expensed in equal monthly amounts during the remainder of 2001 and the first quarter of
2002.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;During the first quarter of 2000, we issued 160,000 shares of common stock under two
separate consulting agreements; these shares were valued for financial accounting purposes at
$480,000, in the aggregate. This amount was expensed in equal monthly amounts during 2000.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Year Ended December 31, 2000, versus Year Ended December 31, 1999.  During 1999
and 2000, nearly all of our revenues were generated by CyberHighway&#8217;s dial-up Internet access
operations.  We derived our revenues from monthly customer payments for dial-up Internet
access, which averaged approximately $18.00 per customer.  Also, until September 2000, we
derived revenue from per-customer royalty payments from our CyberHighway affiliate-ISPs,
which averaged approximately $1.75 per customer.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Due to the recent demise of CyberHighway, our revenues for most of 2001 can be
expected to continue to be significantly below our revenue levels of 1999 and 2000.  However,
due to uncertainties relating to the timing of receipt of expected funds under the Fusion Capital
agreement, we can make no prediction of our actual revenues.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our operating results for 2000 and 1999 are summarized in the following table:</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table15column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table15column2" width="33%" valign="middle"><p>2000</p>
</td>
<td class="table15column3" width="34%" valign="middle"><p>1999</p>
</td>
</tr>
<tr>
<td class="table15column1" width="33%" valign="middle"><p>Revenues</p>
</td>
<td class="table15column2" width="33%" valign="middle"><p>$1,872,629</p>
</td>
<td class="table15column3" width="34%" valign="middle"><p>$2,547,225</p>
</td>
</tr>
<tr>
<td class="table15column1" width="33%" valign="middle"><p>Internet Access Costs and Costs
of Goods Sold</p>
</td>
<td class="table15column2" width="33%" valign="middle"><p>2,145,955</p>
</td>
<td class="table15column3" width="34%" valign="middle"><p>1,152,721</p>
</td>
</tr>
<tr>
<td class="table15column1" width="33%" valign="middle"><p>Gross Profit (Loss)</p>
</td>
<td class="table15column2" width="33%" valign="middle"><p>(273,326)</p>
</td>
<td class="table15column3" width="34%" valign="middle"><p>1,394,504</p>
</td>
</tr>
<tr>
<td class="table15column1" width="33%" valign="middle"><p>Operating Expenses</p>
</td>
<td class="table15column2" width="33%" valign="middle"><p>14,975,583</p>
</td>
<td class="table15column3" width="34%" valign="middle"><p>11,860,758</p>
</td>
</tr>
<tr>
<td class="table15column1" width="33%" valign="middle"><p>Loss from Operations</p>
</td>
<td class="table15column2" width="33%" valign="middle"><p>15,248,909</p>
</td>
<td class="table15column3" width="34%" valign="middle"><p>10,466,254</p>
</td>
</tr>
<tr>
<td class="table15column1" width="33%" valign="middle"><p>Other Expense</p>
</td>
<td class="table15column2" width="33%" valign="middle"><p>9,193,281</p>
</td>
<td class="table15column3" width="34%" valign="middle"><p>2,117,070</p>
</td>
</tr>
<tr>
<td class="table15column1" width="33%" valign="middle"><p>Net Loss</p>
</td>
<td class="table15column2" width="33%" valign="middle"><p>21,885,330</p>
</td>
<td class="table15column3" width="34%" valign="middle"><p>10,930,163</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our 2000 statement of operations reflect the following significant charges against our
earnings:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;each of the following amounts relates to the demise of the business of
CyberHighway:</p>
<p style="text-indent: -1.5in; margin-left: 1.5in">&#160;</p>
<p style="text-indent: -1.5in; margin-left: 1.5in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;$4,814,272 &#8211; amount of intangible assets written off attributable to
acquired customers bases, net of deferred taxes; and</p>
<p style="text-indent: -1.5in; margin-left: 1.5in">&#160;</p>
<p style="text-indent: -1.5in; margin-left: 1.5in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;$4,425,037 &#8211; amount of intangible assets written off attributable to
goodwill.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;$619,000 &#8211; 750,000 shares of our common stock were issued to three vic
e
presidents, 250,000 shares as an employment agreement signing bonus valued at
$2.00 per share and 500,000 shares as employment bonuses valued at $119,000 &#8211;
this expense is included in the &#8220;Salary and Commissions&#8221; statement of operations
line item.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In our 1999 financial statements, we incurred two significant charges against our
earnings, which appear in our statement of operations under the &#8220;Other Income (Expense)&#8221;
heading:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As described above, we incurred a charge of $1,164,561 arising out of our
acquisition, and subsequent tender for rescission, of Net 1.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We incurred a charge of $957,075 arising out of a settlement agreement and
mutual release, which settled legal proceedings in which USURF America and
CyberHighway were involved.  These legal proceedings were settled in full by the
issuance of 340,000 shares of our common stock to the adverse parties and we
paid $43,325 for reimbursement of their respective attorneys&#8217; fees.  The 340,000
shares were valued at $2.6875 per share, or $913,750, in the aggregate.  The price
per share assigned to these shares was the closing price of our common stock on
November 30, 1999, as reported by AMEX.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Due to our severe lack of capital during 1999 and 2000, during both years, we issued a
large number of shares of our stock to consultants in payment of their services.  The fair value of
the shares issued to consultants is included in our statements of operations under the
&#8220;Professional Fees&#8221; line item.  Issuing stock was the only means by which we could obtain the
consultants&#8217; services.  The value of the consulting services received by us under each agreement
has been expensed in equal monthly amounts over their respective terms:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;in 2000, we issued 2,262,166 shares of our common stock under consulting
agreements; these shares were valued for financial accounting purposes at
$3,110,000, in the aggregate.  This amount is being expensed in equal monthly
amounts over periods ranging from four months to one year.  Approximately 75%
of this total amount was expensed during 2000.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;in 1999, we issued 566,000 shares of common stock under consulting
agreements;
these shares were valued for financial accounting purposes at $2,216,000, in the
aggregate. $2,000,000 of this amount is being expensed in equal monthly amounts
over five years, while the remaining $216,000 of this amount was expensed in
equal monthly amounts over periods ranging from three to six months.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our net loss for 2000 is attributable to several large non-standard items:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;the depreciation and amortization of acquired customer bases, goodwill and
other
intangibles of $7,618,755;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;$4,168,610 in professional fees, substantially all of which is
attributable to stock
issuances under various consulting agreements;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;$2,060,528 in salary and commissions was expensed, $619,000 of which is the

result of stock bonuses to three officers; and</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;$9,239,310 in impairment loss relating to the demise of CyberHighway&#8217;
s business
and the associated write off of all related intangible assets.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;For 1999, our net loss is attributable in large measure to the following expense items:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;$7,653,924 in depreciation and amortization of acquired customer bases,
goodwill
and other intangibles;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;$1,945,935 in professional fees, substantially all of which is
attributable to stock
issuances under various consulting agreements; and</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;$1,603,556 in salary and commissions.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our acquisition and subsequent rescission of the acquisition of Net 1, Inc. affected our
1999 and 2000 statements of operations in different ways, as follows:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On August 23, 1999, we acquired Net 1, Inc.  Net 1 is primarily engaged as a
n
Internet service provider in Alabama.  In September 1999, we tendered the shares
of capital stock obtained in the acquisition of Net 1 for rescission of the
transaction.  This rescission was based on perceived material misstatements made
by one of the principals of Net 1.  However, legally, we were still the owner of the
outstanding shares of Net 1 at December 31, 1999, and were required by generally
accepted accounting principles to record Net 1 as a wholly-owned subsidiary from
the date of acquisition.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;It was discovered during the arbitration proceedings between us and the
former
owners of Net 1 that no activity had occurred in Net 1 after the acquisition.  The
customer base was moved to an unrelated company by a former owner, and all
activity was transacted in the unrelated company.  Therefore, no revenues or
expenses were incurred by Net 1 from the date of acquisition, August 23, 1999,
through December 31, 1999.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The total cost of the acquisition was $1,164,561, which exceeded fair
value of the
net assets of Net 1 by $1,164,561.  The excess was deemed to be impaired at
December 31, 1999, due to the change in the operating environment and was
recorded as an impairment loss in our statement of operations for 1999 under the
&#8220;Impairment Loss&#8221; heading.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On October 12, 2000, the acquisition of Net 1 was rescinded.  Included in th
e
terms of the settlement agreement was the return to us of the 250,000 shares
issued by us in the original transaction. We then issued 250,000 shares of our
stock in settlement of the arbitration.  The settlement agreement also called for
one of the former owners of Net 1 to assume a $50,000 liability, that was recorded
by us upon the acquisition. The total gain on the recission of the Net 1 transaction,
$961,436, has been recorded in our statement of operations for 2000 under the
&#8220;Gain on Rescission&#8221; heading.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;For 1999 and 2000, our statements of operations reflect an income tax benefit of
$1,595,424 and $1,653,161, respectively, resulting from the difference in the bases of the
acquired customer bases for book versus tax purposes.  Due to the demise of the business of
CyberHighway, our statement of operations for 2001 will not contain a similar tax benefit.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Community Television Segment.  During 1999, this segment had no revenues and
incurred a nominal loss from operations.  As discussed above, effective July 1, 1999, we assigned
all of our community television properties to New Wave Media Corp. and is now defunct.  This
segment was discontinued as of that date and will not generate any revenues in the future.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Wireless Cable Segment.  The wireless cable segment has had no operating activity since
1997.  As described above, we have ceased, for the foreseeable future, our wireless cable
activities.</p>
<br>
<p>Liquidity and Capital Resources</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;General.  Since our inception, we have had a significant working capital deficit.  Prior to
our January 1999 acquisition of CyberHighway, we had no material revenues and we operated
from a severely illiquid position.  Following the CyberHighway acquisition and until the recent
demise of CyberHighway&#8217;s business, we generated significant monthly revenues, yet continued
to have a working capital deficit.  Currently, we are substantially illiquid, although we do possess
approximately $150,000 in cash, the result of recent securities sales to private investors.  Without
additional capital, it is possible that we would be forced to cease operations.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our Capital Needs.  To sustain our current level of operations for the next twelve months,
we will require additional capital of approximately $300,000.  To accomplish our goals of
expanding our Quick-Cell business, we will require at least $2.0 million.  If we are unable to
obtain this needed capital, we could be forced to cease our operations.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Currently we do not possess enough capital to accomplish our goals for our Quick-Cell
wireless Internet access business, including the construction of Quick-Cell systems.  When we
refer to the construction of a Quick-Cell system in any city, that process requires the following
expenditures:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;A single Quick-Cell cell site, including a Quick-Cell server modem, parts an
d
configuration &#8211; projected average cost: $25,000;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Tower lease site &#8211; projected average cost: $500 per month;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Direct T1 telephone line connection to the Internet &#8211; projected
average cost:
$1,200 per month; and</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Initial inventory of customer modems &#8211; approximate cost: $70,000.</p>

<br>
<p>Each Quick-Cell cell site added to an existing system will cost approximately $25,000 for the
server modem, parts and configuration, plus tower lease costs and, if customer usage requires,
the cost of a direct T1 telephone line connection to the Internet.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Should we be able to obtain the minimum of $400,000 per month pursuant to the Fusion
Capital agreement, we would have enough money to pay for the construction of the initial Quick-Cell cell site in at least three markets per month.  We cannot assure you that we will be able to
construct Quick-Cell cell sites at that rate.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In light of the relatively small amount of capital required to construct each Quick-Cell
cell site, we believe that the expected funding under the Fusion Capital agreement would provide
us with enough capital to construct the initial Quick-Cell cell site and commence marketing
activities in approximately 60 markets.  With the Quick-Cell construction permitted by this
amount of capital, we will be able to determine whether our Quick-Cell wireless Internet access
business is a viable business, as presently offered.  However, the funds expected under the
Fusion Capital agreement will not be adequate for us to pursue our complete Quick-Cell business
plan, and we cannot assure you that we will be able to obtain capital when needed.  Our inability
to obtain further capital when needed would lessen our chance of earning a profit, as we would
become illiquid.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Expected Proceeds from the Fusion Capital Agreement.  Beginning soon after the end of
the second quarter of 2001, we expect to being to receive the first funds of up to $10 million
under our agreement with Fusion Capital.  Assuming we receive the entire $10 million under that
agreement, of which there is no assurance, we anticipate that we will apply these funds as
follows:</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table16column1" width="50%" valign="middle"><p>Purchase of Quick-Cell Equipment</p>
</td>
<td class="table16column2" width="50%" valign="middle"><p>$ 6,000,000</p>
</td>
</tr>
<tr>
<td class="table16column1" width="50%" valign="middle"><p>Construction of Quick-Cell Systems</p>
</td>
<td class="table16column2" width="50%" valign="middle"><p>1,300,000</p>
</td>
</tr>
<tr>
<td class="table16column1" width="50%" valign="middle"><p>Marketing</p>
</td>
<td class="table16column2" width="50%" valign="middle"><p>1,000,000</p>
</td>
</tr>
<tr>
<td class="table16column1" width="50%" valign="middle"><p>General and Administrative Expenses</p>
</td>
<td class="table16column2" width="50%" valign="middle"><p>200,000</p>
</td>
</tr>
<tr>
<td class="table16column1" width="50%" valign="middle"><p>Finder's Fee</p>
</td>
<td class="table16column2" width="50%" valign="middle"><p>800,000</p>
</td>
</tr>
<tr>
<td class="table16column1" width="50%" valign="middle"><p>Working Capital</p>
</td>
<td class="table16column2" width="50%" valign="middle"><p>700,000</p>
</td>
</tr>
<tr>
<td class="table16column1" width="50%" valign="middle"><p>Total</p>
</td>
<td class="table16column2" width="50%" valign="middle"><p>$10,000,000</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;You should note, however, that we may not realize $10 million under the Fusion Capital
agreement, due to the current low market price of our common stock.  In addition, under the
Fusion Capital agreement, we must maintain compliance with certain criteria in order to avoid an
event of default.  These events of default are described on page 42, under the heading &#8220;Events of
Default&#8221;.  Currently, we are in compliance with these criteria and expect to remain in compliance
for the foreseeable future.  In this regard, you should review the &#8220;Risk Factors&#8221; section above.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Should all of our outstanding warrants, including all of the warrants to be issued in
connection with the Fusion Capital agreement, be exercised, we would receive cash proceeds of
approximately $2,540,000.  Funds received from the exercise of warrants would be used to
purchase Quick-Cell equipment, to construct Quick-Cell systems, to market our Quick-Cell
wireless Internet access service and for working capital.  Please see the discussion under &#8220;Use of
Proceeds&#8221;.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;You should note that we may never receive any of the funds discussed above.  Our failure
to obtain capital from these sources could cause us to cease our operations.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Potential Rescission Claims.  Because we lack the capital to pay any potential claims for
rescission that may be asserted by some of our shareholders, any such claim made against us
could negatively impact our ability to continue in business.  At December 31, 2000, a total of
2,767,823 of these shares valued at $3,897,552 had been issued and at March 31, 2001, a total of
4,381,985 of these shares valued at $4,869,255 had been issued, with an additional 500,000
shares valued at $212,000 having been issued since March 31, 2001.  We do not possess capital
with which to pay any such claims, if asserted, and, if such claims are asserted, it is possible that
we would be forced to cease operations, as our then-available capital could become severely
impaired.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Nevertheless, all of the shares that may be subject to these claims have been reclassified
on our balance sheet, that is, at December 31, 2000, and March 31, 2001, these shares were
removed from our &#8220;permanent&#8221; equity and reclassified as &#8220;Redeemable Common Stock&#8221;.  This
reclassification caused us to have large shareholders&#8217; deficits at December 31, 2000, and March
31, 2001.  These shares and their associated values will return to our &#8220;permanent&#8221; equity either
by passage of time for the timely assertion of the rescission claims or at such time as these shares
are sold or otherwise transferred by their holders, which ever occurs earlier.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;March 31, 2001.  Historically, we have had a significant working capital deficit.  At
March 31, 2001, our working capital deficit was $1,472,144, which is slightly lower than our
$1,517,164 deficit at December 31, 2000.  Although we had slightly higher accounts payable,
accrued payroll and notes payable to a shareholder at March 31, 2001, compared to December 31,
2000, these increases were offset by our receipt of cash pursuant to private sales of securities of
$261,000 during the first quarter of 2001.  Most of our accounts payable are accounts payable of
CyberHighway.  Without additional capital, our working capital deficit can be expected to
become larger each quarter.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The following table sets forth our current assets and current liabilities at March 31, 2001,
and December 31, 2000:</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table17column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table17column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table17column3" width="25%" valign="middle"><p>3/31/01</p>
</td>
<td class="table17column4" width="25%" valign="middle"><p>12/31/00</p>
</td>
</tr>
<tr>
<td class="table17column1" width="25%" valign="middle"><p>Current Assets</p>
</td>
<td class="table17column2" width="25%" valign="middle"><p>Cash</p>
</td>
<td class="table17column3" width="25%" valign="middle"><p>$125,494</p>
</td>
<td class="table17column4" width="25%" valign="middle"><p>$1,088</p>
</td>
</tr>
<tr>
<td class="table17column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table17column2" width="25%" valign="middle"><p>Accounts Receivable</p>
</td>
<td class="table17column3" width="25%" valign="middle"><p>384</p>
</td>
<td class="table17column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table17column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table17column2" width="25%" valign="middle"><p>Inventory</p>
</td>
<td class="table17column3" width="25%" valign="middle"><p>246,721</p>
</td>
<td class="table17column4" width="25%" valign="middle"><p>246,721</p>
</td>
</tr>
<tr>
<td class="table17column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table17column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table17column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table17column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table17column1" width="25%" valign="middle"><p>Current Liabilities</p>
</td>
<td class="table17column2" width="25%" valign="middle"><p>Disbursements in
excess of cash balances</p>
</td>
<td class="table17column3" width="25%" valign="middle"><p>$42,469</p>
</td>
<td class="table17column4" width="25%" valign="middle"><p>$42,469</p>
</td>
</tr>
<tr>
<td class="table17column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table17column2" width="25%" valign="middle"><p>Accounts payable</p>
</td>
<td class="table17column3" width="25%" valign="middle"><p>1,473,817</p>
</td>
<td class="table17column4" width="25%" valign="middle"><p>1,472,030</p>
</td>
</tr>
<tr>
<td class="table17column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table17column2" width="25%" valign="middle"><p>Accrued payroll</p>
</td>
<td class="table17column3" width="25%" valign="middle"><p>200,155</p>
</td>
<td class="table17column4" width="25%" valign="middle"><p>158,262</p>
</td>
</tr>
<tr>
<td class="table17column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table17column2" width="25%" valign="middle"><p>Other current liabilities</p>
</td>
<td class="table17column3" width="25%" valign="middle"><p>51,824</p>
</td>
<td class="table17column4" width="25%" valign="middle"><p>41,824</p>
</td>
</tr>
<tr>
<td class="table17column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table17column2" width="25%" valign="middle"><p>Property dividends
payable</p>
</td>
<td class="table17column3" width="25%" valign="middle"><p>43,750</p>
</td>
<td class="table17column4" width="25%" valign="middle"><p>43,750</p>
</td>
</tr>
<tr>
<td class="table17column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table17column2" width="25%" valign="middle"><p>Notes payable to
stockholder</p>
</td>
<td class="table17column3" width="25%" valign="middle"><p>32,728</p>
</td>
<td class="table17column4" width="25%" valign="middle"><p>6,638</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our accrued payroll at March 31, 2001, as well as at December 31, 2000, is attributable to
accrued salary of our president and two of our vice presidents.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The increase in notes payable to stockholder, from $6,638 at December 31, 2000, to
$32,728 at March 31, 2001, represents loans made to us by our president, David M. Loflin.  All
of this indebtedness is due on demand and bears interest at 8% per annum.  The funds loaned
during the first quarter of 2000 were used primarily for operating expenses.  Mr. Loflin has
advised us that he does not intend to demand payment of his loans, until their repayment would
not adversely affect our financial position.  Without outside funding, it is possible that Mr. Loflin
may loan us additional funds, though no assurance or prediction can be made in this regard.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In addition to Mr. Loflin&#8217;s loans, during the first quarter of 2001, we obtained a total of
$261,000 in cash from private sales of our securities.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In February 2001, we sold 840,000 units of securities, each unit being
comprised
of one share of our stock and one warrant with an exercise price of $.15 per share,
to a private investor for $126,000 in cash.  The warrants are exercisable for a
period of three years.  The proceeds from this sale of securities will be applied to
the payment of approximately $50,000 in professional fees and the balance will be
used for working capital.  In connection with this sale of securities, we issued to a
finder 84,000 shares of our common stock and a warrant to purchase 336,000
shares of our common stock at an exercise price of $.15 per share.  These warrants
are exercisable for a period of three years.  The 84,000 shares issued to the finder
were valued at $.15 per share, a total value of $12,600.  No value was placed on
the warrants issued.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In March 2001, we sold 500,000 units of securities, each unit being
comprised of
one share of our stock and one warrant with an exercise price of $.25 per share, to
a private investor for $125,000 in cash.  The warrants are exercisable for a period
of three years.  Approximately 60% of the proceeds from this sale of securities
will be applied to the construction of a Quick-Cell system and the balance will be
used for working capital.  In connection with this sale of securities, we issued to a
finder 50,000 shares of our common stock and a warrant to purchase 200,000
shares of our common stock at an exercise price of $.25 per share.  These warrants
are exercisable for a period of three years.  The 50,000 shares issued to the finder
were valued at $.25 per share, a total value of $12,500.  No value was placed on
the warrants issued.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The funds received were used for working capital and for the initial costs associated with
the establishment of a new company-owned Quick-Cell wireless Internet access system.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Without obtaining at least $1,000,000 in new capital, we will continue to have a
significant working capital deficit and will not be able to operate from a position of liquidity.
This will impair our ability to pursue our Quick-Cell business plan and, thus, our ability ever to
earn a profit.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If we are unable to obtain significant additional capital, it is possible that we would be
forced to cease operations.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Cash Flows from Operating Activities.  During the first quarter of 2001, our operations
used $162,684 in cash compared to cash used of $305,779 during the first quarter of 2000.  In
both periods, the use of cash in operations was a direct result of the lack of revenues compared to
our operating expenses, particularly salary and commissions.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Cash Flows from Investing Activities.  During the first quarter of 2001, our investing
activities neither provided nor used cash.  In the first quarter of 2000, we used cash of $94,908 in
our investing activities, where our equipment purchases were offset, in part, by cash acquired in
acquisitions.  Because we lack working capital, we cannot predict our cash flows from investing
activities for the remainder of 2001.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Cash Flows from Financing Activities.  For the first quarter of 2001, our financing
activities provided $287,090 in cash.  Of this amount, $26,090 is attributable to loans from our
president and $261,000 is attributable to private sales of securities.  For the first quarter of 2000,
our financing activities provided $384,397 in cash, $115,000 of which is attributable to private
sales of our securities and $286,400 of which is attributable to loans from our president.  We
continue to seek capital and cannot, therefore, predict future levels of cash flows from financing
activities.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;December 31, 2000.  At December 31, 2000, our working capital deficit was $1,517,164,
which is greater than our working capital deficit at December 31, 1999, of $694,937.  Our deficit
would have been significantly larger, if not for our president&#8217;s converting $967,000 of our
indebtedness to him (including interest) into shares of our stock.  This conversion of debt into
stock was more than offset by an increase in accounts payable, accrued salary and other current
liabilities.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The following table sets forth our current assets and current liabilities at December 31,
2000 and 1999:</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table18column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table18column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table18column3" width="25%" valign="middle"><p>2000</p>
</td>
<td class="table18column4" width="25%" valign="middle"><p>1999</p>
</td>
</tr>
<tr>
<td class="table18column1" width="25%" valign="middle"><p>Current Assets</p>
</td>
<td class="table18column2" width="25%" valign="middle"><p>Cash</p>
</td>
<td class="table18column3" width="25%" valign="middle"><p>$1,088</p>
</td>
<td class="table18column4" width="25%" valign="middle"><p>$75,313</p>
</td>
</tr>
<tr>
<td class="table18column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table18column2" width="25%" valign="middle"><p>Accounts Receivable</p>
</td>
<td class="table18column3" width="25%" valign="middle"><p>0</p>
</td>
<td class="table18column4" width="25%" valign="middle"><p>59,098</p>
</td>
</tr>
<tr>
<td class="table18column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table18column2" width="25%" valign="middle"><p>Inventory</p>
</td>
<td class="table18column3" width="25%" valign="middle"><p>246,721</p>
</td>
<td class="table18column4" width="25%" valign="middle"><p>386,802</p>
</td>
</tr>
<tr>
<td class="table18column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table18column2" width="25%" valign="middle"><p>Prepaids</p>
</td>
<td class="table18column3" width="25%" valign="middle"><p>0</p>
</td>
<td class="table18column4" width="25%" valign="middle"><p>5,500</p>
</td>
</tr>
<tr>
<td class="table18column1" width="25%" valign="middle"><p>Current Liabilities</p>
</td>
<td class="table18column2" width="25%" valign="middle"><p>Disbursements in
excess of cash balances</p>
<p>Notes payable - current
portion</p>
</td>
<td class="table18column3" width="25%" valign="middle"><p>42,469</p>
<p>0</p>
</td>
<td class="table18column4" width="25%" valign="middle"><p>0</p>
<p>5,910</p>
</td>
</tr>
<tr>
<td class="table18column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table18column2" width="25%" valign="middle"><p>Accounts payable</p>
</td>
<td class="table18column3" width="25%" valign="middle"><p>1,472,030</p>
</td>
<td class="table18column4" width="25%" valign="middle"><p>363,665</p>
</td>
</tr>
<tr>
<td class="table18column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table18column2" width="25%" valign="middle"><p>Accrued payroll</p>
</td>
<td class="table18column3" width="25%" valign="middle"><p>158,262</p>
</td>
<td class="table18column4" width="25%" valign="middle"><p>118,157</p>
</td>
</tr>
<tr>
<td class="table18column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table18column2" width="25%" valign="middle"><p>Other current liabilities</p>
</td>
<td class="table18column3" width="25%" valign="middle"><p>41,824</p>
</td>
<td class="table18column4" width="25%" valign="middle"><p>216,650</p>
</td>
</tr>
<tr>
<td class="table18column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table18column2" width="25%" valign="middle"><p>Property dividends
payable</p>
</td>
<td class="table18column3" width="25%" valign="middle"><p>43,750</p>
</td>
<td class="table18column4" width="25%" valign="middle"><p>43,750</p>
</td>
</tr>
<tr>
<td class="table18column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table18column2" width="25%" valign="middle"><p>Accrued interest to
stockholder</p>
</td>
<td class="table18column3" width="25%" valign="middle"><p>0</p>
</td>
<td class="table18column4" width="25%" valign="middle"><p>29,741</p>
</td>
</tr>
<tr>
<td class="table18column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table18column2" width="25%" valign="middle"><p>Notes payable to
stockholder</p>
</td>
<td class="table18column3" width="25%" valign="middle"><p>6,638</p>
</td>
<td class="table18column4" width="25%" valign="middle"><p>356,239</p>
</td>
</tr>
<tr>
<td class="table18column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table18column2" width="25%" valign="middle"><p>Deferred revenue</p>
</td>
<td class="table18column3" width="25%" valign="middle"><p>0</p>
</td>
<td class="table18column4" width="25%" valign="middle"><p>87,538</p>
</td>
</tr>
</TABLE>
</div>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Many balance sheet line items changed significantly from 1999 to 2000.  These changes
are summarized below:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Accounts Payable &#8211; our accounts payable increased to $1,472,030 in
2000, from
$363,665 in 1999.  This increase is due to our lack of capital throughout 2000,
compounded by our decision to suspend payment of most of our accounts,
beginning in April 2000.  Approximately 80% of our accounts payable are
accounts payable of CyberHighway.  Currently, CyberHighway&#8217;s creditors must
pursue their claims through the bankruptcy proceeding.  USURF America is not
responsible for the payment of any of CyberHighway&#8217;s accounts payable.  We
expect that the debts embodied in the accounts payable of CyberHighway will,
ultimately, be discharged pursuant to the bankruptcy proceeding.  At that as-yet
unidentified time, CyberHighway&#8217;s accounts payable will no longer appear on our
balance sheet.</p>
<p style="margin-left: 1in">&#160;</p>
<p style="margin-left: 1in">During the first quarter of 2001, USURF America paid some of its accounts
payable.  No creditor has taken adverse action against USURF America as a result
of its past accounts payable payment policy and none is expected.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Other Current Liabilities &#8211; our other current liabilities decreased
from 1999 to
2000, from $216,650 to $41,824.  This change resulted from the rescission of the
Net 1 acquisition transaction, as Net 1's liabilities were removed.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Accrued Interest to Stockholder &#8211; at December 31, 2000, we owed our
president
only $6,638, because of his converting approximately $967,000 that we owed him
into shares of our stock in August 2000.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Deferred Revenue &#8211; we had no deferred revenue for 2000, due to the
sudden
demise of CyberHighway during the last quarter of 2000.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Long-term Liabilities &#8211; at December 31, 2000, we had no long-term
liabilities.
Our 1999 long-term liabilities consisted primarily of deferred taxes relating to our
acquired customer bases.  However, deferred taxes are no longer applicable, since
our intangible assets have been written off.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Subscriptions Receivable &#8211; this amount of $933,514 arises from our
president&#8217;s
converting his loans into shares of our stock. This entry appears due to the fact
that the shares issued in that transaction were not actually issued until after
December 31, 2000, due to an administrative oversight.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Stockholders&#8217; Equity (Deficit) &#8211; at December 31, 2000, we had
a stockholders&#8217;
deficit of $4,678,209, the result of the write off of all of our intangible assets and
the reclassification of the shares of common stock subject to potential rescission
claims.  This is compared to our stockholders&#8217; equity of $14,440,309 at December
31, 1999.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Without obtaining at least $1,000,000 in new capital, we will continue to have a
significant working capital deficit and will not be able to operate from a position of liquidity.
This will impair our ability to pursue our Quick-Cell business plan and, thus, our ability ever to
earn a profit.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our accrued payroll at December 31, 2000, as well as at December 31, 1999, is primarily
attributable to accrued salary of our president and two of our vice presidents.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In August 2000, our president, David M. Loflin, converted the entire amount owed to
him, including accrued interest, into a total of 774,162 shares of our common stock.  The total
amount of indebtedness converted to common stock was $967,703.  Mr. Loflin received one
share for each $1.25 owed him - $1.25 was the low sale price for our common stock on the
American Stock Exchange on August 18, 2000, the last trading day prior to the conversion.  Until
converted, all of the loans from Mr. Loflin were payable on demand, with interest accruing at 8%
per annum.  The funds loaned by Mr. Loflin were used primarily for operating expenses,
including expenses of CyberHighway, corporate overhead and the construction of our Quick-Cell
system in Santa Fe, New Mexico.  Subsequent to the conversion transaction, Mr. Loflin has
loaned us small sums.  At December 31, 2000, we owed Mr. Loflin $6,638.  All sums owed to
Mr. Loflin are payable on demand, with interest accruing at 8% per annum.   We cannot assure
you that Mr. Loflin will continue to loan us money when we need it.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;During 2000, we obtained funds from sales of our securities on two occasions:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In March and April 2000, we sold a total of 60,000 units of securities to
private
investors, each unit being comprised of one share of our stock and one warrant
with an exercise price of $7.50 per share.  The warrants are exercisable for a
period of two years.  Each unit was sold for $5.00 in cash, for total proceeds of
$300,000.  These proceeds were used to pay approximately $275,000 in operating
expenses, including operating expenses of CyberHighway, and to purchase about
$50,000 of equipment.</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In December 2000, we sold 400,000 shares of our common stock to a private
investor for $80,000 in cash, $70,000 of which was received in December 2000
and $10,000 of which was received in 2001.  The proceeds from this sale of stock
were used to pay accounting expenses and for working capital.  In connection with
this sale of stock, we issued to a finder 40,000 shares of our common stock and a
warrant to purchase 380,000 shares of our common stock at an exercise price of
$.20 per share.  These warrants are exercisable for a period of three years.  The
40,000 shares issued to the finder were valued at $.20 per share, a total value of
$8,000.  No value was placed on the warrants issued.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As described above, subsequent to 2000, we have sold securities for cash in the total
amount of $251,000 for use in payment of professional fees, construction of a Quick-Cell system
and for working capital.  </p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If we are unable to obtain significant additional capital, it is possible that we would be
forced to cease operations.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Community Television Stations. In furtherance of our plan to focus on the
implementation of our Quick-Cell business plan, effective July 1, 1999, we assigned all of our
community (low power) television properties to New Wave Media Corp., in exchange for
1,500,000 shares of New Wave common stock.  Our board of directors declared a dividend with
respect to all 1,500,000 New Wave shares.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Cash Flows from Operating Activities.  During the year ended December 31, 2000, our
operations used $953,112 in cash compared to cash used of $546,097 during 1999.  In both years,
the use of cash in operations was a direct result of the lack of revenues compared to our operating
expenses, particularly our Internet access costs and salary and commissions.  The recent demise
of the business of CyberHighway has served to reduce substantially our ongoing operating
expenses; however, its demise also reduced our revenues to insubstantial amounts.  The effects of
the demise of CyberHighway will not be readily apparent from our financial statements until the
first quarter of 2001.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;For the year ended December 31, 2000, our operations would have used approximately
$750,000 more in cash, had we not determined to defer payment of nearly all of our accounts
payable for most of the year, due to our lack of working capital.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Cash Flows from Investing Activities.  During the year ended December 31, 2000, our
investing activities used cash of $85,150 compared to $412,785 in 1999.  During 2000, in our
investing activities, purchases of equipment used cash, though to a lesser extent than during
1999; in 1999, our equipment purchases of $614,193 were offset, to some degree, by cash
acquired in acquisitions of $186,318.  Because we lack working capital, we cannot predict our
cash flows from investing activities for 2001.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Cash Flows from Financing Activities.  For 2000, our financing activities provided
$964,037 in cash.  Of this amount, $568,571 is attributable to loans from our president and
$370,000 is attributable to sales of securities.  For 1999, our financing activities provided
$1,026,963 in cash, $235,010 of which is attributable to loans from our president and $545,000
of which is attributable to private sales of our securities.  We continue to seek capital and cannot,
therefore, predict future levels of cash flows from financing activities. However, we expect that
financing activities will provide significant sums of cash, as a result of sales of our common
stock expected under the agreement with Fusion Capital.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Non-Cash Investing and Financing Activities.  During the year ended December 31, 2000,
we issued a total of 2,262,166 shares of common stock under consulting agreements; these shares
have been valued at $3,110,000, in the aggregate.  Also during 2000, we issued a total of 131,063
shares of common stock in acquisitions, which shares were valued at $761,751, in the aggregate.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In August 2000, we issued 250,000 shares of our common stock to a vice president as a
signing bonus under his employment agreement, which were valued at $500,000, in the
aggregate.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In July 2000, we  we entered into an investment banking agreement with Gruntal &amp; Co.,
L.L.C., under which we issued 250,000 shares of our common stock, valued at $470,000, in the
aggregate.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In December 2000, we issued a total of 500,000 shares of our common stock as bonuses
to two of our vice presidents, which were valued at $.24 per share, the last closing price of our
common stock prior to the issuances, a total value of $119,000.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;During 1999, non-cash investing and financing activities included the issuance of shares
for the acquisition of several businesses. By far the largest of these transactions was the
acquisition of CyberHighway.  We issued 2,325,000 shares of our common stock in connection
with this acquisition.  These shares were valued at approximately $18,530,250.  Each of the four
other Internet service providers acquired by us were assimilated into the operations of
CyberHighway.  Now, with the involuntary bankruptcy of CyberHighway, none of these Internet
service providers represents a portion of our continuing operations.  Our historical balance sheets
have reflected these acquisition values, less accumulated amortization.  However, due to the
recent demise of CyberHighway, the unamortized portion of this value was written-off on our
December 31, 2000 balance sheet.  We have suspended, for the foreseeable future, the
development of the acquired business known as www.usurf.com, due to a lack of capital, the
acquisition of which was valued at $863,000, and we have determined not to pursue the
development of www.e-tail.com.</p>
<br>
<p>Management&#8217;s Plans Relating to Future Liquidity</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;To sustain our current level of operations for the next twelve months, we will require
additional capital of approximately $300,000.  To accomplish our goals of expanding our Quick-Cell business, we will require at least $2.0 million.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our best opportunity for obtaining needed funds is pursuant to the Fusion Capital
agreement.  The following summarizes the important terms under the Fusion Capital agreement:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Fusion Capital may purchase up to $10 million of our common stock;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The selling price to Fusion Capital will be equal to a price based upon
the future
market price of the common stock without any fixed discount to the market price;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have the right to require Fusion Capital to purchase up to $400,000 each

month during the agreement;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Should our stock price be $5.00 or higher for five consecutive trading
days, we
have the right to require Fusion Capital to purchase up to the full remaining
portion of the $10 million commitment; and</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;During the term of the Fusion Capital agreement, we may not issue, or
agree to
issue, any variable-priced equity or variable-priced &#8220;equity-like&#8221; securities, unless
we have obtained Fusion Capital's prior written consent.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We may never realize proceeds under the Fusion Capital agreement.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Should we obtain at least $2.0 million under the Fusion Capital agreement, we expect that
we will be able to accomplish our two primary objectives:</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Placing at least 20,000 customers on our Quick-Cell systems during the
next year;
and</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;proving the commercial viability of our Quick-Cell wireless Internet access

service.</p>
<br>
<p>We cannot assure you that we will accomplish these objectives.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Due to the current low market price for our common stock, it is a distinct possibility that
we will not receive all $2.0 million needed to achieve the two primary objectives described
above.  This circumstance could make it extremely difficult for us to obtain additional capital
with which to expand our business.  In this regard, you should read the &#8220;Risk Factors&#8221; section
above.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Currently, we have no other sources for funding on the scale of the Fusion Capital
transaction.</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;If we do not obtain the necessary funding, we would be forced to cease operations.</p>
<br>
<p>Capital Expenditures</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;During 2000, we made approximately $195,000 in equipment purchases, approximately
40% for wireless Internet equipment and approximately 60% for needed equipment in our
network operations center.  We currently have no capital with which to make any significant
capital expenditures.  Should we obtain funding under the Fusion Capital agreement, we will be
able to make major expenditures on Quick-Cell-related equipment, as described above.
However, without additional capital, we will make no capital expenditures.  During Fiscal 1999,
we made $614,193 in equipment purchases.  During the first quarter of 2001, we made no capital
expenditures, due to our limited amount of capital.  It is likely that we will lack capital to make
capital expenditures, unless and until we begin to obtain funds under the Fusion Capital
agreement.</p>
<br>
<p>Year 2000 Issues</p>
<br>
<p>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We experienced no problems related to Year 2000 issues.  During our efforts to become
completely Year 2000 compliant, we incurred expenses of approximately $75,000.</p>
<br>
<p style="text-align: center; line-height: 0.197919in">REGULATION</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Quick-Cell Wireless Internet Access.  Our Quick-Cell wireless Internet access products
operate in unregulated spectra, the 900 MHz and 2400 MHz spectra (primarily the 2400 MHz
spectrum), and we expect that such spectra will remain unregulated.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Regulation of Internet Access Services.  We provide Internet access, in part, using
telecommunications services provided by third-party carriers. Terms, conditions and prices for
telecommunications services are subject to economic regulation by state and federal agencies.
As an Internet access provider, we are not currently subject to direct economic regulation by the
FCC or any state regulatory body, other than the type and scope of regulation that is applicable to
businesses generally.  In April 1998, the FCC reaffirmed that Internet access providers should be
classified as unregulated "information service providers" rather than regulated
"telecommunications providers" under the terms of the Federal Telecommunications Act of
1996.  As a result, we are not subject to federal regulations applicable to telephone companies
and similar carriers merely because we provide our services using telecommunications services
provided by third-party carriers.  To date, no state has attempted to exercise economic regulation
over Internet access providers.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Governmental regulatory approaches and policies to Internet access providers and others
that use the Internet to facilitate data and communication transmissions are continuing to develop
and, in the future, we could be exposed to regulation by the FCC or other federal agencies or by
state regulatory agencies or bodies.  In this regard, the FCC has expressed an intention to
consider whether to regulate providers of voice and fax services that employ the Internet, or IP,
switching as "telecommunications providers", even though Internet access itself would not be
regulated. The FCC is also considering whether providers of Internet-based telephone services
should be required to contribute to the universal service fund, which subsidizes telephone service
for rural and low income consumers, or should pay carrier access charges on the same basis as
applicable to regulated telecommunications providers. To the extent that we engage in the
provision of Internet or Internet protocol-based telephony or fax services, we may become
subject to regulations promulgated by the FCC or states with respect to such activities.  We
cannot assure you that these regulations, if adopted, would not adversely affect our ability to
offer certain enhanced business services in the future.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Regulation of the Internet.  Due to the increasing popularity and use of the Internet by
broad segments of the population, it is possible that laws and regulations may be adopted with
respect to the Internet pertaining to content of Web sites, privacy, pricing, encryption standards,
consumer protection, electronic commerce, taxation, and copyright infringement and other
intellectual property issues.  No one is able to predict the effect, if any, that any future regulatory
changes or developments may have on the demand for our Internet access or other Internet-related services.  Changes in the regulatory environment relating to the Internet access industry,
including the enactment of laws or promulgation of regulations that directly or indirectly affect
the costs of telecommunications access or that increase the likelihood or scope of competition
from national or regional telephone companies, could materially and adversely affect our
business, operating results and financial condition.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">BUSINESS</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">History</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In July 1999, we changed our name to &#8220;USURF America, Inc.&#8221;, from &#8220;Internet Media
Corporation&#8221;.  We were incorporated on November 1, 1996, under the name &#8220;Media
Entertainment, Inc.&#8221;, to act as a holding company in the wireless cable and community (low
power) television industries.  Due to current market conditions in the wireless cable industry, we
have abandoned efforts to develop our wireless cable properties.  In furtherance of our plan to
focus on the exploitation of our Quick-Cell wireless Internet access products, we assigned all of
our community (low power) television properties to New Wave Media Corp.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Since September 1998, we have acquired seven dial-up ISPs, the business of www.e-tail.com and a web design firm.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Current Overview</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our management has committed all available current and future capital and other
resources to the commercial exploitation of our Quick-Cell wireless Internet access products.  It
is these products upon which our future is based.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our dial-up Internet access business has lost nearly all of its customers and, for the
foreseeable future, we have abandoned development of our e-commerce business.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Recent Developments</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On September 29, 2000, an involuntary bankruptcy petition was filed against
CyberHighway, our wholly-owned subsidiary, in the Idaho Federal Bankruptcy Court.  The
petition was brought by ProPeople Staffing, CTC Telecom, Inc. and Hawkins-Smith.  In
December 2000, a settlement was reached and the petitioning creditors and CyberHighway filed a
joint motion to dismiss this involuntary proceeding.  The joint motion to dismiss requires the
approval of CyberHighway&#8217;s creditors.  However, some of CyberHighway&#8217;s creditors have
objected to the dismissal of the proceeding.  The basis of the creditors&#8217; objection is their belief
that CyberHighway&#8217;s as-yet unasserted damage claims against the original petitioning creditors
and their law firm represent CyberHighway&#8217;s most valuable assets.  These objecting creditors
desire that these claims be adjudicated in the bankruptcy court.  It is likely that, at some time in
the future, a final order of bankruptcy will be entered with respect to CyberHighway.  No
prediction of the timing of such an order can be made, although we believe that such an order
would come only after the final adjudication of the claims described above.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Due primarily to the involuntary bankruptcy proceeding, CyberHighway has lost nearly
all of its customers.  We do not expect that CyberHighway will resume operations.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On May 9, 2001, we executed the Fusion Capital agreement, which replaced a similar
agreement dated October 9, 2001.  Under this agreement, Fusion Capital may purchase up to $10
million of our common stock over a period of up to 25 months. (See &#8220;The Fusion Capital
Transaction&#8221;, page 40).  This prospectus relates to the resale of the shares issued and to be issued
pursuant to the Fusion Capital agreement.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;With the recent merger between Qwest Communications and US West, we do not expect
to execute final agreements that embody our previously announced letter of intent.  This change
in circumstance will not hinder our Quick-Cell business plan.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have abandoned our plan to establish ourselves as a national dial-up Internet service
provider.  Because of this change, we terminated our contracts with two companies that serve as
Internet backbone providers, NaviNet, Inc. and ioNET, Inc., a subsidiary of PSINet, Inc., with no
liability accruing to us.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In April 2001, we entered into a Quick-Cell reseller agreement with Wireless
WebConnect!, Inc., a Florida-based national reseller of wireless Internet access services.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Industry Background</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Growth of the Internet; the World Wide Web.  The Internet, commonly known as the
World Wide Web, or simply the Web, is a collection of connected computer systems and
networks that link millions of public and private computers to form, essentially, the largest
computer network in the world.  The Internet has experienced rapid growth in recent years and is
expected to continue its growth.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Internet Access.  Internet access services represent the means by which ISPs interconnect
business and consumer users to the Internet's resources.  Access services vary from dial-up
modem access, like that provided by our CyberHighway subsidiary, for individuals and small
businesses to high-speed dedicated transmission lines for broadband access by large
organizations to wireless Internet access systems, like our Quick-Cell wireless Internet access
system.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Strategic Relationships</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Financial Relationships.  We view our investment banking relationship with Gruntal &amp;
Co., L.LC., New York, New York, and our recently established relationship with Fusion Capital
as valuable strategic relationships as we move ahead with efforts to exploit our wireless Internet
access products.  Our efforts will require significant capital and we expect that these relationships
will assist in obtaining some of the needed capital.  However, we cannot assure you that this will
be the case.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Business Relationship.  We recently entered into a reseller agreement relating to our
Quick-Cell wireless Internet access products with Wireless WebConnect!, Inc., a Florida-based
subsidiary of Intellicall, Inc., a publicly-held company.  WebConnect is a nationally-known
reseller of wireless Internet access services.  Based on statements made by WebConnect
personnel, we anticipate that this strategic alliance will provide us a relatively rapid means of
increasing the number of Quick-Cell customers.  However, because activities under this
agreement have only recently begun, there is no actual sales data available upon which you can
judge WebConnect&#8217;s ability to resell our Quick-Cell products.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Wireless Internet Access</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;What is Wireless Internet?  &#8220;Wireless Internet&#8221; is a new type of communications
spectrum recently designated by the FCC.  Wireless Internet access requires a transmission
facility maintained by an ISP employing a wireless system and the user&#8217;s modem (a
transmitter/receiver modem) equipped with an antenna.  Wireless Internet capability allows users
to access the Internet from a stationary computer or, in some situations, from a mobile, lap-top
computer.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;What is Quick-Cell?  &#8220;Quick-Cell&#8221; is the brand name of our proprietary wireless Internet
access system.  Each Quick-Cell system is comprised of one or more server modems, or cells.
Server modems, which are less than one cubic foot in size, are mounted on tall structures, towers,
tall buildings or billboards, for example.  The space needed for mounting the server modems can
be leased for an average monthly payment of about $500.  Each server modem relays transmitted
data directly into the Internet via a T1, or larger, telephone line.  The monthly charge for each T1
line ranges from $600 to $1,500, depending on the market.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Installed customer modems, which are slightly larger in size than a deck of playing cards,
transmit data to, and receive data from, a server modem.  Each customer modem is installed in
the customer&#8217;s computer and connected by a thin cable to a small antenna that is mounted on the
outside of the customer&#8217;s place of business or home, as the case may be.  The installation process
for customer modems is quite similar to that of cable television: the installation crew installs the
customer modem in the computer, mounts the antenna outside, connects the modem and antenna
with the cable and tests the connection.  Depending on the market, each customer installation is
expected to cost between $40 and $80.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The number of Quick-Cell server modems needed for a particular system depends on a
few factors:</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;the geographic size of the city to be served
&#8211; each server modem&#8217;s signal covers
an area approximately seven miles in diameter;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;the population density of the city to be served
&#8211; since each server modem is
capable of handling up to approximately 4,000 customers, the greater the
population density, the greater the number of server modems required;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;the terrain of the city to be served &#8211; the
hillier the terrain, the greater the number
of server modems required; and</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;the density of foliage of the city to be served
&#8211; more densely foliated areas require
a greater number of server modems.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Within a particular system, each additional server modem is configured to share
transmitted data with the other server modems, so as to provide an uninterrupted connection to
the Internet.  In a Quick-Cell system with multiple server modems, the server modems are
geographically located in a honeycomb fashion, for technical reasons.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Data transmission speeds remain constant within a Quick-Cell system&#8217;s transmission
radius, regardless of the distance from the server modem.  On the fringes of a Quick-Cell
system&#8217;s transmission radius, a customer&#8217;s connection may fade in and out, similar to the
reception of distant AM radio stations.  To avoid this circumstance, we will attempt to avoid
installing a customer modem within the fringe areas.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Quick-Cell Equipment and Facilities.  Until February 2001, all of our Quick-Cell
modems were manufactured for us by OTC Telecom, San Jose, California, using off-the-shelf
circuit boards and other parts.  These modems cost approximately $300 each, because we lacked
capital to purchase large quantities at a reduced per-modem cost.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In February 2001, we completed the design and testing of our own modem circuit board.
This advancement has freed us from our dependence on OTC Telecom for modems.  We now are
able to solicit competitive bids from circuit board manufacturers and other parts suppliers, then
assemble the modems in our new facility located in Baton Rouge, Louisiana.  Our first assembly
run in this facility began in May 2001.  With these changes, the modems will cost approximately
$250.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In June 2001, we completed development of a new configuration of our Quick-Cell server
modem which will permit each server modem to serve approximately 4,000 users, or twice as
many users as earlier server modem configurations.  Because we will be required to construct
fewer server modem sites as we build-out a particular Quick-Cell market, this advancement is
expected to reduce our future Quick-Cell system build-out costs by approximately 20%.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We will not construct towers on which to mount server modems.  Instead, we will lease
tower spaces, rooftop spaces or spaces on other tall structures.  We have recently signed 23
individual, single-city tower leases with SBA Communications Corporation, a Boca Raton,
Florida-based tower company.  We are currently negotiating with other tower companies for
similar agreements in other cities.  Based on our management&#8217;s experience, securing adequate
locations to mount the server modems is not expected to impede Quick-Cell system construction
in any market.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In each market, we will obtain the necessary fiber-optic telephone line connections to the
Internet from one of the many telecommunications companies capable of providing an adequate
Internet connection.  Based on our past experience, we do not believe that we will encounter any
difficulty in obtaining needed connections to the Internet at acceptable prices.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Quick-Cell System Control Software.  We have developed software that enables us to
control the data transmission speed of each customer modem within each Quick-Cell system, all
from a single location.  With this software, we are able to increase or decrease a customer&#8217;s data
transmission speed in just a few minutes&#8217; time.  This software also permits us to monitor easily
each Quick-Cell server modem&#8217;s bandwidth usage, which will enable us to add a server modem
to a Quick-Cell system that is approaching maximum capacity prior to the time that system
becomes overloaded and its transmission speed slows.  This capability will enhance our ability to
provide our customers data transmission service at speeds for which they contracted.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Current Market.  We have one Quick-Cell system operating in Santa Fe, New Mexico,
where we serve approximately 120 customers.  We have been unable to acquire more customers
in Santa Fe, because we have lacked capital for advertising and customer installation expenses.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Reseller Agreement.  In April 2001, we entered into a Quick-Cell reseller agreement with
Wireless WebConnect!, Inc., a Florida-based wireless Internet access reseller.  Prior to this time,
WebConnect has acted primarily as a reseller of a nationally-known wireless Internet access
service, known as &#8220;Ricochet<sup>TM</sup>&#8221;, which is offered by Metricom, Inc., San Jose, California.  Our
reseller agreement with WebConnect is for an initial term of 10 years.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Under the reseller agreement, WebConnect will select markets in which it desires to
market our Quick-Cell service and begin to pre-sell the service.  When 200 customers have
subscribed to the service, we will construct the Quick-Cell system for that market, at
WebConnect&#8217;s expense, paid in advance.  WebConnect will also purchase all customer modems
from us.  We will provide all customer installation services, at WebConnect&#8217;s expense.
WebConnect will provide all first level customer support services, services that do not require a
visit to the customer&#8217;s location.  We will provide all second level customer support services,
services that require technical expertise and/or a visit to the customer&#8217;s location, at
WebConnect&#8217;s expense.  In addition, WebConnect will pay us a monthly per-customer royalty
that we expect to average about $12.  However, because WebConnect has not yet begun selling
our Quick-Cell service in any market, we cannot state with certainty the actual average monthly
per-customer royalties that we will be paid by WebConnect.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;While WebConnect has achieved a high level of success in reselling Metricom&#8217;s
Ricochet<sup>TM</sup> wireless Internet service, we cannot assure you that WebConnect will be successful in
reselling our Quick-Cell service.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;It is possible that WebConnect&#8217;s rate of sales will outstrip our ability to obtain needed
equipment, including customer modems, due to our lack of capital, or ability to hire and train
qualified installation crews.  In these circumstances, we would be unable to take full advantage
of WebConnect&#8217;s abilities, thereby limiting potential profits.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Other Quick-Cell Marketing Strategies.  In the middle of 2000, we began marketing our
Quick-Cell systems to local exchange telephone companies, independent telephone companies,
digital subscriber line resellers and Internet service providers.  We sold three Quick-Cell systems
in a short time.  Due to a lack of capital, we have suspended this marketing effort.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;These Quick-Cell systems were sold to companies located in Brownwood, Texas,
Wheeling, West Virginia, and San Juan, Puerto Rico.  No paying customers use these systems,
due to circumstances involving these companies that are beyond our control.  We are unsure if
and when the owners of these Quick-Cell systems will begin to offer service to the public.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In 1999, we licensed five small Internet service providers to operate our Quick-Cell
system.  Three of these companies never acted on the granted licenses and they expired.  A
licensed Quick-Cell system in Casper, Wyoming, operated for three months, but was
discontinued due to the sale of the licensee&#8217;s business.  The Santa Fe, New Mexico, licensee was
acquired by us in June 1999.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Quick-Cell Sales and Marketing.  In cities in which we construct company-owned Quick-Cell systems, we intend to employ telephone marketing as the
initial means for acquiring
customers, primarily business customers.  As a particular market begins to mature, we will
employ mass media, including radio advertising.  In conjunction with our mass media
advertising, we will employ a sales force that will focus primarily on potential business
customers.  This focus on business customers is based on our management&#8217;s informal study of
Internet usage by businesses versus home users that revealed businesses&#8217; higher demand for high-speed Internet access.  Our management&#8217;s decision may prove to have been incorrect, which
would significantly impair our ability to earn a profit.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Without additional capital, we will not be able to construct another company-owned
Quick-Cell system.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In cities where a Quick-Cell reseller operates, we will not have final approval of the
reseller&#8217;s marketing strategies.  Our resellers will be permitted to market our Quick-Cell service
in any commercially reasonable manner. We cannot, therefore, assure you that any of our
resellers will ever achieve high enough sales levels that would permit us to earn a profit.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Competitive Features of Quick-Cell.  While we believe Quick-Cell possesses some
competitive advantages over other Internet access modes, it currently has three significant
competitive disadvantages:</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;No wide-spread brand name recognition;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Professional installation usually required; and</p>

<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Internet access only available locally, compared
to dial-up Internet access that is
available from virtually any telephone in any geographic location.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">It is possible that we could overcome the first two listed disadvantages, after a lengthy period of
marketing and product research and development.  However, we currently lack capital to
overcome either disadvantage.  Further, it is likely that we will never overcome the third
disadvantage, due to the inherent broadcast limitations of wireless technologies.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We believe Quick-Cell offers the following competitive advantages:</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Speed: our Quick-Cell system is capable of data
transmission speeds of up to 10
Mbs; we expect that most of our customers&#8217; connections will transmit data at the
rate of 256 kbs, the wireless equivalent of the well-publicized digital subscriber
line (DSL) hard wire Internet access method; our Quick-Cell system offers far
greater data transmission speeds than cellular telephone-based Internet access
methods;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Lower Cost: we expect that our Quick-Cell service
will be offered at costs
between 15% and 60% less than available hard-wire Internet access, depending on
the particular market, that is, less than the sum of monthly Internet service
provider charges and monthly telephone line charges; Quick-Cell will also be
priced competitively with cellular-telephone-based and other wireless Internet
access methods;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;No Telephone Company Involvement: our Quick-Cell
customers will not be
required to incur the expense of a hard-wire telephone line through which to
access the Internet;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Security/Encryption: our Quick-Cell system is
capable of encrypting, or
scrambling, its broadcast signal, thereby offering a high degree of security to
customers; and</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Mobility: our Quick-Cell system is able to permit
service personnel of a business
to file contemporaneous reports, request and receive technical assistance and
perform other computer-based functions from a customer&#8217;s place of business or
from a service vehicle, as long as the personnel remain within the Quick-Cell
system&#8217;s coverage area.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in"&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Other Wireless Product.  In January 1998, we delivered our first proprietary wireless
DataLink system.  This DataLink system was delivered to the Baton Rouge refinery of one of the
largest international oil companies, the refinery being the second largest in the U.S.  The
DataLink system was purchased to replace an existing hard-wire (T1 telephone line) data
transmission system.  The wireless DataLink system transfers data at the rate of 2 megabytes per
second.  Due to a lack of capital for marketing and equipment, our management suspended
DataLink-related activities.  It was determined that our Quick-Cell products provided us the
greater opportunity of achieving short-term market share and profitability.  We cannot assume
you that our management&#8217;s decision in the regard will prove to have been correct or that we will
ever earn a profit.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Dial-up Internet Access</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As recently as September 2000, our CyberHighway subsidiary provided dial-up Internet
service to about 25,000 customers, approximately 8,500 directly and 16,500 through affiliate-Internet service providers.  As of the end of February 2001, we had lost nearly all of our dial-up
customers.  This rapid demise of CyberHighway&#8217;s business is due primarily to three factors:</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In September 2000, we sold our affiliate-ISP
business, due to its lack of
profitability;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In September 2000, an involuntary bankruptcy
petition was filed against
CyberHighway &#8211; we estimate that we lost at least 6,000 customers due to this
event;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our November 2000 switch-over to our contracted
Internet service company&#8217;s
network &#8211; we estimate that we lost at least 2,000 customers to due to this event.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The remainder of lost customers is attributable to CyberHighway&#8217;s normal customer
attrition rate, in light of the fact that CyberHighway ceased to advertise its services following the
involuntary bankruptcy filing.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We do not intend to commit any resources towards the revitalization of the business of
CyberHighway.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Customers and Markets.  We have lost nearly all of our dial-up Internet access customers.
We do not expect that we will ever reclaim any dial-up customers.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Sales and Marketing.  CyberHighway has ceased all sales and marketing activities.  We
do not expect that these activities will be resumed.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Affiliate-ISP Program.  From its inception, CyberHighway employed an affiliate
marketing program, a technique designed to generate rapid expansion of CyberHighway&#8217;s
subscriber base, which it did. However, the affiliate-ISP program was terminated during 1999.  In
September 2000, this business was sold, due to its continuing monthly losses.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Customer Service and Support</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We are committed to the highest levels of customer satisfaction.  We believe that
maintaining high levels of customer satisfaction will remain as a key competitive factor.
Currently, we provide wireless Internet access customer support during normal business hours.
Our customer support operations can be expected to expand, if and when we obtain needed
capital.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Competition</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We believe that the primary competitive factors determining success as an Internet access
provider are: a reputation for reliability and high-quality service; effective customer support;
access speed; pricing; effective marketing techniques for customer acquisition; ease of use; and
scope of geographic coverage.  We believe that we will be able to address adequately all of these
factors, except that we will not be able to offer scope of geographic coverage for the foreseeable
future.  It is also possible that we will not address any of these competitive factors successfully.
Should we fail to do so, our business would likely never earn a profit.  We currently lack capital
necessary to compete effectively.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We face severe competition from other wireless Internet access providers, such as from
Metricom&#8217;s RicochetTM product, as well as large, national providers of cellular telephone
service providers.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The market for the provision of dial-up Internet access services, in which our Quick-Cell
wireless Internet access service will compete, is extremely competitive and highly fragmented.
Current and prospective competitors include many large, nationally-known companies that
possess substantially greater resources, financial and otherwise, market presence and brand name
recognition than do we.  We currently compete, or expect to compete, for the foreseeable future,
with the following: national Internet service providers, numerous regional and local Internet
service providers, most of which have significant market share in their markets; established
on-line information service providers, such as America Online, which provide basic Internet
access, as well as proprietary information not available through public Internet access; providers
of web hosting, co-location and other Internet-based business services; computer hardware and
software and other technology companies that provide Internet connectivity with their products;
telecommunications companies, including global long distance carriers, regional Bell operating
companies and local telephone companies; operators that provide Internet access through
television cable lines; electric utility companies; communications companies; companies that
provide television or telecommunications through participation in satellite systems; and, to a
lesser extent, non-profit or educational Internet access providers.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;With respect to potential competitors, we expect that manufacturers of computer
hardware and software products, as well as media and telecommunications companies will
continue to enter the Internet services market, which will serve to intensify competition.  In
addition, as more consumers and businesses increase their Internet usage, we expect existing
competitors to increase further their emphasis on Internet access and electronic commerce
initiatives, resulting in even greater competition.  The ability of competitors or others to enter
into business combinations, strategic alliances or joint ventures, or to bundle their services and
products with Internet access, could place us at a significant competitive disadvantage.  We
currently lack capital necessary to compete effectively and we may never obtain enough capital to
permit us to compete effectively in our markets.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Moreover, we expect to face competition in the future from companies that provide
connections to consumers' homes, such as telecommunications providers, cable companies and
electrical utility companies. For example, recent advances in technology have enabled cable
television operators to offer Internet access through their cable facilities at significantly higher
speeds than existing analog modem speeds. These types of companies could include Internet
access in their basic bundle of services or offer such access for a nominal additional charge.  Any
such developments could reduce our market share, thereby impairing our ability to earn a profit.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Properties</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;General.  We own all of the equipment necessary for the operation of a state-of-the-art
network operations center.  However, because of our agreement with Dialup USA, we no longer
maintain this center.  We intend to utilize this equipment in facilitating the expected growth of
our wireless Internet access business.  In addition, we own office equipment necessary to conduct
our business.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In Baton Rouge, Louisiana, we lease approximately 650 square feet for our executive
offices, for a monthly rental of approximately $800, and a 1,600 square foot modem assembly
facility, for a monthly rental of approximately $1500.  We lease approximately 500 square feet in
Santa Fe, New Mexico, for a monthly rental of approximately $800.  CyberHighway has given up
our leased premises.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Wireless Cable Properties.  We own the rights to wireless cable channels in Poplar Bluff,
Missouri, Lebanon, Missouri, Port Angeles, Washington, The Dalles, Oregon, Sand Point, Idaho,
Fallon, Nevada, and Astoria, Oregon.  We have abandoned our efforts to develop these wireless
cable properties, due to current market conditions.  Rather, because our Quick-Cell system can be
adapted for use on the wireless cable frequencies, we intend to develop these properties into
operating wireless Internet systems, at such time as two-way data transmission on these
frequencies is permitted.  We cannot predict when this permission will be granted, if ever.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Intellectual Property.  We currently rely on common law principles for the protection of
our copyrights and trademarks and trade secret laws to protect our proprietary intellectual
property rights.  We do not intend to file patent applications relating to our Quick-Cell wireless
Internet access products, until completion of future generations of the products.  We have not
filed trademark applications relating to the &#8220;Quick-Cell&#8221; and the &#8220;USURF Wireless Internet&#8221;
brand names.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have received authorization to use the products of each manufacturer of software that
is bundled in its software for users with personal computers operating on the Windows or
Macintosh platforms. While certain of the applications included in our start-up kit for Internet
access services subscribers are shareware that we have obtained permission to distribute or that
are otherwise in the public domain and freely distributable, certain other applications included in
our start-up kit have been licensed where necessary.  We currently intend to maintain or negotiate
renewals of all existing software licenses and authorizations as necessary.  We may also enter
into licensing arrangements for other applications, in the future.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Employees</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have eight employees, including four officers.  All of our officers have entered into
employment agreements.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;None of our employees is covered by any collective bargaining agreement, nor have we
ever experienced a work stoppage.  Our management believes employee relations to be good.
Much of our future success will depend, in large measure, upon our ability to continue to attract
and retain highly skilled technical, sales, marketing and customer support personnel.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">THE FUSION CAPITAL TRANSACTION</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">General</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On May 9, 2001, we entered into an amended and restated common stock purchase
agreement with Fusion Capital, which replaced a similar agreement dated October 9, 2000, and
amended by letter agreement on December 27, 2000, pursuant to which Fusion Capital agreed to
purchase up to $10 million of our common stock. The selling price of the shares will be equal to
a price based upon the future market price of the common stock without any fixed discount to the
market price.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Purchase of Shares Under the Fusion Capital Agreement</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Under the Fusion Capital agreement, on each trading day during the term of the
agreement, Fusion Capital is obligated to purchase a specified dollar amount of our common
stock.  Subject to our right to suspend Fusion Capital&#8217;s purchases at any time and our right to
terminate the Fusion Capital agreement at any time, Fusion Capital will purchase on each trading
day during the term of the agreement $20,000 of our common stock.  The daily purchase amount
may be decreased by us at any time.  We also have the right to increase the daily purchase
amount of $20,000 any time the market price of our common stock is above $5.00 per share for
five consecutive trading days.  The selling price per share is equal to the lesser of:
                                                 </p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;the lowest sale price of our common stock on the
purchase date; or</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;the average of the three lowest closing sale
prices of our common stock during the
15 consecutive trading days prior to the date of submission of a purchase by
Fusion Capital.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The selling price will be adjusted for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction occurring during the fifteen (15) trading days in
which the closing bid price is used to compute the purchase price.  Even though the Fusion
Capital Agreement restricts Fusion Capital from owning more than 9.9% of our stock at any one
time, this restriction does not prevent Fusion Capital from selling a portion of its holdings and
later purchasing additional shares.  Thus, it is possible that the total number of shares purchased
by Fusion Capital would be greater than 9.9% of the then-outstanding common stock.  Because
this restriction on ownership may be waived by us and Fusion Capital, it is possible that Fusion
Capital could own more than 9.9% of our common stock at any one time.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The following table sets forth the number of shares of our common stock that would be
sold to Fusion Capital upon our sale of common stock under the Fusion Capital agreement at
varying purchase prices:</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table19column1" width="25%" valign="middle"><p>Assumed Per Share
Purchase Price</p>
</td>
<td class="table19column2" width="25%" valign="middle"><p>Total Shares Issuable
Upon a Full Purchase
Under the Fusion
Capital Agreement
(1)</p>
</td>
<td class="table19column3" width="25%" valign="middle"><p>Gross Proceeds</p>
</td>
<td class="table19column4" width="25%" valign="middle"><p>Percent of Our
Common Stock
Outstanding After
Giving Effect to the
Issuance to Fusion
Capital</p>
</td>
</tr>
<tr>
<td class="table19column1" width="25%" valign="middle"><p>$.39(2)</p>
</td>
<td class="table19column2" width="25%" valign="middle"><p>6,000,000</p>
</td>
<td class="table19column3" width="25%" valign="middle"><p>$2,340,000</p>
</td>
<td class="table19column4" width="25%" valign="middle"><p>22.94%</p>
</td>
</tr>
<tr>
<td class="table19column1" width="25%" valign="middle"><p>$1.50</p>
</td>
<td class="table19column2" width="25%" valign="middle"><p>6,000,000</p>
</td>
<td class="table19column3" width="25%" valign="middle"><p>$9,000,000</p>
</td>
<td class="table19column4" width="25%" valign="middle"><p>22.94%</p>
</td>
</tr>
<tr>
<td class="table19column1" width="25%" valign="middle"><p>$2.00</p>
</td>
<td class="table19column2" width="25%" valign="middle"><p>5,000,000</p>
</td>
<td class="table19column3" width="25%" valign="middle"><p>$10,000,000</p>
</td>
<td class="table19column4" width="25%" valign="middle"><p>19.88%</p>
</td>
</tr>
<tr>
<td class="table19column1" width="25%" valign="middle"><p>$5.00</p>
</td>
<td class="table19column2" width="25%" valign="middle"><p>2,000,000</p>
</td>
<td class="table19column3" width="25%" valign="middle"><p>$10,000,000</p>
</td>
<td class="table19column4" width="25%" valign="middle"><p>9.03%</p>
</td>
</tr>
<tr>
<td class="table19column1" width="25%" valign="middle"><p>$10.00</p>
</td>
<td class="table19column2" width="25%" valign="middle"><p>1,000,000</p>
</td>
<td class="table19column3" width="25%" valign="middle"><p>$10,000,000</p>
</td>
<td class="table19column4" width="25%" valign="middle"><p>4.72%</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">____________</p>
<p style="line-height: 0.197919in">(1) Closing price on July 19, 2001, as reported by AMEX.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Since we only plan to sell up to 6,000,000 shares to Fusion Capital under the Fusion
Capital agreement, the selling price of our stock sold to Fusion Capital will need to average
$1.67 per share for us to receive the maximum proceeds of $10 million under that agreement.
Assuming a selling price of $.39 per share, the closing sale price of the common stock on July
19, 2001, and the purchase by Fusion Capital of the full amount of shares purchasable under the
Fusion Capital agreement, proceeds to us would only be approximately $2,340,000, unless we
choose to issue more than 6,000,000 shares, which we have the right to do.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Our Right to Suspend Purchases</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;At any time or from time to time, we have the unconditional right to prevent any
purchases by Fusion Capital effective upon one trading day&#8217;s prior notice.  Any suspension
would remain in effect until our revocation of the suspension.  To the extent we need to use the
cash proceeds of the sales of common stock under the Fusion Capital agreement for working
capital or other business purposes, we do not intend to restrict purchases under the Fusion Capital
agreement.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Our Right to Increase and Decrease the Daily Purchase Amount</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have the unconditional right to decrease the daily amount to be purchased by Fusion
Capital at any time for any reason, effective upon one trading day&#8217;s notice.  We also have the
right to increase the $20,000 daily purchase amount any time the market price of our common
stock is above $5.00 per share for five consecutive trading days.  For any trading day that the
market price of our common stock is below $5.00, the daily purchase amount shall not be greater
than $20,000.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Our Termination Rights</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have the unconditional right at any time for any reason to give notice to Fusion
Capital terminating the common stock purchase agreement.  Such notice shall be effective one
trading day after Fusion Capital receives such notice.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Effect of Performance of the Fusion Capital Agreement on our Shareholders</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;All shares registered in this offering will be freely tradable. It is anticipated that shares
registered in this offering will be sold over a period of up to 25 months from the date of this
prospectus. The sale of a significant amount of shares registered in this offering at any given time
could cause the trading price of our common stock to decline and to be highly volatile. Fusion
Capital may ultimately purchase all of the shares of common stock issuable under the Fusion
Capital agreement, and it may resell some, none or all of the shares of common stock it acquires
upon purchase. Therefore, the purchases under the Fusion Capital agreement may result in
substantial dilution to the interests of other holders of our common stock. However, we have the
right at any time for any reason to: (1) reduce the daily purchase amount, (2) suspend purchases
of the common stock by Fusion Capital and (3) terminate the Fusion Capital agreement.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">No Short-Selling or Hedging by Fusion Capital</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Fusion Capital has agreed that neither it nor any of its affiliates will engage in any direct
or indirect short-selling or hedging of our common stock during any time prior to the termination
of the Fusion Capital agreement.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Events of Default</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Generally, Fusion Capital may terminate the Fusion Capital agreement without any
liability or payment to us upon the occurrence of any of the following events of default:</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;if for any legal reason the shares purchased
cannot be sold pursuant to this
prospectus for a period of 10 consecutive trading days or for more than an
aggregate of 30 trading days in any 365-day period;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;suspension by the American Stock Exchange of our
common stock from trading
for a period of 10 consecutive trading days or for more than an aggregate of 30
trading days in any 365-day period;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;our failure to satisfy any listing criteria of the
American Stock Exchange for a
period of 10 consecutive trading days or for more than an aggregate of 30 trading
days in any 365-day period;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(1) notice from us or our transfer agent to the
effect that we or the transfer agent
intends not to comply with a proper request for purchase of shares under the
Fusion Capital agreement; (2) our failure to promptly confirm to the transfer agent
Fusion Capital's purchase notice; or (3) the failure of the transfer agent to issue
shares of our common stock promptly upon delivery of a purchase notice or upon
delivery of a warrant exercise notice;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;any material breach of the representations or
warranties or covenants contained in
the Fusion Capital agreement or any related agreements which has or which could
have a material adverse affect on us, subject to a cure period of 10 trading days;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;if the number of shares to be issued to Fusion
Capital reaches an aggregate
amount that would require shareholder approval under our principal market
regulations (to the extent not  previously obtained and then required) or otherwise
cause us to breach our principal market rules and regulations;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;a default of any payment obligation of USURF
America in excess of $1.0 million;
or</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;commencement of insolvency or bankruptcy
proceedings by or against USURF
America.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Shares and Warrants Issued to Fusion Capital</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Under the Fusion Capital agreement, Fusion Capital has received 800,000 shares as part
of its commitment fee.  These shares may not be sold by Fusion Capital until the earliest of
termination of the Fusion Capital agreement, default under the Fusion Capital agreement or
approximately 25 months from the date hereof. Under the Fusion Capital agreement, we have
issued to Fusion Capital, as part of its commitment fee, warrants to purchase 215,000 shares of
our common stock at an exercise price of $.25 per share, warrants to purchase 215,000 shares of
our common stock at an exercise price of $.35 per share and warrants to purchase 215,000 shares
of our common stock at an exercise price of $.45 per share.  These warrants are exercisable by
Fusion Capital for a period of five years from the date of their issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">No Variable-Priced Financings</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in",&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Until the termination of the Fusion Capital agreement, we have agreed not to issue, or
enter into any agreement with respect to the issuance of, any variable-priced equity or variable-priced "equity-like" securities, unless we have obtained Fusion Capital's prior written consent.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Holdings of Fusion Capital Upon Termination of the Offering</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Because Fusion Capital may sell all, some or none of the common stock offered by this
prospectus, no estimate can be given as to the amount of common stock that will be held by
Fusion Capital upon early termination of the offering.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Registration Rights Agreement</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In connection with the execution of the Fusion Capital agreement, we executed a
registration rights agreement with Fusion Capital, which relates to the shares of our stock issued
or to be issued under the Fusion Capital agreement.  We are required under the registration rights
agreement to register all such shares of our common stock pursuant to a registration statement
and to keep such registration statement current for purposes of Rule 424 under the Securities Act,
for a period of up to five years.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Finder&#8217;s Fee</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Pursuant to the transactions contemplated by the Fusion Capital agreement, we have
issued to our investment banker, Gruntal &amp; Co., L.L.C., as a finder&#8217;s fee, 200,000 shares of our
common stock and a total of 161,250 warrants.  All of the warrants issued to Gruntal &amp; Co. are
exercisable for a period of five years from the date of their issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In addition to the shares and warrants to be issued to Gruntal &amp; Co., we will be obligated
to pay to Gruntal &amp; Co., as a further finder&#8217;s fee, a sum of cash equal to 8% of the gross proceeds
obtained by us pursuant to the Fusion Capital agreement.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">MANAGEMENT</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Directors and Officers</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The following table sets forth the officers and directors of USURF America.</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table20column1" width="33%" valign="middle"><p>Name</p>
</td>
<td class="table20column2" width="33%" valign="middle"><p>Age</p>
</td>
<td class="table20column3" width="34%" valign="middle"><p>Position</p>
</td>
</tr>
<tr>
<td class="table20column1" width="33%" valign="middle"><p>David M. Loflin</p>
</td>
<td class="table20column2" width="33%" valign="middle"><p>43</p>
</td>
<td class="table20column3" width="34%" valign="middle"><p>President, Acting Chief
Financial Officer and Director</p>
</td>
</tr>
<tr>
<td class="table20column1" width="33%" valign="middle"><p>Waddell D. Loflin</p>
</td>
<td class="table20column2" width="33%" valign="middle"><p>51</p>
</td>
<td class="table20column3" width="34%" valign="middle"><p>Vice President, Secretary and
Director</p>
</td>
</tr>
<tr>
<td class="table20column1" width="33%" valign="middle"><p>Robert A. Hart IV</p>
</td>
<td class="table20column2" width="33%" valign="middle"><p>53</p>
</td>
<td class="table20column3" width="34%" valign="middle"><p>Vice President of Technology</p>
</td>
</tr>
<tr>
<td class="table20column1" width="33%" valign="middle"><p>James Kaufman</p>
</td>
<td class="table20column2" width="33%" valign="middle"><p>36</p>
</td>
<td class="table20column3" width="34%" valign="middle"><p>Vice President - Corporate
Development</p>
</td>
</tr>
<tr>
<td class="table20column1" width="33%" valign="middle"><p>Ross S. Bravata</p>
</td>
<td class="table20column2" width="33%" valign="middle"><p>42</p>
</td>
<td class="table20column3" width="34%" valign="middle"><p>Director</p>
</td>
</tr>
<tr>
<td class="table20column1" width="33%" valign="middle"><p>Micheal Cohn</p>
</td>
<td class="table20column2" width="33%" valign="middle"><p>43</p>
</td>
<td class="table20column3" width="34%" valign="middle"><p>Director</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">_____________</p>
<p style="line-height: 0.197919in">(1)  David M. Loflin and Waddell D. Loflin are brothers.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our current officers and directors serve until the next annual meeting of our board of
directors or until their respective successors are elected and qualified.  All officers serve at the
discretion of our board of directors.  Family relationships between our officers and directors are
noted above.  Certain information regarding the backgrounds of each of the officers and directors
is set forth below.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;David M. Loflin, President and Director, has, for more than the past five years, owned
and operated Gulf Atlantic Communications, Inc., a Baton Rouge, Louisiana-based wireless
technology firm specializing in development of wireless cable systems and broadcast television
stations.  Gulf Atlantic has designed, constructed and operated two wireless cable systems: (1)
Baton Rouge, Louisiana, and (2) Selma, Alabama.  Mr. Loflin developed and currently operates
one television station, WTVK-TV11, Inc. (a Warner Brothers Network affiliate), Channel 11 in
Baton Rouge, Louisiana.  For over ten years, Mr. Loflin has served as a consultant for Wireless
One, one of the largest wireless communications firms in the United States.  Mr. Loflin is a
member of the Wireless Cable Association International and the Community Broadcasters
Association.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Waddell D. Loflin, Vice President, Secretary and Director, has, for more than the past
five years, served as Vice President of Operations and Treasurer of Gulf Atlantic
Communications, Inc. and WTVK-TV11, Inc., both in Baton Rouge, Louisiana.  In addition, Mr.
Loflin serves as Production Manager and Film Director for WTVK-TV11, Inc.  Mr. Loflin served
as General Manager for Baton Rouge Television Company, Baton Rouge, Louisiana, a wireless
cable system, where he directed the development and launch of such wireless cable system.
Also, Mr. Loflin has devoted over five years to demographic research relating to the wireless
cable industry.  Mr. Loflin is a member of the Wireless Cable Association International and the
Community Broadcasters Association.  Mr. Loflin holds a B.A. degree in Social Sciences from
Oglethorpe University, Atlanta, Georgia.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Robert A. Hart, IV, Vice President of Technology, is a 30-year veteran of the
telecommunications industry as proprietor of Hart Engineers, which provides engineering and
consulting services to BellSouth, numerous independent telephone companies and other
communications service providers.  Mr. Hart is a graduate of Louisiana State University with a
B.S. degree in Electrical Engineering and is a Registered Professional Engineer.  Mr. Hart has
served on the board of the Small Business Personal Communications Services (PCS)
Association, a national trade association focused on small business applications and
opportunities for PCs technology (a universal wireless communications technology), and also
served this organization as chairman of the lobbying committee.  He is also a past board member
and current member of the Association of Communication Engineers, and current member of the
Institute of Electrical and Electronics Engineers, National Society of Professional Engineers and
the Louisiana Engineering Society.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;James Kaufman, Vice President &#8211; Corporate Development, received a B.S. degree in
Journalism from the University of Colorado, Boulder, Colorado. From 1994 to 1995, Mr.
Kaufman was a registered representative with D.E. Fry, a Denver, Colorado-based broker-dealer.
From 1995 to 1996, Mr. Kaufman was a registered representative with A.G. Edwards, a St.
Louis, Missouri-based broker-dealer.  From 1997 to February 1999, Mr. Kaufman served as
Director of Corporate Development for B. Edward Haun &amp; Company, a Denver, Colorado-based
investment banking and research firm.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Ross S. Bravata, Director, has, since 1981, worked for Novartis (formerly Ciba
Corporation), in various positions, and currently serves as a Senior Control Systems Technician.
In such capacity, Mr. Bravata supervises the service and maintenance of electronic
instrumentation.  Since 1988, Mr. Bravata has served as a director and principal financial officer
of CG Federal Credit Union, Baton Rouge, Louisiana.  Also, Mr. Bravata has, since its inception
in 1994, served as a director of Trinity&#8217;s Restaurant, Inc., in Baton Rouge, Louisiana.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Michael Cohn, Director, has, for over 20 years, owned and operated Arrow Pest Control,
Inc., Baton Rouge, Louisiana.  In addition, Mr. Cohn owns Arrow Pest Control of New Orleans,
Wilson and Sons Exterminating in Mobile, Alabama, and Premier Termite and Pest Control in
Florida.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Executive Committee</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our board of directors created an Executive Committee to facilitate management between
meetings of the full board of directors.  David M. Loflin, Waddell D. Loflin and Ross S. Bravata
comprise the Executive Committee.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our bylaws provide that the Executive Committee has the authority to exercise all powers
of the board of directors, except the power:</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Declare dividends;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Sell or otherwise dispose of all or substantially
all of our assets;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Recommend to our shareholders any action requiring
their approval; and</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Change the membership of any committee, fill the
vacancies thereon or discharge
any committee.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Executive Committee, in general, acts on all matters requiring approval of our board
of directors.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Audit Committee</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In September 1999, our board of directors created an Audit Committee, consisting of
three members, the majority of whom must be outside directors.  The initial members of the
Audit Committee are David M. Loflin and Michael Cohn.  There is one vacancy on this
committee, due to the recent resignation of Richard N. Gill as a director.  The Audit Committee
has the responsibility to review internal controls, accounting policies and financial reporting
practices, to review the financial statements, the arrangements for, and scope of, the independent
audit as well as the results of the audit arrangement and to review the services and fees of the
independent auditors, their independence and recommend to the board of directors for its
approval and for the ratification by our shareholders the engagement of the independent auditors
to serve the following year in examining our accounts.  The Audit Committee has held two
meetings.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The Audit Committee recommended the change in our auditors to the full board of
directors.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Executive Compensation</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The following table sets forth in summary form the compensation received during each of
the last three completed fiscal years by our Chief Executive Officer and each executive officer
who received total salary and bonus exceeding $100,000 during any of the last three fiscal years.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table21column1" width="14%" valign="middle"><p>Name and
Principal
Position</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>Year</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>Salary $</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>Bonus $</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>Other Annual
Compensation $</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>Long-term
Compensation Awards of
Stock
Options #</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>All other
Compensation $</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>David M.
LoflinPresident [Principal
Executive
Officer]</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>2000</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$62,500(1)</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>1999</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$62,500(2)</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>1998</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$55,000</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>Waddell D.
Loflin [Vice
President and
Secretary]</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>2000</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$41,667(3)</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$48,000(7)</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>1999</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$41,667(4)</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>1998</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$48,000</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>James
Kaufman[Vice President -
Corporate
Development]</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>2000</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$103,000(5)</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$71,000(8)</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>1999</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$103,000(6)</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>1998</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>Julius W.
Basham,
II[Former
Chief
Operating
Officer]</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>2000</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>1999</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$133,762</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>1998</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>Robert A.
Hart IV [Vice
President -
Technology]</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>2000</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$500,000(9)</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>1999</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
<tr>
<td class="table21column1" width="14%" valign="middle"><p>&#160;</p>
</td>
<td class="table21column2" width="14%" valign="middle"><p>1998</p>
</td>
<td class="table21column3" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column4" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column5" width="14%" valign="middle"><p>$-0-</p>
</td>
<td class="table21column6" width="14%" valign="middle"><p>0</p>
</td>
<td class="table21column7" width="16%" valign="middle"><p>$-0-</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">___________</p>
<p style="line-height: 0.197919in">(1) $27,083 of this amount has been accrued.</p>
<p style="line-height: 0.197919in">(2) $27,083 of this amount has been accrued.</p>
<p style="line-height: 0.197919in">(3) $10,417 of this amount has been accrued.</p>
<p style="line-height: 0.197919in">(4) $10,417 of this amount has been accrued.</p>
<p style="line-height: 0.197919in">(5) $20,667 of this amount has been accrued.</p>
<p style="line-height: 0.197919in">(6) $20,667 of this amount has been accrued; $82,666 of this amount was paid in shares of our
stock.</p>
<p style="line-height: 0.197919in">(7) This bonus was paid by the issuance of 200,000 shares to Mr. Loflin, which were valued at
$.24 per share, the last closing price of our common stock prior to the issuance.</p>
<p style="line-height: 0.197919in">(8) This bonus was paid by the issuance of 300,000 shares to Mr. Kaufman, which were valued at
$.24 per share, the last closing price of our common stock prior to the issuance.</p>
<p style="line-height: 0.197919in">(9) Mr. Hart received 250,000 shares of our common stock as a signing bonus under the terms of
his employment agreement.  These shares were valued at $2.00 per share.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In May 2000, we issued 250,000 shares to Robert A. Hart IV, our vice president of
technology, as a bonus, upon the execution of his employment agreement.  These shares were
valued at $2.00 per share, which was the closing price of our common stock on the day of Mr.
Hart&#8217;s execution of his employment agreement.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In December 2000, two of our vice presidents, Waddell D. Loflin and James Kaufman,
were issued shares of our common stock as a bonus.  Mr. Loflin was issued 200,000 shares and
Mr. Kaufman was issued 300,000 shares.  These shares were valued at $.24 per share, which was
the closing sale price of our common stock on the day immediately preceding their issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Compensation of Directors</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In March 1998, four of our directors, Waddell Loflin, Ross S. Bravata, Richard N. Gill
and Michael Cohn, were issued 20,000 shares each of our common stock as a bonus for their
services as directors.  These shares were valued at $.80 per share by the board of directors;
however, for financial reporting purposes, these shares were valued at $.56 per share, the last
closing bid price for our common stock prior to issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;No other compensation has been paid to any of our directors for their services as
directors.  It is possible that our management could begin to pay our directors for meetings
attended or grant a small number of stock options for their services.  However, no specific
determination in this regard has been made.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Employment Contracts and Termination of</p>
<p style="line-height: 0.197919in">Employment and Change-in-Control Agreements</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#16,Each of our officers have entered into employment agreement, as well as confidentiality
agreements and agreements not to compete.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table22column1" width="20%" valign="middle"><p>Name of Officer</p>
</td>
<td class="table22column2" width="20%" valign="middle"><p>Position(s)</p>
</td>
<td class="table22column3" width="20%" valign="middle"><p>Term</p>
</td>
<td class="table22column4" width="20%" valign="middle"><p>Salary</p>
</td>
<td class="table22column5" width="20%" valign="middle"><p>Date</p>
</td>
</tr>
<tr>
<td class="table22column1" width="20%" valign="middle"><p>David M. Loflin</p>
</td>
<td class="table22column2" width="20%" valign="middle"><p>President</p>
</td>
<td class="table22column3" width="20%" valign="middle"><p>7 years</p>
</td>
<td class="table22column4" width="20%" valign="middle"><p>$150,000(1)</p>
</td>
<td class="table22column5" width="20%" valign="middle"><p>6/1/99</p>
</td>
</tr>
<tr>
<td class="table22column1" width="20%" valign="middle"><p>Waddell D. Loflin</p>
</td>
<td class="table22column2" width="20%" valign="middle"><p>Vice President and
Secretary</p>
</td>
<td class="table22column3" width="20%" valign="middle"><p>7 years</p>
</td>
<td class="table22column4" width="20%" valign="middle"><p>$100,000(2)</p>
</td>
<td class="table22column5" width="20%" valign="middle"><p>6/1/99</p>
</td>
</tr>
<tr>
<td class="table22column1" width="20%" valign="middle"><p>Robert A. Hart IV</p>
</td>
<td class="table22column2" width="20%" valign="middle"><p>Vice President of
Technology</p>
</td>
<td class="table22column3" width="20%" valign="middle"><p>3 years</p>
</td>
<td class="table22column4" width="20%" valign="middle"><p>$90,000(3)</p>
</td>
<td class="table22column5" width="20%" valign="middle"><p>5/25/00</p>
</td>
</tr>
<tr>
<td class="table22column1" width="20%" valign="middle"><p>James Kaufman</p>
</td>
<td class="table22column2" width="20%" valign="middle"><p>Vice President,
Corporate
Development</p>
</td>
<td class="table22column3" width="20%" valign="middle"><p>1 year</p>
</td>
<td class="table22column4" width="20%" valign="middle"><p>$120,000(4)</p>
</td>
<td class="table22column5" width="20%" valign="middle"><p>3/22/99</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">____________</p>
<p style="line-height: 0.197919in">(1) Mr. Loflin has agreed to defer payment of a portion of his salary until we are able to pay it.
As at December 31, 2000, we owed Mr. Loflin deferred salary in the amount of $54,166.</p>
<p style="line-height: 0.197919in">(2) Mr. Loflin has agreed to defer payment of a portion of his salary until we are able to pay it.
As at December 31, 2000, we owed Mr. Loflin deferred salary in the amount of $20,834.</p>
<p style="line-height: 0.197919in">(3) Mr. Hart will begin to receive salary payments at such time as we obtain a significant capital
investment.  Mr. Hart received 250,000 shares of our stock as a signing bonus, which shares were
valued at $500,000.  The value of these shares was derived from the closing price for our stock
on the date of execution of his employment agreement.</p>
<p style="line-height: 0.197919in">(4) Mr. Kaufman has agreed to defer payment of a portion of his salary until we are able to pay it.
As at December 31, 2000, we owed Mr. Kaufman deferred salary in the amount of $41,334, 80%
of which is payable in shares of our stock.  In 2000, we issued Mr. Kaufman a total of 34,536
shares of our stock valued at $154,667 in payment of the stock portion of his salary.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In January 1999, we entered into an employment agreement with Julius W. Basham, II,
formerly a director and our former chief operating officer.  Pursuant to the terms of a settlement
agreement, Mr. Basham resigned as chief operating officer on January 4, 2000.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In November 2000, we terminated the employment of Darrell Davis, formerly Vice
President of U.S. Internet Operations, based on violations of his employment agreement.  (See
&#8220;Litigation&#8221; for a discussion of Mr. Davis&#8217; termination).</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In December 2000, we terminated the employment of Christopher L. Wiebelt, formerly
Vice President of Finance and Chief Financial Officer, based on violations of his employment
agreement.  (See &#8220;Litigation&#8221; for a discussion of Mr. Wiebelt&#8217;s termination).</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have no compensatory plan or arrangement that results or will result from the
resignation, retirement or any other termination of an executive officer&#8217;s employment or from a
change in control or a change in an executive officer&#8217;s responsibilities following a change-in-control.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Option/SAR Grants in Last Fiscal Year</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have never granted any stock appreciation rights (SARs), nor do we expect to grant
any SARs in the foreseeable future.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Section 16(a) Beneficial Ownership Reporting Compliance</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We became subject to the provisions of Sections 16(a) of the Securities Exchange Act of
1934 on October 14, 1999.  Section 16(a) requires directors, executive officers and persons who
own more than 10% of our outstanding common stock to file with the SEC an Initial Statement
of Beneficial Ownership of Securities (Form 3) and Statements of Changes of Beneficial
Ownership of Securities (Form 4).  Directors, executive officers and greater-than-10%
shareholders are required by SEC regulation to furnish copies to us of all Section 16(a) forms
they file.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Based on a review of copies of these reports furnished to us, we believe that all of our
directors, executive directors and greater-than-10% beneficial owners filed their respective Form
3 reports; all of the Form 3 reports were filed late.  Form 5 reports for 1999 and 2000 for all
officers and directors are due and have not yet been filed.  Form 4 reports for certain of our
officers and directors are due and have not yet been filed.  We have requested that all of these
persons file the required reports.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Based on a review of the copies of these reports furnished to us, it appears that Julius W.
Basham, II, a former officer, director and 10%-owner, is current in his filings of required Forms
4 and Form 5 and is no longer required to file ownership reports.  </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Indemnification of Directors and Officers</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Article X of the Articles of Incorporation of USURF America provides that no director or
officer shall be personally liable to USURF America or its shareholders for damages for breach
of fiduciary duty as a director or officer; provided, however, that such provision shall not
eliminate or limit the liability of a director or officer for (1) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law or (2) the payment of dividends in
violation of law.  Any repeal or modification of Article X shall be prospective only and shall not
adversely affect any right or protection of a director or officer of USURF America existing at the
time of such repeal or modification for any breach covered by Article X which occurred prior to
any such repeal or modification.  The effect of Article X is that directors and officers will
experience no monetary loss for damages arising out of actions taken (or not taken) in such
capacities, except for damages arising out of intentional misconduct, fraud or a knowing
violation of law, or the payment of dividends in violation of law.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As permitted by Nevada law, our bylaws provide that we will indemnify our directors and
officers against expense and liabilities they incur to defend, settle or satisfy any civil, including
any action alleging negligence, or criminal action brought against them on account of their being
or having been directors or officers unless, in any such action, they are judged to have acted with
gross negligence or willful misconduct.  Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended, may be permitted to directors, officers or control persons
pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">CERTAIN TRANSACTIONS</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Founders</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In November 1996, David M. Loflin purchased 1,600,000 shares of our common stock
for $1,600 and Waddell D. Loflin, purchased 200,000 shares of our common stock for $200.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Conversion of Loans to Stock by Officer</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As of August 21, 2000, we owed Mr. Loflin a total of $967,703 ($916,045 in principal,
$51,658 in interest), the result of cash loans made to us by Mr. Loflin during the past
approximately two years.  The proceeds of these loans were used primarily for operating
expenses and purchases of equipment.  On August 21, 2000, we entered into a letter agreement
with our president, David M. Loflin, whereby Mr. Loflin agreed to convert all sums owed to him
into shares of our common stock.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Pursuant to the letter agreement, Mr. Loflin received one share of common stock for
every $1.25 of debt converted, for a total of 774,162 shares.  The $1.25 price was agreed upon as
that price was the low sale price for our common stock on Friday, August 18, 2000, as reported
by AMEX.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our board of directors, in authorizing the transaction described above, found the
transaction to be in the best interest of USURF America, as it would significantly improve our
financial condition, potentially making it more attractive to prospective investors.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Subscription Agreements</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In December 1996, we entered into a subscription agreement with David M. Loflin,
whereby we issued 1,578,512 shares of our common stock to Mr. Loflin in exchange for
assignments of licenses and leases of licenses of television channels and wireless cable television
channels and options to acquire these assets.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;These assets were valued at $1,826,873, which was determined pursuant to a market
report and appraisal prepared by Broadcast Services International, Inc., Sacramento, California.
A more complete description of this appraisal appears below, under the heading &#8220;Appraisal&#8221;.
Mr. Loflin&#8217;s total acquisition costs of these assets are unknown.  Accordingly, our financial
statements attribute no value to these assets.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Also in December 1996, we entered into a subscription agreement with Waddell D.
Loflin, whereby we issued 104,249 shares of our common stock to Mr. Loflin in exchange for an
assignment of the license of a television channel.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;These assets were valued at $120,652, which was determined pursuant to the appraisal
described above.  Mr. Loflin&#8217;s acquisition costs of these assets are unknown.  Accordingly, our
financial statements attribute no value to these assets.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Reorganizations</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Effective December 31, 1996, we entered into an agreement and plan of reorganization,
whereby we purchased television station K13VE Channel 13 in Baton Rouge, Louisiana.  In this
transaction, David M. Loflin received 227,336 shares of our common stock for his ownership in
this television station.  The television station was valued at $263,106, which was determined
pursuant to the appraisal described above.  Mr. Loflin&#8217;s acquisition costs relating to the rights to
K13VE Channel 13 were $6,750.  An additional $10,587 in costs was capitalized.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Effective December 31, 1996, we entered into an agreement and plan of reorganization,
whereby we purchased licenses and leases of licenses of wireless cable television channels in
Poplar Bluff, Missouri, and Lebanon, Missouri.  In this transaction, David M. Loflin received
1,179,389 shares of our common stock valued at $1,364,553; Ross S. Bravata, one of our
directors, received 42,887 shares of our common stock valued at $49,620; and Michael Cohn,
one of our directors, received 53,608 shares of our common stock valued at $62,024.  The values
assigned to the assets acquired from Messrs. Loflin, Bravata and Cohn were determined pursuant
to the appraisal described above.  The acquisition cost of these assets was $179,611, which is
reflected in our financial statements.  At the time of this transaction, Messrs. Bravata and Cohn
were not directors.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Securities Purchases</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In March 1997, Michael Cohn purchased 20,000 shares of our common stock for $50,000
in cash. At the time of this transaction, Mr. Cohn was not a director.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In January 1999, Mr. Cohn purchased 30,000 units of our securities in a private offering,
at a purchase of $4.50 per unit, or $135,000 in the aggregate.  Each unit purchased by Mr. Cohn
consisted of one share of our common stock and one common stock purchase warrant to purchase
one share of our common stock at an exercise price of $7.00 per share.  Mr. Cohn purchased
units on the same terms and conditions as were offered to unaffiliated persons.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In November 1999, Mr. Cohn purchased 50,000 units of our securities in a private
offering, at a purchase of $3.00 per unit, or $150,000 in the aggregate.  Each unit purchased by
Mr. Cohn consisted of one share of our common stock and one common stock purchase warrant
to purchase one share of our common stock at an exercise price of $7.00 per share.  Mr. Cohn
purchased units on the same terms and conditions as were offered to unaffiliated investors.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Stock Bonus &#8211; Officers</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In May 2000, one of our vice presidents, Robert A. Hart IV, was issued 250,000 shares of
our common stock as an employment agreement signing bonus.  These shares were valued at
$500,000, or $2.00 per share, pursuant to the terms of the Mr. Hart&#8217;s employment agreement.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In December 2000, two of our vice presidents, Waddell D. Loflin and James Kaufman,
were issued shares of our common stock as a bonus.  Mr. Loflin was issued 200,000 shares and
Mr. Kaufman was issued 300,000 shares.  These shares were valued at $119,000, or $.24 per
share, which was the closing sale price of our common stock on the day immediately preceding
their issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Stock Bonus &#8211; Directors</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In March 1998, four of our directors, Waddell Loflin, Ross S. Bravata, Richard N. Gill
and Michael Cohn, were issued 20,000 shares each of our common stock as a bonus for their
services as directors.  These shares were valued by the board of directors at $.80 per share.
However, for financial reporting purposes, these shares were valued at $.56 per share, the last
closing bid price for our common stock prior to issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Employment Agreements</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Each of our officers have entered into employment agreement, as well as confidentiality
agreements and agreements not to compete.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table23column1" width="20%" valign="middle"><p>Name of Officer</p>
</td>
<td class="table23column2" width="20%" valign="middle"><p>Position(s)</p>
</td>
<td class="table23column3" width="20%" valign="middle"><p>Term</p>
</td>
<td class="table23column4" width="20%" valign="middle"><p>Salary</p>
</td>
<td class="table23column5" width="20%" valign="middle"><p>Date</p>
</td>
</tr>
<tr>
<td class="table23column1" width="20%" valign="middle"><p>David M. Loflin</p>
</td>
<td class="table23column2" width="20%" valign="middle"><p>President</p>
</td>
<td class="table23column3" width="20%" valign="middle"><p>7 years</p>
</td>
<td class="table23column4" width="20%" valign="middle"><p>$150,000(1)</p>
</td>
<td class="table23column5" width="20%" valign="middle"><p>6/1/99</p>
</td>
</tr>
<tr>
<td class="table23column1" width="20%" valign="middle"><p>Waddell D. Loflin</p>
</td>
<td class="table23column2" width="20%" valign="middle"><p>Vice President and
Secretary</p>
</td>
<td class="table23column3" width="20%" valign="middle"><p>7 years</p>
</td>
<td class="table23column4" width="20%" valign="middle"><p>$100,000(2)</p>
</td>
<td class="table23column5" width="20%" valign="middle"><p>6/1/99</p>
</td>
</tr>
<tr>
<td class="table23column1" width="20%" valign="middle"><p>Robert A. Hart IV</p>
</td>
<td class="table23column2" width="20%" valign="middle"><p>Vice President of
Technology</p>
</td>
<td class="table23column3" width="20%" valign="middle"><p>3 years</p>
</td>
<td class="table23column4" width="20%" valign="middle"><p>$90,000(3)</p>
</td>
<td class="table23column5" width="20%" valign="middle"><p>5/25/00</p>
</td>
</tr>
<tr>
<td class="table23column1" width="20%" valign="middle"><p>James Kaufman</p>
</td>
<td class="table23column2" width="20%" valign="middle"><p>Vice President,
Corporate
Development</p>
</td>
<td class="table23column3" width="20%" valign="middle"><p>1 year</p>
</td>
<td class="table23column4" width="20%" valign="middle"><p>$120,000(4)</p>
</td>
<td class="table23column5" width="20%" valign="middle"><p>3/22/99</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">____________</p>
<p style="line-height: 0.197919in">(1) Mr. Loflin has agreed to defer payment of a portion of his salary until we are able to pay it.
As at December 31, 2000, we owed Mr. Loflin deferred salary in the amount of $54,166.</p>
<p style="line-height: 0.197919in">(2) Mr. Loflin has agreed to defer payment of a portion of his salary until we are able to pay it.
As at December 31, 2000, we owed Mr. Loflin deferred salary in the amount of $20,834.</p>
<p style="line-height: 0.197919in">(3) Mr. Hart will begin to receive salary payments at such time as we obtain a significant capital
investment.  Mr. Hart received 250,000 shares of our stock as a signing bonus, which shares were
valued at $500,000.  The value of these shares was derived from the closing price for our stock
on the date of execution of his employment agreement.</p>
<p style="line-height: 0.197919in">(4) Mr. Kaufman has agreed to defer payment of a portion of his salary until we are able to pay it.
As at December 31, 2000, we owed Mr. Kaufman deferred salary in the amount of $41,334, 80%
of which is payable in shares of our stock.  In 2000, we issued Mr. Kaufman a total of 34,536
shares of our stock valued at $154,667 in payment of the stock portion of his salary.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In January 1999, we entered into an employment agreement with Julius W. Basham, II,
formerly a director and our former chief operating officer.  Pursuant to the terms of a settlement
agreement, Mr. Basham resigned as chief operating officer on January 4, 2000.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In May 2000, we issued 250,000 shares to Robert A. Hart IV, our vice president of
technology, as a bonus, upon the execution of his employment agreement.  These shares were
valued at $2.00 per share, which was the closing price of our common stock on the day of Mr.
Hart&#8217;s execution of his employment agreement.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In November 2000, we terminated the employment of Darrell Davis, formerly Vice
President of U.S. Internet Operations, based on violations of his employment agreement.  (See
&#8220;Litigation&#8221; for a discussion of Mr. Davis&#8217; termination).</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In December 2000, we terminated the employment of Christopher L. Wiebelt, formerly
Vice President of Finance and Chief Financial Officer, based on violations of his employment
agreement.  (See &#8220;Litigation&#8221; for a discussion of Mr. Wiebelt&#8217;s termination).</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Voting Agreement</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160,On January 29, 1999, David W. Loflin, Waddell D. Loflin, Julius W. Basham, David W.
Brown and Wm. Kim Stimpson entered into a voting agreement, whereby all of these persons are
required to vote all shares owned by them for David M. Loflin and Waddell D. Loflin in all
elections of directors of USURF America.  Currently, approximately 4,100,000 shares are subject
to this voting agreement.  This amount of stock represents approximately 21% of our currently
outstanding shares.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Settlement Agreement</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On November 30, 1999, we entered into a settlement agreement and mutual release,
which settled certain legal proceedings in which USURF America and CyberHighway, had been
involved.  The parties to the settlement agreement were: USURF America, CyberHighway, Julius
W. Basham, II, William Kim Stimpson and David W. Brown.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Under the settlement agreement, the following legal proceedings have been settled in full:
(1) David W. Brown, Plaintiff v. USURF America, Inc. and Cyberhighway, Inc., Defendants, in
the District Court of the Fourth Judicial District of the State of Idaho, in and for the County of
Ada, Civil Case No. CV OC 9904230D; (2) Julius W. Basham, II, Individual Plaintiff, David W.
Brown, William Kim Stimpson, Individuals, Involuntary Party Plaintiffs v. USURF America,
Inc., formerly known as Internet Media, Inc., in the District Court of the Fourth Judicial District
of the State of Idaho, in and for the County of Ada, Civil Case No. CVOC 9904382D; and (3)
David W. Brown, Claimant v. Cyberhighway, Inc., Respondent, Industrial Commission, State of
Idaho, IDOL 3362-1999.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Other material terms of the settlement agreement include:</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;each and every of the claims made in the legal
proceedings described above by
Basham, Stimpson and Brown were dismissed with prejudice and any other
potential claims of Basham, Stimpson and Brown against USURF America and/or
CyberHIghway released;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;USURF America and CyberHighway released any and
all claims against Basham,
Stimpson and Brown;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Basham, Stimpson and Brown each reaffirmed their
existing agreements not to
compete, with the exception that Brown is now able to seek any employment
opportunity, except that Brown remains prohibited from working for any person
or entity engaged in the 2.4 GHz wireless Internet access industry;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Basham, Stimpson and Brown each reaffirmed their
existing confidentiality
agreements in their entirety;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;USURF America delivered a total of 340,000 shares
of common stock, as follows:
215,000 shares to Basham; 34,000 shares to Stimpson; and 91,000 shares to
Brown; these shares were valued at $2.6875 per share, $913,750 in the aggregate;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Basham resigned as chief operating officer of
USURF America;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;USURF America paid, as reimbursement for attorneys
fees incurred by Basham,
Stimpson and Brown, the total sum of $43,325 to the law firm of Givens Pursley,
Boise, Idaho;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;each of Basham, Stimpson and Brown acknowledged
that the voting agreement
among Basham, Stimpson, Brown, David M. Loflin and Waddell D. Loflin
remained in full force and effect; and</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;nothing contained in the settlement agreement is
construed as an admission of
liability by any party to the settlement agreement.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;For a discussion on the financial impact of the settlement agreement, please see
&#8220;Management&#8217;s Discussion and Analysis of Financial Condition and Results of Operations&#8221;.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The board of directors determined that entering into the settlement agreement was in the
best interest of USURF America.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">H + N Partners</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;During 1998, we issued a total of 187,000 shares of our common stock to H + N Partners,
a fictitious name division of B. Edward Haun &amp; Company, a Denver, Colorado-based investment
banking and research firm in which James Kaufman, our Vice President &#8211; Corporate
Development, was a partner.  Mr. Kaufman received a portion of the shares issued to H + N
Partners.  37,000 of the shares were valued at $2.00 per share and 150,000 of the shares were
valued at $2.50 per share.  All of the shares issued to H+N Partners were the subject of effective
registration statements filed with the SEC.  Mr. Kaufman was not an officer at the time of the
stock issuances to H + N Partners.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Also during 1998, in connection with a private offering of our securities, we issued  to H
+ N Partners 56,667 warrants to purchase a like number of shares of our common stock at an
exercise price of $1.25 per share and 56,667 warrants to purchase a like number of shares of our
common stock at an exercise price of $1.50 per share.  H+N Partners is a selling shareholder
under this prospectus as to all of the shares underlying these warrants.  Mr. Kaufman was not an
officer at the time of the warrant issuances to H + N Partners.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Fusion Capital Consulting Agreement</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in"&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On January 12, 2001, we entered into a one-year consulting agreement with Fusion
Capital, pursuant to which Fusion Capital agreed to provide operational and strategic consulting
services.  Fusion Capital will receive 10,000 shares of our common stock during each month of
this agreement and reimbursement for expenses. </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Appraisal</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Background.  The appraisal referred to above was prepared by Broadcast Services
International, Inc., a now-defunct Sacramento, California-based communications appraisal firm.
The report of Broadcast Services was based on 1990 Census Data.  With respect to the wireless
cable markets, the engineering studies relied upon by Broadcast Services indicate the number of
households within the broadcast radius using the 1200 MHZ frequency.  The 1200 MHZ
frequency was assumed, due to Broadcast Service&#8217;s experience that, given all of the variables
that may be present in a market-by-market system build-out, the actual benchmark performance
is more truly reflected by using the higher (1200 MHZ) frequency, such that the signal
attenuation is not over-stated.  Valuation formulas for the wireless cable markets were based on
initial public offerings within the wireless cable industry during the past three years.  The
formulas used in evaluation of the broadcast channels were based on recent sales and market
evaluation techniques employed by the Community Broadcasters Association, among others.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Use of Appraisal.  At our inception, the board of directors adopted a plan that provided
that our initial capitalization be 6,000,000 shares.  1,800,000 of these shares were sold as
founders&#8217; stock and 360,000 shares were sold to a public company for distribution as a dividend.
The balance of these shares, 3,840,000 shares, were to be utilized to acquire assets, which were
acquired pursuant to the subscription agreements  and the reorganization agreements described
above.  The board of directors utilized the appraisal as a means to allocate the 3,840,000 shares
among the assets acquired, as follows:</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table24column1" width="20%" valign="middle"><p>Transaction</p>
</td>
<td class="table24column2" width="20%" valign="middle"><p>Appraised Value
of Assets Acquired</p>
</td>
<td class="table24column3" width="20%" valign="middle"><p>Shares of Common
Stock Issued</p>
</td>
<td class="table24column4" width="20%" valign="middle"><p>Current Percentage
of Outstanding
Shares</p>
</td>
<td class="table24column5" width="20%" valign="middle"><p>Historical Cost of
Assets</p>
</td>
</tr>
<tr>
<td class="table24column1" width="20%" valign="middle"><p>Subscription
Agreement with
David M. Loflin</p>
</td>
<td class="table24column2" width="20%" valign="middle"><p>$1,826,873</p>
</td>
<td class="table24column3" width="20%" valign="middle"><p>1,578,512</p>
</td>
<td class="table24column4" width="20%" valign="middle"><p>8.08%</p>
</td>
<td class="table24column5" width="20%" valign="middle"><p>Unknown(1)</p>
</td>
</tr>
<tr>
<td class="table24column1" width="20%" valign="middle"><p>Subscription
Agreement with
Waddell D. Loflin</p>
</td>
<td class="table24column2" width="20%" valign="middle"><p>120,652</p>
</td>
<td class="table24column3" width="20%" valign="middle"><p>104,249</p>
</td>
<td class="table24column4" width="20%" valign="middle"><p>less than 1%</p>
</td>
<td class="table24column5" width="20%" valign="middle"><p>Unknown(1)</p>
</td>
</tr>
<tr>
<td class="table24column1" width="20%" valign="middle"><p>First
Reorganization</p>
</td>
<td class="table24column2" width="20%" valign="middle"><p>263,106</p>
</td>
<td class="table24column3" width="20%" valign="middle"><p>227,336</p>
</td>
<td class="table24column4" width="20%" valign="middle"><p>1.16%</p>
</td>
<td class="table24column5" width="20%" valign="middle"><p>$17,337</p>
</td>
</tr>
<tr>
<td class="table24column1" width="20%" valign="middle"><p>Second
Reorganization</p>
</td>
<td class="table24column2" width="20%" valign="middle"><p>2,233,555</p>
</td>
<td class="table24column3" width="20%" valign="middle"><p>1,929,903</p>
</td>
<td class="table24column4" width="20%" valign="middle"><p>9.88%</p>
</td>
<td class="table24column5" width="20%" valign="middle"><p>$179,611</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">____________</p>
<p style="line-height: 0.197919in">(1) These historical costs could not be determined by our original independent auditor, due to the
lack of reliable cost records associated with the underlying assets.  Consequently, no value was
assigned to these assets, for financial statement purposes.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The apparent $1.157 per share value was determined by dividing the 3,840,000 shares of our
common stock allocated by the board of directors for asset acquisition into the $4,444,186 total
appraised value of the assets acquired.  The board of directors utilized this apparent per share
value for corporate purposes, that is, the determination of consideration received for the issuance
of shares of our common stock.  However, the independent appraiser did not value the shares of
our common stock issued in consideration of the assets acquired.  Rather, the independent
appraiser valued only the assets acquired by us in the various transactions.  The $1.157 per share
figure was utilized by the board of directors primarily as a means of allocating the 3,840,000
shares among the four asset acquisition transactions consummated in completing its plan for our
initial capitalization.  Thus, the $1.157 figure, while utilized in two ways by the board of
directors, was determined arbitrarily by the board of directors and is not based on any accounting
or other financial criteria.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The appraised value of the assets described above bears no relationship to the costs of the
assets to the affiliates from whom they were acquired.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">PRINCIPAL SHAREHOLDERS</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;As of the date of this prospectus, there are 20,146,770 shares of our common stock issued
and outstanding.  The following table sets forth certain information regarding the current
beneficial ownership of our common stock, and after giving effect to the issuance of 6,000,000
shares of common stock under the Fusion Capital agreement and all 3,447,727 shares of common
stock underlying currently outstanding and exercisable options and warrants by (i) persons
known to be beneficial owners of more than 5% of our common stock, (ii) each our officers and
directors and (iii) our officers and directors, as a group.  Unless otherwise noted, the address of
the listed persons is 8748 Quarters Lake Road, Baton Rouge, Louisiana 70809.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Name and Address
of Beneficial
Owner</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>Shares Owned
Beneficially</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>Percent Owned(1)</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>Shares Owned
Beneficially</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>Percent Owned(1)</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>David M. Loflin(2)</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>3,250,960</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>13.78%</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>3,250,960</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>13.78%</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Waddell D.
Loflin(2)</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>290,000</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>1.22%</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>290,000</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>1.22%</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>James Kaufman</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>575,000</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>2.43%</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>575,000</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>2.43%</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>665 W. Velarde
Drive</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Thousand Oaks,
CA 91360</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Robert A. Hart IV</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>250,000</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>1.05%</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>250,000</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>1.05%</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Ross S. Bravata</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>32,000</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>less than 1%</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>32,000</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>less than 1%</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Michael Cohn</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>209,000(3)</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>less than 1%</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>79,000(4)</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>less than 1%</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Fusion Capital
Fund II, LLC</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>1,515,000(5)</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>6.37%</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>1,515,000</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>6.37%</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>222 Merchandise
Mart Plaza</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Suite 9-112</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Chicago, IL 60654</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Shelter Capital
Ltd.</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>1,328,000(6)</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>5.62%</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>25,000(7)</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>less than 1%</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>P.O. Box 635</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Providenciales</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Turks and Caicos
Islands</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>British West Indies</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Claymore Asset
Management Ltd.</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>1,680,000(8)</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>7.12%</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>0</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>0%</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>P.O. Box 64</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Providenciales</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>Turks and Caicos
Islands</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>British West Indies</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table25column1" width="20%" valign="middle"><p>All officers and
directors as a
group (6 persons)</p>
</td>
<td class="table25column2" width="20%" valign="middle"><p>4,606,960(4)</p>
</td>
<td class="table25column3" width="20%" valign="middle"><p>19.52%</p>
</td>
<td class="table25column4" width="20%" valign="middle"><p>4,476,960</p>
</td>
<td class="table25column5" width="20%" valign="middle"><p>18.97%</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">_______________</p>
<p style="line-height: 0.197919in">* Less than 1%.</p>
<p style="line-height: 0.197919in">(1)  Based on 23,594,497 shares outstanding, assuming the issuance of all 3,447,727 shares
underlying currently outstanding and exercisable warrants.</p>
<p style="line-height: 0.197919in">(2)  All of the shares owned by this shareholder are subject to a voting agreement and must be
voted for David M. Loflin and Waddell D. Loflin, in all elections of directors; approximately
4,100,000 shares are currently subject to this voting agreement.</p>
<p style="line-height: 0.197919in">(3) 80,000 of these shares have not been issued, but underlie currently exercisable warrants.</p>
<p style="line-height: 0.197919in">(4) Assumes 80,000 shares underlying warrants are purchased and sold and 50,000 shares
currently owned are sold by Mr. Cohn under this prospectus.</p>
<p style="line-height: 0.197919in">(5) 800,000 of these shares may not be sold by Fusion Capital until the earliest of the termination
of the Fusion Capital agreement, default under the Fusion Capital agreement or approximately 25
months from the date hereof.  645,000 of these shares have not been issued, but underlie
currently exercisable warrants.</p>
<p style="line-height: 0.197919in">(6) 960,000 of these shares have not been issued, but underlie currently exercisable warrants.</p>
<p style="line-height: 0.197919in">(7) Assumes 960,000 shares underlying warrants are purchased and sold and 343,000 shares
currently owned are sold by Shelter Capital Ltd. under this prospectus.</p>
<br>
<p style="line-height: 0.197919in">(8) 840,000 of these shares have not been issued, but underlie currently exercisable warrants.</p>
<p style="line-height: 0.197919in">(9) Assumes 840,000 shares underlying warrants are purchased and sold and 840,000 shares
currently owned are sold by Claymore Asset Management Ltd. under this prospectus.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">LITIGATION</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Net 1 Acquisition Transaction</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In September 1999, we tendered the acquired shares of capital stock of Net 1, Inc. for
rescission.  We had intended to commence arbitration to pursue our rescission claim.  However,
one of the former owners of Net 1, Knud Nielsen, III, instituted arbitration, through the American
Arbitration Association, and sought to enforce certain registration rights associated with a portion
of the shares of our common stock received by him in the acquisition transaction.  We presented
the rescission claim as a counterclaim in the arbitration proceeding.  In October 2000, this
litigation was settled, with the acquisition being rescinded in its entirety.  We issued 250,000
shares of our common stock to the former owners of Net 1 in settlement of certain claims.  These
shares were valued at $961,436.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">CyberHighway Involuntary Bankruptcy</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On September 29, 2000, an involuntary bankruptcy petition was filed against
CyberHighway in the Idaho Federal Bankruptcy Court, styled In Re: CyberHighway, Inc., Case
No. 00-02454.  The petitioning creditors were ProPeople Staffing, CTC Telecom, Inc. and
Hawkins-Smith.  In December 2000, CyberHighway and the petitioning creditors filed a joint
motion to dismiss this proceeding.  The joint motion to dismiss requires the approval of
CyberHighway&#8217;s creditors. However, some of CyberHighway&#8217;s creditors have objected to the
dismissal of the proceeding.  The basis of the creditors&#8217; objection is their belief that
CyberHighway&#8217;s as-yet unasserted damage claims against the original petitioning creditors and
their law firm and a claim against Dialup USA, Inc. represent CyberHighway&#8217;s most valuable
assets.  These as-yet unasserted claims include claims for bad faith filing of the original
bankruptcy petition as to the original petitioning creditors and their law firm, as well as claim for
tortious interference with beneficial business relationships as to Dialup USA, Inc.  The objecting
creditors desire that these claims be adjudicated in the bankruptcy court.  It is likely that, at some
time in the future, a final order of bankruptcy will be entered with respect to CyberHighway, no
prediction of the timing of such an order can be made, although we believe that such an order
would come only after the final adjudication of the claims described above.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Other Litigation</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In November 2000, CyberHighway requested and received a temporary restraining order
against Darrell Davis, formerly one of our officers, and his wife, Deanna Davis.  We have alleged
that the Davises have diverted dial-up customers from CyberHighway to a company controlled by
him, all while he was an employee of USURF America.  We expect that a hearing for our motion
for a permanent injunction will occur in the very near future.  In addition, we are seeking
monetary damages in this action.  This case is in its early stages and no prediction as to its final
outcome can be made.  This case is styled: CyberHighway, Inc. versus Deanna Davis,
individually and d/b/a Cyber-Trail, Inc., and Darrell D. Davis, 19th Judicial District Court, Parish
of East Baton Rouge, State of Louisiana, Case No. 478320.  Patrick F. McGrew, Esquire, is our
counsel in this case.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In January 2000, we instituted arbitration proceedings against Christopher L. Wiebelt, our
former vice president of finance and chief financial officer.  We have alleged that Mr. Wiebelt
violated certain terms of his employment agreement and are seeking damages resulting from
those violations.  This case is in its early stages and no prediction as to its outcome can be made.
This case is styled: USURF America, Inc. versus Christopher L. Wiebelt, American Arbitration
Association, Case No. 71-160-00087-01.  The law firm of Newlan &amp; Newlan is our counsel in
this proceeding.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Possible Claim</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Some time in the future, it is possible that we will enter into arbitration proceedings with
Commonwealth Associates.  The dispute revolves around Commonwealth&#8217;s claim that we owe it
approximately 127,000 shares of our common stock.  We do not believe Commonwealth is
entitled to any shares and will vigorously defend our position in arbitration.  We cannot predict
the outcome of this arbitration proceeding.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Potential Legal Proceeding</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In addition to CyberHighway&#8217;s cause of action against Dialup USA, it is the intention of
USURF America to pursue damage claims against Dialup USA for tortiously interfering with the
beneficial business relationships between CyberHighway and its customers.  These claims arise
out of Dialup USA&#8217;s actions on behalf of one of our former officers, which were designed to
divert customers to a company controlled by him.  Our claim against Dialup USA will be for
approximately $2 million.  We have not established a date by which we intend to commence this
legal proceeding. </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">PLAN OF DISTRIBUTION</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">General</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The shares of common stock offered by this prospectus are being offered by the selling
shareholders, Fusion Capital Fund II, LLC and Gruntal &amp; Co., L.L.C.  The common stock may be
resold or distributed from time to time by the selling shareholders directly to one or more
purchasers or through brokers, dealers or underwriters who may act solely as agents or may
acquire such common stock as principals, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices, or at fixed prices, which may be
changed. The sale of the common stock offered by this prospectus may be effected in one or
more of the following methods:</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;ordinary brokers' transactions;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;transactions involving cross or block trades or
otherwise on the American Stock
Exchange;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;purchases by brokers, dealers or underwriters as
principal and resale by such
purchasers for their own accounts pursuant to this prospectus;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;"at the market" to or through market makers or
into an existing market for the
common stock;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;in other ways not involving market makers or
established trading markets,
including direct sales to purchasers or sales effected through agents;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;in privately negotiated transactions; or</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;</p>
<p style="line-height: 0.197919in; text-indent: -1in; margin-left: 1in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;any combination of the foregoing.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Please see the table on page 41 for the number of shares of our common stock that Fusion
Capital would be offering hereunder, based on purchases under the Fusion Capital agreement at
varying purchase prices.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;In order to comply with the securities laws of certain states, if applicable, the shares may
be sold only through registered or licensed brokers or dealers. In addition, in certain states, the
shares may not be sold unless they have been registered or qualified for sale in such state or an
exemption from such registration or qualification requirement is available and complied with.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Brokers, dealers, underwriters or agents participating in the distribution of the shares as
agents may receive compensation in the form of commissions, discounts or concessions from the
selling shareholder and/or purchasers of the common stock for whom such broker-dealers may
act as agent, or to whom they may sell as principal, or both. The compensation paid to a
particular broker-dealer may be less than or in excess of customary commissions.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Fusion Capital is an "underwriter" within the meaning of the Securities Act.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Neither we nor the selling shareholders can presently estimate the amount of
compensation that any agent will receive. We know of no existing arrangements between the
selling shareholders, any other shareholder, broker, dealer, underwriter or agent relating to the
sale or distribution of the shares.  At a time a particular offer of shares is made, a prospectus
supplement, if required, will be distributed that will set forth the names of any agents,
underwriters or dealers and any compensation from the selling shareholder and any other
required information.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We will pay all of the expenses incident to the registration, offering and sale of the shares
to the public other than commissions or discounts of underwriters, broker-dealers or agents. We
have also agreed to indemnify Fusion Capital and related persons against specified liabilities,
including liabilities under the Securities Act.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Insofar as indemnification for liabilities arising under the Securities Act may be permitted
to directors, officers and controlling persons of USURF America, we have been advised that in
the opinion of the SEC such indemnification is against public policy as expressed in the
Securities Act and is therefore, unenforceable.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Fusion Capital and its affiliates have agreed not to engage in any direct or indirect short
selling or hedging of our common stock during the term of the Fusion Capital agreement.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have advised the selling shareholders that, while they are engaged in a distribution of
the shares included in this prospectus, they are required to comply with Regulation M
promulgated under the Securities Exchange Act of 1934, as amended. With certain exceptions,
Regulation M precludes the selling shareholders, any affiliated purchasers, and any broker-dealer
or other person who participates in such distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase any security which is the subject of the
distribution until the entire distribution is complete. Regulation M also prohibits any bids or
purchases made in order to stabilize the price of a security in connection with the distribution of
that security. All of the foregoing may affect the marketability of the shares offered hereby this
prospectus.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;This offering will terminate on the date on which all shares offered by this prospectus
have been sold by the selling shareholders.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Fusion Capital</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Up to 7,445,000 shares of our common stock are being offered for sale by Fusion Capital,
a selling shareholder.  Under the Fusion Capital agreement, Fusion Capital agreed to purchase up
to $10 million of our common stock. The purchase price of our common stock is based upon the
future market price of our common stock. We will implement the Fusion Capital agreement, after
the registration statement of which this prospectus is a part is effective. </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We estimate that the maximum number of shares we will sell to Fusion Capital under the
Fusion Capital agreement will be 6,000,000. We have the right under certain conditions to
suspend and/or terminate that agreement without any payment or liability to Fusion Capital.  The
Fusion Capital agreement is described above in detail under the heading "The Fusion Capital
Transaction".</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Gruntal &amp; Co.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Gruntal &amp; Co. is also offering for sale the shares of our common stock, as listed below
under the heading &#8220;Selling Shareholders&#8221;.  Gruntal &amp; Co. will receive the proceeds from the
sales of its shares of stock.  These shares of stock may be sold by Gruntal &amp; Co., from time to
time, in the same manner or manner as shares offered and sold by Fusion Capital, in the
discretion of Gruntal &amp; Co.  At the time a particular offer of shares is made by or on the behalf of
Gruntal &amp; Co., a prospectus and, to the extent required, a prospectus supplement, is required to
be distributed.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Gruntal &amp; Co. has advised us that it will not, in any manner, participate or otherwise be
involved in the distribution of our shares of common stock to be made by Fusion Capital
pursuant to this prospectus.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">SELLING SHAREHOLDERS</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The following table assumes that each selling shareholder is offering for sale shares of
common stock previously issued or issuable by us.  We have agreed to pay all expenses in
connection therewith (other than brokerage commissions and fees and expenses of counsel of the
respective selling shareholders).  None of the selling shareholders has ever held any position with
us or had any other material relationship with us.  The following table sets forth the beneficial
ownership of the shares of the stock by each person who is a selling shareholder.  We will not
receive any proceeds from the sales of stock by the selling shareholders.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table26column1" width="20%" valign="middle"><p>Name of
Beneficial Owner</p>
</td>
<td class="table26column2" width="20%" valign="middle"><p>Shares of Common
Stock Beneficially
Owned</p>
</td>
<td class="table26column3" width="20%" valign="middle"><p>Shares of Common
Stock Being
Offered</p>
</td>
<td class="table26column4" width="20%" valign="middle"><p>Percentage Owned
Before Offering(1)</p>
</td>
<td class="table26column5" width="20%" valign="middle"><p>Percentage Owned
After Offering(2)</p>
</td>
</tr>
<tr>
<td class="table26column1" width="20%" valign="middle"><p>Fusion Capital
Fund II, LLC</p>
</td>
<td class="table26column2" width="20%" valign="middle"><p>7,515,000(3)(4)</p>
</td>
<td class="table26column3" width="20%" valign="middle"><p>7,445,000</p>
</td>
<td class="table26column4" width="20%" valign="middle"><p>31.63%</p>
</td>
<td class="table26column5" width="20%" valign="middle"><p>0%</p>
</td>
</tr>
<tr>
<td class="table26column1" width="20%" valign="middle"><p>Gruntal &amp; Co.,
L.L.C.</p>
</td>
<td class="table26column2" width="20%" valign="middle"><p>611,250(5)</p>
</td>
<td class="table26column3" width="20%" valign="middle"><p>611,250</p>
</td>
<td class="table26column4" width="20%" valign="middle"><p>2.60%</p>
</td>
<td class="table26column5" width="20%" valign="middle"><p>0%</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">____________</p>
<p style="line-height: 0.197919in">(1) Based on 23,594,497 shares outstanding, assuming the issuance of a total of 3,447,727 shares
of common stock that can be acquired by any person pursuant to any option, warrant or other
right within 60 days of the date of this prospectus, all of which are deemed outstanding for the
purpose of computing the percentage of existing shares beneficially owned by each person listed.</p>
<p style="line-height: 0.197919in">(2)  Based on 29,594,497 shares outstanding, assuming the issuance of (A) 6,000,000 shares of
common stock under the Fusion Capital agreement and (B) all 3,447,727 shares of common
stock that can be acquired by any person pursuant to any option, warrant or other right within 60
days of the date of this prospectus, all of which are deemed outstanding for the purpose of
computing the percentage of existing shares beneficially owned by each person listed.</p>
<p style="line-height: 0.197919in">(3) Only 800,000 of these shares have been issued; 645,000 of these shares underlie currently
issued and exercisable warrants; 6,000,000 of these shares have been reserved for issuance under
the Fusion Capital agreement and have not yet been issued.</p>
<p style="line-height: 0.197919in">(4) 800,000 of these shares may not be sold by Fusion Capital until the earliest of termination of
the Fusion Capital agreement, default under the Fusion Capital agreement or approximately 25
months from the date hereof.</p>
<p style="line-height: 0.197919in">(5) 450,000 of these shares have been issued; 161,250 of these shares underlie currently issued
and exercisable warrants.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">DESCRIPTION OF SECURITIES</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Authorized Capital Stock</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our authorized capital stock consists of 100,000,000 shares of common stock, $.0001 par
value per share.  The following description of certain provisions of our common stock does not
purport to be complete and is subject to, and qualified in its entirety by, the provisions of the our
Articles of Incorporation, as amended.</p>
<br>
<p style="line-height: 0.197919in">Description of Common Stock</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;There are 20,146,770 shares of our common stock outstanding.  An additional 3,447,727
shares of common stock have been reserved for issuance pursuant to various warrants and an
additional 6,000,000 shares of common stock have been reserved for issuance pursuant the
Fusion Capital agreement.  Each share of common stock is entitled to one vote at all meetings of
shareholders.  All shares of common stock are equal to each other with respect to liquidation
rights and dividend rights.  There are no preemptive rights to purchase any additional shares of
common stock, nor are there any subscription, conversion or redemption rights applicable to the
common stock.  Our Articles of Incorporation, as amended, prohibit cumulative voting in the
election of directors.  The absence of cumulative voting means that holders of more than 50% of
the shares voting for the election of directors can elect all directors if they choose to do so.  In
such event, the holders of the remaining shares of common stock will not be entitled to elect any
director.  A majority of the shares entitled to vote, represented in person or by proxy, constitutes
a quorum at a meeting of shareholders.  In the event of liquidation, dissolution or winding up,
holders of shares of common stock will be entitled to receive, on a pro rata basis, all assets
remaining after satisfaction of all liabilities.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Transfer Agent and Registrar</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Securities Transfer Corporation, Frisco, Texas, is the transfer agent and registrar for our
common stock.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">LEGAL MATTERS</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The law firm of Newlan &amp; Newlan, Lewisville, Texas, has acted as our legal counsel in
connection with the registration statement of which this prospectus forms a part and related
matters.  The partners of the firm of Newlan &amp; Newlan own a total of 668,500 shares of our
common stock.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">EXPERTS</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our financial statements for the years ended December 31, 1999 and 2000, as indicated in
the report thereon,  that appear in this prospectus have been audited by Postlethwaite &amp;
Netterville, independent auditor.  The financial statements audited by Postlethwaite &amp;
Netterville, have been included in reliance on its reports given as its authority as an expert in
accounting and auditing.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Our financial statements for the year ended December 31, 1998, as indicated in the report
thereon, that appear in this prospectus have been audited by Weaver and Tidwell, L.L.P.,
independent auditor.  The financial statements audited by Weaver and Tidwell, L.L.P., have been
included in reliance on its reports given as its authority as an expert in accounting and auditing.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;On January 11, 2000, Weaver and Tidwell, L.L.P. was dismissed as our independent
auditor.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">ABOUT THIS PROSPECTUS</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;This prospectus is part of a registration statement that we filed with the SEC using a
&#8220;shelf&#8221; registration process.  Under this shelf process, the selling shareholders, including Fusion
Capital, may sell up to an aggregate of 8,056,250 shares of our common stock in one or more
offerings.  This prospectus and any applicable prospectus supplement provided to you should be
considered together with the additional information described under the heading &#8220;Where You
Can Find More Information&#8221;.  The registration statement that contains this prospectus (including
exhibits to the registration statement) contains additional information about our company and the
securities offered by this prospectus.  That registration statement can be read at the SEC web site
or at the SEC offices mentioned under the heading &#8220;Where You Can Find More Information&#8221;.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">WHERE YOU CAN FIND MORE INFORMATION</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We have filed a registration statement on Form S-1 (including its exhibits and schedules)
with the SEC under the Securities Act with respect to our common stock to be sold in this
offering.  This prospectus, which is part of the registration statement, does not contain all of the
information included in the registration statement.  Certain information is omitted and you should
refer to the registration statement and its exhibits.  With respect to references made in this
prospectus to any contract, agreement or other document of USURF America, such references are
not necessarily complete and you should refer to the exhibits attached to the registration
statement for copies of the actual contract, agreement or other document.  You may review a
copy of the registration statement, including exhibits, at the SEC&#8217;s public reference room at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the SEC located at Seven World Trade Center, Suite 1300, New York, New
York 10048, or at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661.  Please call 1-800-SEC-0330 for further information about the operation of the public
reference rooms.  The registration statement and our other SEC filings can also be reviewed by
accessing the SEC&#8217;s Internet site at http://www.sec.gov, which contains reports, proxy and
information statements and other information regarding registrants that file electronically with
the SEC.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We file annual, quarterly and current reports, proxy statements and other information with
the SEC.  You may read and copy any reports, statements or other information on file at the
public reference rooms.  You can also request copies of these documents, for a copying fee, by
writing to the SEC.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;We will furnish our shareholders with annual reports containing financial statements
audited by our independent auditors and to make available to our shareholders quarterly reports
containing unaudited financial data for the first three quarters of each fiscal year.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">INDEX TO FINANCIAL STATEMENTS</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: right; line-height: 0.197919in">Page</p>
<p style="text-align: center; line-height: 0.197919in">Three Months Ended March 31, 2001 and 2000</p>
<p style="text-align: center; line-height: 0.197919in">(unaudited)</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Consolidated Balance Sheets at March 31, 2001, and </p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;December 31, 2000 (audited)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;F-1 </p>
<p style="line-height: 0.197919in">Consolidated Statements of Operations for the Three Months</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;Ended March 31, 2001 and 2000&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;F-3 </p>
<p style="line-height: 0.197919in">Consolidated Statements of Cash Flows for the Three Months</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;Ended March 31, 2001 and 2000&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;F-4 </p>
<p style="line-height: 0.197919in">Notes to Consolidated Financial Statements&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;F-6 </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="text-align: center; line-height: 0.197919in">Years Ended December 31, 2000, 1999 and 1998</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Report of Independent Auditor&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;F-11</p>
<p style="line-height: 0.197919in">Report of Independent Auditor&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;F-12</p>
<p style="line-height: 0.197919in">Consolidated Balance Sheets at December 31, 2000 and 1999&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;F-13</p>
<p style="line-height: 0.197919in">Consolidated Statements of Operations for the Years Ended</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;December 31, 2000, 1999 and 1998&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;F-15</p>
<p style="line-height: 0.197919in">Consolidated Statements of Changes in Stockholders&#8217; Equity</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;for the Years Ended December 31, 2000, 1999 and 1998&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;F-16</p>
<p style="line-height: 0.197919in">Consolidated Statements of Cash Flows for the Years Ended</p>
<p style="line-height: 0.197919in">&#160;&#160;&#160;December 31, 2000, 1999 and 1998&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;F-18</p>
<p style="line-height: 0.197919in">Notes to Consolidated Financial Statements&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;F-20</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table27column1" width="100%" valign="middle"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td class="table27column1" width="100%" valign="middle"><p>CONSOLIDATED BALANCE SHEETS</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table28column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>3/31/01</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>12/31/00</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>(unaudited)</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>(audited)</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>ASSETS</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>CURRENT ASSETS</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>Cash and cash equivalents</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>$125,494</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>$1,088</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>Accounts receivable - net</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>384</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>Inventory</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>246,721</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>246,721</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>Total current assets</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>372,599</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>247,809</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>PROPERTY AND
EQUIPMENT,</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>Cost</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>138,954</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>138,954</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>Less: accumulated depreciation</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>(81,056)</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>(69,476)</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>57,898</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>69,478</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>INVESTMENTS</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>68,029</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>68,029</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>OTHER ASSETS</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>25,000</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>25,000</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>25,000</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>25,000</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table28column1" width="33%" valign="middle"><p>Total assets</p>
</td>
<td class="table28column2" width="33%" valign="middle"><p>$523,526</p>
</td>
<td class="table28column3" width="34%" valign="middle"><p>$410,316</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-1</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table29column1" width="33%" valign="middle"><p>LIABILITIES AND
STOCKHOLDERS' EQUITY</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>CURRENT LIABILITIES</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>Disbursements in excess of cash
balances</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>42,469</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>42,469</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>Accounts payable</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>1,473,817</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>1,472,030</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>Accrued payroll</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>200,155</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>158,262</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>Other current liabilities</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>51,824</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>41,824</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>Property dividends payable</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>43,750</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>43,750</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>Notes payable to stockholder</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>32,728</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>6,638 </p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>Total current liabilities</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>1,844,743</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>1,764,973</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>LONG-TERM LIABILITIES</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>Deferred income tax</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>Total liabilities</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>1,844,743</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>1,764,973</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>REDEEMABLE COMMON
STOCK</p>
<p>Common stock subject to
rescission, $.0001 par value,
Outstanding: 4,381,985 shares
at March 31, 2001 and
2,767,823 shares at December
31, 2000</p>
<p>Deferred consulting</p>
</td>
<td class="table29column2" width="33%" valign="middle"><br>
<br>
<br>
<br>
<br>
<br>
<br>
<br>
<p>4,869,255 </p>
<p>0</p>
<p>----------</p>
<p>4,869,255</p>
<p>----------</p>
</td>
<td class="table29column3" width="34%" valign="middle"><br>
<br>
<br>
<br>
<br>
<br>
<br>
<br>
<p>3,897,552 </p>
<p>(574,000)</p>
<p>---------</p>
<p>3,323,552</p>
<p>---------</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>STOCKHOLDERS' EQUITY</p>
</td>
<td class="table29column2" width="33%" valign="middle"><br>
<br>
<p>&#160;</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>Common stock, $.0001 par
value; Authorized:
100,000,000; Issued and
Outstanding: 13,670,785 shares
at March 31, 2001 and
13,920,985 shares at December
31, 2000</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>1,367</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>1,392</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>Additional paid-in capital</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>30,262,522</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>30,286,687</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>Accumulated deficit</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>(35,403,419)</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>(34,502,160)</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>Subscriptions receivable</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>313,000</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>933,514</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>Deferred consulting</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>(1,363,942)</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>(1,397,642)</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>(6,190,472)</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>(4,678,209)</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table29column1" width="33%" valign="middle"><p>TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY</p>
</td>
<td class="table29column2" width="33%" valign="middle"><p>$523,526</p>
</td>
<td class="table29column3" width="34%" valign="middle"><p>$410,316</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-2</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table30column1" width="100%" valign="middle"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td class="table30column1" width="100%" valign="middle"><p>CONSOLIDATED STATEMENTS OF OPERATIONS</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>Three Months Ended March 31,
2001</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>Three Months Ended March 31,
2000</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>(unaudited)</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>(unaudited)</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>REVENUES</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>Internet access revenues</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>$384</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>$597,392</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>Internet access costs and cost of
goods sold</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>(269,136)</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>Gross profit</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>384</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>328,256</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>OPERATING EXPENSES</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>Depreciation and amortization</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>11,580</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>2,238,544</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>Professional fees</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>707,288</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>390,038</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>Rent</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>5,361</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>61,570</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>Salary and commissions</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>160,746</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>399,358</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>Advertising</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>15,179</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>Other</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>16,668</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>249,530</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>Total Operating Expenses</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>901,643</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>3,354,219</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>LOSS FROM OPERATIONS</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>(901,259)</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>(3,025,963)</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>OTHER INCOME(EXPENSE)</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>6,618</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>Interest expense</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>(9,770)</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>LOSS BEFORE INCOME TAX</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>(901,259)</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>(3,029,115)</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>INCOME TAX BENEFIT</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>471,519</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>NET LOSS</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>(901,259)</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>(2,557,596)</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>Net loss per common share</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>(.06)</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>(0.20)</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table31column1" width="33%" valign="middle"><p>Weighted average number of
shares outstanding</p>
</td>
<td class="table31column2" width="33%" valign="middle"><p>13,934,118</p>
</td>
<td class="table31column3" width="34%" valign="middle"><p>12,937,499</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-3</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table32column1" width="100%" valign="middle"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td class="table32column1" width="100%" valign="middle"><p>CONSOLIDATED STATEMENTS OF CASH FLOWS</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table33column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>Three Months Ended March 31,
2001</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>Three Months Ended March 31,
2000</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>(unaudited)</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>(unaudited)</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>CASH FLOWS FROM
OPERATING ACTIVITIES</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Net loss</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>$(901,259)</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>$(2,557,596)</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Adjustment to reconcile net loss
to net cash used in operating
activities</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Depreciation and amortization</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>11,580</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>2,238,544</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Consulting fees recognized</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>670,400</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>311,750</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Compensation expense</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>3,300</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>24,000</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Deferred income taxes</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>(471,519)</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Accounts receivable</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>(384)</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>633</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Inventory</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>6,301</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Other current liabilities</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>10,000</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>(16,823)</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Other assets and liabilities</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>9,276</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Deferred revenue</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>68,051</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Accounts payable</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>1,786</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>49,464</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Prepaid expenses and other
current assets</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>(3,381)</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Accrued payroll</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>41,893</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>35,521</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>Net cash used in operating
activities</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>(162,684)</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>(305,779)</p>
</td>
</tr>
<tr>
<td class="table33column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table33column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table33column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-4</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table34column1" width="33%" valign="middle"><p>CASH FLOWS FROM
INVESTING ACTIVITIES</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>Cash acquired in acquisitions</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>7,704</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>Capital expenditures</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>(102,612)</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>Net cash used in investing
activities</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>(94,908)</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>CASH FLOWS FROM
FINANCING ACTIVITIES</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>Payments on notes payable and
capital lease obligations</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>(5,910)</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>Proceeds from subscriptions
receivable</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>261,000</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>115,000</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>Proceeds from note payable to
stockholder</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>26,090</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>286,400</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>Issuance of common stock for
cash</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>Payment on note payable to
stockholder</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>(11,093)</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>Net cash provided by financing
activities</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>287,090</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>384,397</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>----------</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>----------</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>Net increase (decrease) in cash
and cash equivalents</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>124,406</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>(16,290)</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>Cash and cash equivalents,
beginning of period</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>1,088</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>75,313</p>
</td>
</tr>
<tr>
<td class="table34column1" width="33%" valign="middle"><p>Cash and cash equivalents, end
of period</p>
</td>
<td class="table34column2" width="33%" valign="middle"><p>125,494</p>
</td>
<td class="table34column3" width="34%" valign="middle"><p>59,023</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-5</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table35column1" width="100%" valign="middle"><p>SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING</p>
</td>
</tr>
<tr>
<td class="table35column1" width="100%" valign="middle"><p>AND OTHER CASH FLOW INFORMATION</p>
</td>
</tr>
</TABLE>
</div>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table36column1" width="100%" valign="middle"><p>Three Months March 31, 2001:</p>
</td>
</tr>
<tr>
<td class="table36column1" width="100%" valign="middle"><p>- In January 2001, the Company entered into a one-year consulting agreement, by issuing
200,000 shares of stock valued at $62,000.</p>
</td>
</tr>
<tr>
<td class="table36column1" width="100%" valign="middle"><p>- In January 2001, the Company issued 800,000 shares of stock valued at $248,000, in payment
of a commitment fee under a common stock purchase agreement.</p>
</td>
</tr>
<tr>
<td class="table36column1" width="100%" valign="middle"><p>- In January 2001, 774,162 shares were issued to the Company's president, pursuant to a debt
conversion agreement, which shares were not issued in 2000, due to an administrative error.</p>
</td>
</tr>
<tr>
<td class="table36column1" width="100%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table36column1" width="100%" valign="middle"><p>Three Months March 31, 2000:</p>
</td>
</tr>
<tr>
<td class="table36column1" width="100%" valign="middle"><p>- In January 2000, the Company entered into a one-year legal and business consulting services
agreement, by issuing 100,000 shares of stock valued at $300,000.</p>
</td>
</tr>
<tr>
<td class="table36column1" width="100%" valign="middle"><p>- In January 2000, the Company entered into a one-year business and communications consulting
services agreement, by issuing 60,000 shares of stock valued at $180,000.</p>
</td>
</tr>
<tr>
<td class="table36column1" width="100%" valign="middle"><p>- In February 2000, the Company acquired all of the stock of The Spinning Wheel, Inc., by
issuing 81,063 shares of stock valued at $324,252. This acquisition was accounted for as a
purchase business combination.</p>
</td>
</tr>
<tr>
<td class="table36column1" width="100%" valign="middle"><p>- In February 2000, the Company acquired all of the ownership interests of Internet Innovations,
L.L.C., by issuing 50,000 shares of stock valued at $437,500. This acquisition was accounted for
as a purchase business combination.</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-6</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table37column1" width="100%" valign="middle"><p>USURF AMERICA, INC.</p>
</td>
</tr>
<tr>
<td class="table37column1" width="100%" valign="middle"><p>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>
</td>
</tr>
<tr>
<td class="table37column1" width="100%" valign="middle"><p>Three Months Ended March 31, 2001</p>
</td>
</tr>
<tr>
<td class="table37column1" width="100%" valign="middle"><p>(Unaudited)</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Note 1. Nature of Business, Organization and Basis of Presentation</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Basis of Presentation</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">USURF America, Inc. (USURF), formerly Internet Media Corporation, was incorporated as
Media Entertainment, Inc. in the State of Nevada on November 1, 1996. USURF currently
provides wireless Internet access services to a small number of customers in Santa Fe, New
Mexico. USURF's original purpose was to operate as a holding company in the wireless cable
television and community (low power) television industries, as well as other segments of the
communications industry. Until January 1999, the Company was in the development stage. In
1998 the Company changed its focus to concentrate its efforts in the wireless internet
communications industry. The Company later ceased efforts to develop the wireless cable and
low power television business areas and assigned all of its assets from the low power television
activities to New Wave Media Corp. in exchange for a 15% ownership interest in New Wave
Media Corp. </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Effective December 31, 1996, USURF acquired all of the outstanding common stock of Winter
Entertainment, Inc., a Delaware corporation incorporated on December 28, 1995 (WEI), and
Missouri Cable TV Corp., a Louisiana corporation incorporated on October 9, 1996 (MCTV).
WEI operates a community television station in Baton Rouge, Louisiana; MCTV owns wireless
cable television channels in Poplar Bluff, Missouri, which system has been constructed and is
ready for operation, and Lebanon, Missouri. Effective October 8, 1998, the Company formed
Santa Fe Wireless Internet, Inc. (Santa Fe), a New Mexico corporation, to hold the assets
acquired from Desert Rain Internet Services. Santa Fe was organized to provide wireless internet
access. The acquisition of WEI and MCTV by USURF was accounted for as a reorganization of
companies under common control. The assets and liabilities acquired were recorded at historical
cost in a manner similar to a pooling of interests. The acquisition of Santa Fe was accounted for
as a purchase whereby cost is allocated to the assets acquired.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">On January 29, 1999, the Company acquired all the stock of CyberHighway, Inc., a Boise,
Idaho-based ISP, by issuing 2,000,000 shares of stock valued at approximately $15,940,000. In
addition, 325,000 shares of common stock were issued in payment of a finder's fee arising out of
this acquisition. This acquisition was accounted for as a purchase business combination.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In June 1999, USURF acquired all the stock of Santa Fe Trail Internet Plus, Inc., a Santa Fe, New
Mexico-based ISP, by issuing 100,000 shares of stock valued at approximately $400,000. This
acquisition was accounted for as a purchase business combination.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In July 1999, USURF acquired all of the stock of Premier Internet Services, Inc., an Idaho-based
ISP, by issuing 127,000 shares of stock valued at approximately $508,000. This acquisition was
accounted for as a purchase business combination.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-7</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In November 1999, the Company acquired the customer base of Cyber Mountain, Inc. a Denver,
Colorado-based ISP, for 25,000 shares of stock valued at approximately $75,000. In December
1999, USURF acquired a portion of the ISP-related equipment and customer base of Cyber
Highway of North Georgia, Inc., a Demorest, Georgia-based ISP for 54,000 shares of stock
valued at approximately $212,000.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In February 2000, the Company acquired Spinning Wheel, Inc., an Idaho Springs, Idaho-based
ISP, for 81,063 shares of stock valued at approximately $325,000. This acquisition has been
accounted for as a purchase business combination. </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In February 2000, the Company acquired Internet Innovations, LLC, a Baton Rouge, Louisiana
based web design company, for 50,000 shares of common stock valued at approximately
$437,000. This acquisition has been accounted for as a purchase business combination.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Principles of Consolidation</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The accompanying consolidated financial statements include all the accounts of USURF and all
wholly owned subsidiaries. Inter-company transactions and balances have been eliminated in the
consolidation. </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Loss Per Common Share</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Basic loss per common share has been computed by dividing the net loss by the weighted
average number of shares of common stock outstanding throughout the period.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Note 2. Interim Consolidated Financial Statements</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In the opinion of management, the accompanying consolidated financial statements for the three
months ended March 31, 2001 and 2000, reflect all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial condition, results of operations
and cash flows of USURF, including subsidiaries, and include the accounts of USURF and all of
its subsidiaries. All material inter-company transactions and balances are eliminated.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The financial statements included herein have been prepared by USURF, without audit, pursuant
to the rules and regulations of the SEC. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and regulations. It is suggested
that these unaudited financial statements be read in conjunction with the financial statements and
notes thereto included in USURF's Annual Report on Form 10-KSB/A for the year ended
December 31, 2000, as filed with the SEC. Certain reclassifications and adjustments may have
been made to the financial statements for the comparative period of the prior fiscal year to
conform with the 2001 presentation. The results of operations for the interim periods are not
necessarily indicative of the results to be obtained for the entire year.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-8</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Note 3. Notes Payable to Shareholder</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table38column1" width="50%" valign="middle"><p>&#160;</p>
</td>
<td class="table38column2" width="50%" valign="middle"><p>March 31, 2001</p>
</td>
</tr>
<tr>
<td class="table38column1" width="50%" valign="middle"><p>&#160;</p>
</td>
<td class="table38column2" width="50%" valign="middle"><p>(unaudited)</p>
</td>
</tr>
<tr>
<td class="table38column1" width="50%" valign="middle"><p>Notes payable to majority stockholder, interest
accrues at 8%, due on demand and unsecured</p>
</td>
<td class="table38column2" width="50%" valign="middle"><p>$32,728</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Note 4. Stock Sales</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In February 2001, the Company sold, pursuant to a Securities Purchase Agreement, 840,000
shares of common stock and 840,000 warrants with an exercise price of $.15, exercisable for a
period of three years from issuance. These securities were sold for $126,000 in cash, with no
portion of the purchase price having been allocated to these warrants. In connection with this
transaction, the Company issued, as a finder's fee, 84,000 shares of common stock and 336,000
warrants with an exercise price of $.15 per share, exercisable for a period of three years from
issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In March 2001, the Company sold, pursuant a Securities Purchase Agreement, 500,000 shares of
common stock and 500,000 warrants with an exercise price of $.25, exercisable for a period of
three years from issuance. These securities were sold for $125,000 in cash, with no portion of the
purchase price having been allocated to the warrants. In connection with this transaction, the
Company issued, as a finder's fee, 50,000 shares of common stock and 200,000 warrants with an
exercise price of $.25 per share, exercisable for a period of three years from issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Note 5. Other Material Stock Issuances</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In January 2000, the Company issued 800,000 shares of its common stock as a commitment fee
under a common stock purchase agreement to an unrelated company. See Note 7.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Note 6. Contingencies</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">A. Bankruptcy</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">On September 29, 2000, three creditors of CyberHighway filed an involuntary petition in the
Idaho Federal Bankruptcy Court, styled In Re: CyberHighway, Inc., Case No. 00-02454. In
December 2000, CyberHighway and the petitioning creditors filed a joint motion to dismiss this
proceeding. The joint motion to dismiss requires the approval of CyberHighway's creditors.
However, some of CyberHighway's creditors objected to the dismissal of the proceeding. The
basis of the creditors' objection is their belief that CyberHighway's as-yet unasserted damage
claims against the original petitioning creditors and their law firm and a claim against Dialup
USA, Inc. represent CyberHighway's most valuable assets. These as-yet unasserted claims
include claims for bad faith filing of the original bankruptcy petition as to the original petitioning
creditors and their law firm, as well as claim for tortious interference with beneficial business
relationships as to Dialup USA, Inc. The objecting creditors desire that all claims be adjudicated
in the bankruptcy court. The Company believes it is likely that, at some time in the future, a final
order of bankruptcy will be entered with respect to CyberHighway.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-9</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Subsequent to the involuntary bankruptcy, CyberHighway lost nearly all of its customers. Due to
this loss of customer base, the Company's intangible assets relating to those customers were
determined to be worthless. The write-off of the intangible assets reflected on the Company's
December 31, 2000 balance sheet was $4,814,272 (net of deferred taxes). Due to this change in
operating environment, the Company's revenues have decreased substantially as well as a
decrease in expenses associated with the elimination of personnel previously required to operate
the Company's network operations center, and accordingly goodwill has been impaired. The
write-down of goodwill reflected on the Company's December 31, 2000, balance sheet was
$4,425,037.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">B. Potential Rescission Claims</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Since January 2000, a total of 4,881,985 shares of the common stock of the Company may have
been issued in violation of Section 5 of the Securities Act of 1933, as amended. The aggregate
value assigned to these shares upon their issuance totaled $5,081,255. It is possible that each of
the issues of these shares has a potential claim for rescission of their respective issuance
transactions.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The Company believes that it is unlikely that any of these potential rescission claims will be
asserted against the Company.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Note 7. Financing Transaction</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">On October 9, 2000, the Company signed a common stock purchase agreement with an unrelated
company to sell up to $10,000,000 of its common stock. This agreement was replaced by a
similar agreement on April 25, 2001, as amended and restated May 9, 2001. The purchase price
of the shares under this agreement will vary, based on future market prices of the Company's
common stock. The agreement calls for the Company to meet certain requirements and maintain
certain criteria with respect to its common stock in order to avoid an event of default, which
includes:</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table39column1" width="100%" valign="middle"><p>- if for any legal reason the shares purchased cannot be sold pursuant to this prospectus for a
period of 10 consecutive trading days or for more than an aggregate of 30 trading days in any
365-day period;</p>
</td>
</tr>
<tr>
<td class="table39column1" width="100%" valign="middle"><p>- suspension by the American Stock Exchange of Company common stock from trading for a
period of 10 consecutive trading days or for more than an aggregate of 30 trading days in any
365-day period;</p>
</td>
</tr>
<tr>
<td class="table39column1" width="100%" valign="middle"><p>- the Company's failure to satisfy any listing criteria of the American Stock Exchange for a
period of 10 consecutive trading days or for more than an aggregate of 30 trading days in any
365-day period;</p>
</td>
</tr>
<tr>
<td class="table39column1" width="100%" valign="middle"><p>- (1) notice from the Company's transfer agent to the effect that the Company or the transfer
agent intends not to comply with a proper request for purchase of shares under the purchase
agreement; (2) the Company's failure to promptly confirm to the transfer agent the buyer's
purchase notice; or (3) the failure of the transfer agent to issue shares of common stock promptly
upon delivery of a purchase notice or upon delivery of a warrant exercise notice;</p>
</td>
</tr>
<tr>
<td class="table39column1" width="100%" valign="middle"><p>- any material breach of the representations or warranties or covenants contained in the purchase
agreement or any related agreements which has or which could have a material adverse affect on
the Company, subject to a cure period of 10 trading days;</p>
</td>
</tr>
<tr>
<td class="table39column1" width="100%" valign="middle"><p>- if the number of shares to be issued to the buyer reaches an aggregate amount that would
require shareholder approval under the principal market regulations (to the extent not previously
obtained and then required) or otherwise cause us to breach the principal market rules and
regulations;</p>
</td>
</tr>
<tr>
<td class="table39column1" width="100%" valign="middle"><p>- a default of any payment obligation of the Company in excess of $1.0 million; or</p>
</td>
</tr>
<tr>
<td class="table39column1" width="100%" valign="middle"><p>- commencement of insolvency or bankruptcy proceedings by or against the Company.</p>
</td>
</tr>
<tr>
<td class="table39column1" width="100%" valign="middle"><p>&#160;</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-10</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Upon the occurrence of the event of default, the buyer would no longer be obligated to purchase
any additional shares of stock. The Company is currently in compliance with these criteria and
expects to continue to comply in the future. Also, this agreement will expire on June 30, 2001, if
all of the circumstances necessary to effect the transaction have not occurred by that date,
including completion of a registration statement with respect thereto. This registration statement
is to be filed in the near future, but may not be completed prior to the June 30, 2001, deadline.
The buyer is under no obligation to grant an extension.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-11</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">INDEPENDENT AUDITORS' REPORT</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">To the Board of Directors and Stockholders</p>
<p style="line-height: 0.197919in">USURF America, Inc. and Subsidiaries</p>
<p style="line-height: 0.197919in">Baton Rouge, Louisiana</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">We have audited the accompanying consolidated balance sheets of USURF America, Inc. and
Subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial statements based on our
audits.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">We conducted our audits in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audits to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of USURF America, Inc. and Subsidiaries as of December 31,2000 and
1999, and the results of its operations and cash flows for the years then ended in conformity with
generally accepted accounting principles.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The accompanying financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 18 to the consolidated financial statements,
the Company has significant operating losses. In addition, the Company has excess current
liabilities over current assets of approximately $1.5 million. These conditions raise substantial
doubt about its ability to continue as a going concern. Management's plans regarding these
matters are also described in Note 18. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty. </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">/s/ POSTLETHWAITE &amp; NETTERVILLE</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Baton Rouge, Louisiana</p>
<p style="line-height: 0.197919in">April 16, 2001, except as to Note 21 which is dated May 30, 2001</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-12</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">INDEPENDENT AUDITOR'S REPORT</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">To the Board of Director's and Stockholders</p>
<p style="line-height: 0.197919in">USURF America, Inc.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">We have audited the accompanying consolidated statements of operations, changes in
stockholders' equity and cash flows for the year ended December 31, 1998 of USURF America,
Inc. (formerly Internet Media Corporation) and Subsidiaries. These consolidated financial
statements are the responsibility of the company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">We conducted our audit in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a reasonable basis for our
opinion.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated results of operations and cash flows for the year ended
December 31, 1998 of USURF America, Inc. (formerly Internet Media Corporation) and
Subsidiaries, in conformity with generally accepted accounting principles.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The accompanying consolidated financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 18 to the financial statements,
the Company has insignificant operating revenue. In addition, the Company has limited capital
resources and a loss from operations since inception, all of which raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these matters are also
discussed in Note 18. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">/s/ WEAVER AND TIDWELL, L.L.P.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Fort Worth, Texas</p>
<p style="line-height: 0.197919in">April 9, 1999</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-13</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table40column1" width="100%" valign="middle"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td class="table40column1" width="100%" valign="middle"><p>BATON ROUGE, LOUISIANA</p>
</td>
</tr>
<tr>
<td class="table40column1" width="100%" valign="middle"><p>CONSOLIDATED BALANCE SHEETS</p>
</td>
</tr>
<tr>
<td class="table40column1" width="100%" valign="middle"><p>DECEMBER 31, 2000 AND 1999</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>2000</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>1999</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>ASSETS</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>CURRENT ASSETS</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>Cash and cash equivalents</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>$1,088</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>$75,313</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>Accounts receivable - net</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>59,098</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>Inventory</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>246,721</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>386,802</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>Prepaid expenses and other
current assets</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>5,500</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>---------</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>247,809</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>526,713</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>---------</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>PROPERTY AND
EQUIPMENT</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>Cost</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>138,954</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>1,135,638</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>Less: accumulated depreciation</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>(69,476)</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>(421,786)</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>---------</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>69,478</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>713,852</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>---------</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>INVESTMENTS</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>68,029</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>68,029</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>---------</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>OTHER ASSETS</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>Acquired customer base - net</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>11,764,650</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>Goodwill - net</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>5,681,992</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>Other intangibles - net</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>782,580</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>Other assets</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>25,000</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>7,353</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>---------</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>25,000</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>18,236,575</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>---------</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>TOTAL ASSETS</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>$410,316</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>$19,545,169</p>
</td>
</tr>
<tr>
<td class="table41column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table41column2" width="33%" valign="middle"><p>======</p>
</td>
<td class="table41column3" width="34%" valign="middle"><p>======</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-14</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table42column1" width="33%" valign="middle"><p>LIABILITIES AND
STOCKHOLDER'S EQUITY</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Disbursements in Excess of
Cash Balances</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>$42,469</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>$0</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Notes payable - current portion</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>5,910</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Accounts payable</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>1,472,030</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>363,665</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Accrued payroll</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>158,262</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>118,157</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Other current liabilities</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>41,824</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>216,650</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Property dividends payable</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>43,750</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>43,750</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Accrued interest to stockholder</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>29,741</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Notes payable to stockholder</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>6,638</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>356,239</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Deferred revenue</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>87,538</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>---------</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>1,764,973</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>1,221,650</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>LONG-TERM LIABILITIES</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Deferred income taxes</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>3,883,210</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>---------</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>1,764,973</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>5,104,860</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>REDEEMABLE COMMON
STOCK</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Common Stock subject to
rescission, 2,767,823 shares
outstanding at December 31,
2000, $.0001 par value </p>
<p>Deferred consulting</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>3,897,552<br>
<br>
</p>
<p>(574,000)</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>0<br>
<br>
</p>
<p>0</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>3,323,552</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>STOCKHOLDERS' EQUITY</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Common stock, $.0001 par
value Authorized: 100,000,000
shares Issued and outstanding:
13,920,985 in 2000; 12,786,116
in 1999</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>1,392</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>1,279</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Additional paid-in capital</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>30,286,687</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>28,918,638</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Accumulated deficit</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>(34,502,160)</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>(12,616,830)</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Subscriptions receivable</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>933,514</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>(860)</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>Deferred consulting</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>(1,397,642)</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>(1,861,918)</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>---------</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>(4,678,209)</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>14,440,309</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>---------</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table42column1" width="33%" valign="middle"><p>TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY</p>
</td>
<td class="table42column2" width="33%" valign="middle"><p>$410,316</p>
</td>
<td class="table42column3" width="34%" valign="middle"><p>$19,545,169</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">The accompanying notes are an integral part of these statements.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-15</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table43column1" width="100%" valign="middle"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td class="table43column1" width="100%" valign="middle"><p>BATON ROUGE, LOUISIANA</p>
</td>
</tr>
<tr>
<td class="table43column1" width="100%" valign="middle"><p>CONSOLIDATED STATEMENTS OF OPERATIONS</p>
</td>
</tr>
<tr>
<td class="table43column1" width="100%" valign="middle"><p>YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>2000</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>1999</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>1998</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>REVENUES</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Internet access revenues</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>$1,781,082</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>$2,268,511</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>$5,440</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Equipment sales</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>91,547</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>278,714</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Internet access costs
and cost of goods sold</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>(2,145,955)</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>(1,152,721)</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>-----------</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>-----------</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>-----------</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Gross profit (loss)</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>(273,326)</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>1,394,504</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>5,440</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>OPERATING
EXPENSES</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Depreciation and
amortization</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>7,618,755</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>7,653,924</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>4,394</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Professional fees</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>4,168,610</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>1,945,935</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>813,517</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Rent</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>216,416</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>132,395</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>15,823</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Salaries and
commissions</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>2,060,528</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>1,603,556</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>154,924</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Advertising</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>24,583</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>125,034</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Other</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>886,691</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>399,914</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>45,806</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>-----------</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>-----------</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>-----------</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>14,975,583</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>11,860,758</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>1,034,464</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>LOSS FROM
OPERATIONS</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>(15,248,909)</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>(10,466,254)</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>(1,029,024)</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>OTHER INCOME
(EXPENSE)</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Other income</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>67,447</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>23,875</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Litigation settlement</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>0</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>(957,075)</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Impairment loss</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>(9,239,310)</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>(1,164,561)</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Interest expense</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>(21,418)</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>(19,309)</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>(8,602)</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>-----------</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>-----------</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>-----------</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>(9,193,281)</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>(2,117,070)</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>(8,602)</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>-----------</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>-----------</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>-----------</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>GAIN ON
RESCISSION</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>961,436</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>0</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>-----------</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>-----------</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>-----------</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>LOSS BEFORE
INCOME TAX</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>(23,480,754)</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>(12,583,324)</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>(1,037,626)</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>INCOME TAX
BENEFIT</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>1,595,424</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>1,653,161</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>-----------</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>-----------</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>-----------</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>NET LOSS</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>$(21,885,330)</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>$(10,930,163)</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>$(1,037,626)</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>=======</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>=======</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>=======</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Net loss per common
share</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>(1.68)</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>(0.96)</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>(0.14)</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>=======</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>=======</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>=======</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>Weighted average
number of shares
outstanding</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>13,000,391</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>11,419,641</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>7,361,275</p>
</td>
</tr>
<tr>
<td class="table44column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table44column2" width="25%" valign="middle"><p>=======</p>
</td>
<td class="table44column3" width="25%" valign="middle"><p>=======</p>
</td>
<td class="table44column4" width="25%" valign="middle"><p>=======</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">The accompanying notes are an integral part of these statements.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-16</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table45column1" width="100%" valign="middle"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td class="table45column1" width="100%" valign="middle"><p>BATON ROUGE, LOUISIANA</p>
</td>
</tr>
<tr>
<td class="table45column1" width="100%" valign="middle"><p>CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY</p>
</td>
</tr>
<tr>
<td class="table45column1" width="100%" valign="middle"><p>YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table46column1" width="13%" valign="middle"><p>&#160;</p>
</td>
<td class="table46column2" width="13%" valign="middle"><p>Shares</p>
</td>
<td class="table46column3" width="13%" valign="middle"><p>Common
Stock</p>
</td>
<td class="table46column4" width="13%" valign="middle"><p>Paid-in
Capital</p>
</td>
<td class="table46column5" width="13%" valign="middle"><p>Accumulated Deficit</p>
</td>
<td class="table46column6" width="13%" valign="middle"><p>Subscriptions
Receivable</p>
</td>
<td class="table46column7" width="13%" valign="middle"><p>Deferred
Consulting</p>
</td>
<td class="table46column8" width="9%" valign="middle"><p>Total</p>
</td>
</tr>
<tr>
<td class="table46column1" width="13%" valign="middle"><p>Balance,
December
31, 1997</p>
</td>
<td class="table46column2" width="13%" valign="middle"><p>6,424,000</p>
</td>
<td class="table46column3" width="13%" valign="middle"><p>642</p>
</td>
<td class="table46column4" width="13%" valign="middle"><p>998,466</p>
</td>
<td class="table46column5" width="13%" valign="middle"><p>(649,041)</p>
</td>
<td class="table46column6" width="13%" valign="middle"><p>(860)</p>
</td>
<td class="table46column7" width="13%" valign="middle"><p>(311,889)</p>
</td>
<td class="table46column8" width="9%" valign="middle"><p>37,318</p>
</td>
</tr>
<tr>
<td class="table46column1" width="13%" valign="middle"><p>Issuance of
common
stock for
future
services</p>
</td>
<td class="table46column2" width="13%" valign="middle"><p>1,655,759</p>
</td>
<td class="table46column3" width="13%" valign="middle"><p>166</p>
</td>
<td class="table46column4" width="13%" valign="middle"><p>1,556,734</p>
</td>
<td class="table46column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column7" width="13%" valign="middle"><p>(1,556,900)</p>
</td>
<td class="table46column8" width="9%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table46column1" width="13%" valign="middle"><p>Issuance of
common
stock for
cash</p>
</td>
<td class="table46column2" width="13%" valign="middle"><p>400,000</p>
</td>
<td class="table46column3" width="13%" valign="middle"><p>40</p>
</td>
<td class="table46column4" width="13%" valign="middle"><p>332,760</p>
</td>
<td class="table46column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column8" width="9%" valign="middle"><p>332,800</p>
</td>
</tr>
<tr>
<td class="table46column1" width="13%" valign="middle"><p>Issuance of
common
stock for
investments</p>
</td>
<td class="table46column2" width="13%" valign="middle"><p>17,500</p>
</td>
<td class="table46column3" width="13%" valign="middle"><p>2</p>
</td>
<td class="table46column4" width="13%" valign="middle"><p>43,748</p>
</td>
<td class="table46column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column8" width="9%" valign="middle"><p>43,750</p>
</td>
</tr>
<tr>
<td class="table46column1" width="13%" valign="middle"><p>Declared
dividends</p>
</td>
<td class="table46column2" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column3" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column4" width="13%" valign="middle"><p>(57,519)</p>
</td>
<td class="table46column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column8" width="9%" valign="middle"><p>(57,519)</p>
</td>
</tr>
<tr>
<td class="table46column1" width="13%" valign="middle"><p>Amortization of
deferred
consulting</p>
</td>
<td class="table46column2" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column3" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column4" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column7" width="13%" valign="middle"><p>765,865</p>
</td>
<td class="table46column8" width="9%" valign="middle"><p>765,865</p>
</td>
</tr>
<tr>
<td class="table46column1" width="13%" valign="middle"><p>Net loss</p>
</td>
<td class="table46column2" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column3" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column4" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column5" width="13%" valign="middle"><p>(1,037,626)</p>
</td>
<td class="table46column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table46column8" width="9%" valign="middle"><p>(1,037,626)</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-17</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table47column1" width="13%" valign="middle"><p>Balance,
December
31, 1998</p>
</td>
<td class="table47column2" width="13%" valign="middle"><p>8,497,259</p>
</td>
<td class="table47column3" width="13%" valign="middle"><p>850</p>
</td>
<td class="table47column4" width="13%" valign="middle"><p>2,874,189</p>
</td>
<td class="table47column5" width="13%" valign="middle"><p>(1,686,667)</p>
</td>
<td class="table47column6" width="13%" valign="middle"><p>(860)</p>
</td>
<td class="table47column7" width="13%" valign="middle"><p>(1,102,924)</p>
</td>
<td class="table47column8" width="9%" valign="middle"><p>84,588</p>
</td>
</tr>
<tr>
<td class="table47column1" width="13%" valign="middle"><p>Issuance of
common
stock for
future
services</p>
</td>
<td class="table47column2" width="13%" valign="middle"><p>566,000</p>
</td>
<td class="table47column3" width="13%" valign="middle"><p>57</p>
</td>
<td class="table47column4" width="13%" valign="middle"><p>2,215,943</p>
</td>
<td class="table47column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column7" width="13%" valign="middle"><p>(2,216,000)</p>
</td>
<td class="table47column8" width="9%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table47column1" width="13%" valign="middle"><p>Issuance of
common
stock for
acquisitions</p>
</td>
<td class="table47column2" width="13%" valign="middle"><p>3,030,000</p>
</td>
<td class="table47column3" width="13%" valign="middle"><p>303</p>
</td>
<td class="table47column4" width="13%" valign="middle"><p>21,586,726</p>
</td>
<td class="table47column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column8" width="9%" valign="middle"><p>21,587,029</p>
</td>
</tr>
<tr>
<td class="table47column1" width="13%" valign="middle"><p>Issuance of
common
stock for
cash</p>
</td>
<td class="table47column2" width="13%" valign="middle"><p>115,000</p>
</td>
<td class="table47column3" width="13%" valign="middle"><p>11</p>
</td>
<td class="table47column4" width="13%" valign="middle"><p>394,989</p>
</td>
<td class="table47column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column8" width="9%" valign="middle"><p>395,000</p>
</td>
</tr>
<tr>
<td class="table47column1" width="13%" valign="middle"><p>Exercise of
warrants</p>
</td>
<td class="table47column2" width="13%" valign="middle"><p>176,857</p>
</td>
<td class="table47column3" width="13%" valign="middle"><p>18</p>
</td>
<td class="table47column4" width="13%" valign="middle"><p>337,304</p>
</td>
<td class="table47column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column8" width="9%" valign="middle"><p>337,322</p>
</td>
</tr>
<tr>
<td class="table47column1" width="13%" valign="middle"><p>Issuance of
subscription
agreement</p>
</td>
<td class="table47column2" width="13%" valign="middle"><p>50,000</p>
</td>
<td class="table47column3" width="13%" valign="middle"><p>5</p>
</td>
<td class="table47column4" width="13%" valign="middle"><p>149,995</p>
</td>
<td class="table47column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column6" width="13%" valign="middle"><p>(150,000)</p>
</td>
<td class="table47column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column8" width="9%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table47column1" width="13%" valign="middle"><p>Proceeds on
subscription receivable</p>
</td>
<td class="table47column2" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column3" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column4" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column6" width="13%" valign="middle"><p>150,000</p>
</td>
<td class="table47column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column8" width="9%" valign="middle"><p>150,000</p>
</td>
</tr>
<tr>
<td class="table47column1" width="13%" valign="middle"><p>Issuance of
stock per
employment agreement</p>
</td>
<td class="table47column2" width="13%" valign="middle"><p>11,000</p>
</td>
<td class="table47column3" width="13%" valign="middle"><p>1</p>
</td>
<td class="table47column4" width="13%" valign="middle"><p>43,311</p>
</td>
<td class="table47column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table47column8" width="9%" valign="middle"><p>43,312</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-18</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table48column1" width="13%" valign="middle"><p>Expenses to
be paid by
issuance of
common
stock</p>
</td>
<td class="table48column2" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column3" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column4" width="13%" valign="middle"><p>257,167</p>
</td>
<td class="table48column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column8" width="9%" valign="middle"><p>257,167</p>
</td>
</tr>
<tr>
<td class="table48column1" width="13%" valign="middle"><p>Issuance of
common
stock for
settlement</p>
</td>
<td class="table48column2" width="13%" valign="middle"><p>340,000</p>
</td>
<td class="table48column3" width="13%" valign="middle"><p>34</p>
</td>
<td class="table48column4" width="13%" valign="middle"><p>913,716</p>
</td>
<td class="table48column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column8" width="9%" valign="middle"><p>913,750</p>
</td>
</tr>
<tr>
<td class="table48column1" width="13%" valign="middle"><p>Stock
warrants</p>
</td>
<td class="table48column2" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column3" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column4" width="13%" valign="middle"><p>145,298</p>
</td>
<td class="table48column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column8" width="9%" valign="middle"><p>145,298</p>
</td>
</tr>
<tr>
<td class="table48column1" width="13%" valign="middle"><p>Amortization of
deferred
consulting</p>
</td>
<td class="table48column2" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column3" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column4" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column7" width="13%" valign="middle"><p>1,457,006</p>
</td>
<td class="table48column8" width="9%" valign="middle"><p>1,457,006</p>
</td>
</tr>
<tr>
<td class="table48column1" width="13%" valign="middle"><p>Net loss</p>
</td>
<td class="table48column2" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column3" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column4" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column5" width="13%" valign="middle"><p>(10,930,163)</p>
</td>
<td class="table48column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table48column8" width="9%" valign="middle"><p>(10,930,163)</p>
</td>
</tr>
<tr>
<td class="table48column1" width="13%" valign="middle"><p>Balance,
December
31, 1999</p>
</td>
<td class="table48column2" width="13%" valign="middle"><p>12,786,116</p>
</td>
<td class="table48column3" width="13%" valign="middle"><p>1,279</p>
</td>
<td class="table48column4" width="13%" valign="middle"><p>28,918,638</p>
</td>
<td class="table48column5" width="13%" valign="middle"><p>(12,616,830)</p>
</td>
<td class="table48column6" width="13%" valign="middle"><p>(860)</p>
</td>
<td class="table48column7" width="13%" valign="middle"><p>(1,861,918)</p>
</td>
<td class="table48column8" width="9%" valign="middle"><p>14,440,309</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-19</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table49column1" width="13%" valign="middle"><p>Issuance of
common
stock for
future
services</p>
</td>
<td class="table49column2" width="13%" valign="middle"><p>425,227</p>
</td>
<td class="table49column3" width="13%" valign="middle"><p>42</p>
</td>
<td class="table49column4" width="13%" valign="middle"><p>958,138</p>
</td>
<td class="table49column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column7" width="13%" valign="middle"><p>(958,180)</p>
</td>
<td class="table49column8" width="9%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table49column1" width="13%" valign="middle"><p>Issuance of
common
stock for
cash</p>
</td>
<td class="table49column2" width="13%" valign="middle"><p>400,000</p>
</td>
<td class="table49column3" width="13%" valign="middle"><p>40</p>
</td>
<td class="table49column4" width="13%" valign="middle"><p>79,960</p>
</td>
<td class="table49column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column6" width="13%" valign="middle"><p>(10,000)</p>
</td>
<td class="table49column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column8" width="9%" valign="middle"><p>70,000</p>
</td>
</tr>
<tr>
<td class="table49column1" width="13%" valign="middle"><p>Issuance of
subscription
agreement</p>
</td>
<td class="table49column2" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column3" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column4" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column6" width="13%" valign="middle"><p>(25,000)</p>
</td>
<td class="table49column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column8" width="9%" valign="middle"><p>(25,000)</p>
</td>
</tr>
<tr>
<td class="table49column1" width="13%" valign="middle"><p>&#160;</p>
</td>
<td class="table49column2" width="13%" valign="middle"><p>&#160;</p>
</td>
<td class="table49column3" width="13%" valign="middle"><p>&#160;</p>
</td>
<td class="table49column4" width="13%" valign="middle"><p>&#160;</p>
</td>
<td class="table49column5" width="13%" valign="middle"><p>&#160;</p>
</td>
<td class="table49column6" width="13%" valign="middle"><p>&#160;</p>
</td>
<td class="table49column7" width="13%" valign="middle"><p>&#160;</p>
</td>
<td class="table49column8" width="9%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table49column1" width="13%" valign="middle"><p>Issuance of
stock per
employment agreement</p>
</td>
<td class="table49column2" width="13%" valign="middle"><p>19,642</p>
</td>
<td class="table49column3" width="13%" valign="middle"><p>2</p>
</td>
<td class="table49column4" width="13%" valign="middle"><p>115,080</p>
</td>
<td class="table49column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column8" width="9%" valign="middle"><p>115,082<br>
<br>
<br>
<br>
</p>
<p>0</p>
</td>
</tr>
<tr>
<td class="table49column1" width="13%" valign="middle"><p>Expenses
paid by
issuance of
common
stock</p>
</td>
<td class="table49column2" width="13%" valign="middle"><p>290,000</p>
</td>
<td class="table49column3" width="13%" valign="middle"><p>29</p>
</td>
<td class="table49column4" width="13%" valign="middle"><p>214,871</p>
</td>
<td class="table49column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column8" width="9%" valign="middle"><p>214,900</p>
</td>
</tr>
<tr>
<td class="table49column1" width="13%" valign="middle"><p>Conversion
of debt to
equity</p>
</td>
<td class="table49column2" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column3" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column4" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column6" width="13%" valign="middle"><p>969,374</p>
</td>
<td class="table49column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column8" width="9%" valign="middle"><p>969,374</p>
</td>
</tr>
<tr>
<td class="table49column1" width="13%" valign="middle"><p>Amortization of
deferred
consulting</p>
</td>
<td class="table49column2" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column3" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column4" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column5" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column7" width="13%" valign="middle"><p>1,422,456</p>
</td>
<td class="table49column8" width="9%" valign="middle"><p>1,422,456</p>
</td>
</tr>
<tr>
<td class="table49column1" width="13%" valign="middle"><p>Net loss</p>
</td>
<td class="table49column2" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column3" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column4" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column5" width="13%" valign="middle"><p>(21,885,330)</p>
</td>
<td class="table49column6" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column7" width="13%" valign="middle"><p>0</p>
</td>
<td class="table49column8" width="9%" valign="middle"><p>(21,885,330)</p>
</td>
</tr>
<tr>
<td class="table49column1" width="13%" valign="middle"><p>Balance,
December
31, 2000</p>
</td>
<td class="table49column2" width="13%" valign="middle"><p>13,920,985</p>
</td>
<td class="table49column3" width="13%" valign="middle"><p>1,392</p>
</td>
<td class="table49column4" width="13%" valign="middle"><p>30,286,687</p>
</td>
<td class="table49column5" width="13%" valign="middle"><p>(34,502,160)</p>
</td>
<td class="table49column6" width="13%" valign="middle"><p>933,514</p>
</td>
<td class="table49column7" width="13%" valign="middle"><p>(1,397,642)</p>
</td>
<td class="table49column8" width="9%" valign="middle"><p>(4,678,209)</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-20</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table50column1" width="100%" valign="middle"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td class="table50column1" width="100%" valign="middle"><p>BATON ROUGE, LOUISIANA</p>
</td>
</tr>
<tr>
<td class="table50column1" width="100%" valign="middle"><p>CONSOLIDATED STATEMENTS OF CASH FLOWS</p>
</td>
</tr>
<tr>
<td class="table50column1" width="100%" valign="middle"><p>YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table51column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>2000</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>1999</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>1998</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>CASH FLOWS FROM
OPERATING
ACTIVITIES</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Net loss</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>$(21,885,330)</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>$(10,930,163)</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>$(1,037,626)</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Adjustment to reconcile
net loss to net cash used
in operating activities</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Depreciation and
amortization</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>7,618,755</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>7,653,924</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>4,394</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Consulting fees paid
with stock</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>3,000,276</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>1,457,006</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>765,865</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Litigation settlement</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>214,900</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>913,750</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Gain on rescission</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>(961,436)</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>0</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Impairment loss and
write down of assets</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>10,577,878</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>1,164,561</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Legal fees paid with
stock</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>281,498</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>126,500</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Compensation expense
paid with stock</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>774,066</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>319,301</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Deferred income taxes</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>(1,595,423)</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>(1,653,161)</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Loss on disposal</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>0</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>280</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Changes in operating
assets and liabilities</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Accounts receivable</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>59,098</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>35,537</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>(809)</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Inventory</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>71,000</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>49,518</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Prepaid expenses and
other current assets</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>5,500</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>7,980</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Accounts payable</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>1,108,365</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>(36,857)</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>1,787</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Accrued payroll</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>40,105</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>118,157</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>(39,310)</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Other current liabilities</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>(174,826)</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>215,929</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Other assets and
liabilities</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>0</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>(11,555)</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>(300)</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Deferred revenue</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>(87,538)</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>23,196</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>---------</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>---------</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>Net cash used in
operating activities</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>(953,112)</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>(546,097)</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>(305,999)</p>
</td>
</tr>
<tr>
<td class="table51column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table51column2" width="25%" valign="middle"><p>---------</p>
</td>
<td class="table51column3" width="25%" valign="middle"><p>---------</p>
</td>
<td class="table51column4" width="25%" valign="middle"><p>---------</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-21</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table52column1" width="25%" valign="middle"><p>CASH FLOWS FROM
INVESTING
ACTIVITIES</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Proceeds on disposal of
fixed assets</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>$ 40,050</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>$15,090</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>$0</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Cash acquired in
acquisitions</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>0</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>186,318</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>(24,666)</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Payment of
organization costs</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>0</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>0</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>569</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Capital expenditures</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>(125,200)</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>(614,193)</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>(25,605)</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>---------</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>---------</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Net cash used in
investing activities</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>(85,150)</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>(412,785) </p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>(49,702)</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>---------</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>---------</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>CASH FLOWS FROM
FINANCING
ACTIVITIES</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Payments on notes
payable</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>$ (5,910)</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>$(65,369)</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Disbursements in
excess of cash balances</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>42,469</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>0</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Payments on notes
payable - stockholder</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>(11,093)</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>(25,000)</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Payments on
subscriptions receivable</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>0</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>150,000</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Proceeds from note
payable - stockholder</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>568,571</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>235,010</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>30,133</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Issuance of common
stock for cash</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>370,000</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>395,000</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>332,800</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Warrants exercised</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>0</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>337,322</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>---------</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>---------</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Net cash provided by
financing activities</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>964,037</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>1,026,963</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>362,933</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>---------</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>---------</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>---------</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Net increase (decrease)
in cash and cash
equivalents</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>(74,225)</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>68,081</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>7,232</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Cash and cash
equivalents, Beginning
of period</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>75,313</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>7,232</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>Cash and cash
equivalents, End of
period</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>$1,088</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>$75,313</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>$7,232</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>=======</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>========</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>========</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table52column1" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column2" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column3" width="25%" valign="middle"><p>&#160;</p>
</td>
<td class="table52column4" width="25%" valign="middle"><p>&#160;</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">The accompanying notes are an integral part of these statements.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">F-22</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table53column1" width="100%" valign="middle"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td class="table53column1" width="100%" valign="middle"><p>BATON ROUGE, LOUISIANA</p>
</td>
</tr>
<tr>
<td class="table53column1" width="100%" valign="middle"><p>NOTES TO CONSOLIDATED STATEMENTS</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Basis of Presentation</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">USURF America, Inc. (USURF), formerly Internet Media Corporation, was incorporated as
Media Entertainment, Inc. in the State of Nevada on November 1, 1996. USURF currently
provides wireless Internet access services to a small number of customers in Santa Fe, New
Mexico. USURF's original purpose was to operate as a holding company in the wireless cable
television and community (low power) television industries, as well as other segments of the
communications industry. Until January 1999, the Company was in the development stage. In
1998 the Company changed its focus to concentrate in the wireless internet communications
industry. The Company later ceased efforts to develop the wireless cable and low power
television business areas and assigned all of its assets from the low power television activities to
New Wave Media Corp. in exchange for a 15% ownership interest in New Wave Media Corp. </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Effective December 31, 1996, USURF acquired all of the outstanding common stock of Winter
Entertainment, Inc., a Delaware corporation incorporated on December 28, 1995 (WEI), and
Missouri Cable TV Corp., a Louisiana corporation incorporated on October 9, 1996 (MCTV).
WEI operates a community television station in Baton Rouge, Louisiana; MCTV owns wireless
cable television channels in Poplar Bluff, Missouri, which system has been constructed and is
ready for operation, and Lebanon, Missouri. Effective October 8, 1998, the Company formed
Santa Fe Wireless Internet, Inc. (Santa Fe), a New Mexico corporation, to hold the assets
acquired from Desert Rain Internet Services. Santa Fe was organized to provide wireless internet
access. The acquisition of WEI and MCTV by USURF was accounted for as a reorganization of
companies under common control. The assets and liabilities acquired were recorded at historical
cost in a manner similar to a pooling of interests. The acquisition of Santa Fe was accounted for
as a purchase whereby cost is allocated to the assets acquired.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">On January 29, 1999, the Company acquired all the stock of CyberHighway, Inc., a Boise,
Idaho-based ISP, by issuing 2,000,000 shares of stock valued at approximately $15,940,000. In
addition, 325,000 shares of common stock were issued in payment of a finder's fee arising out of
this acquisition. This acquisition was accounted for as a purchase business combination.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In June 1999, USURF acquired all the stock of Santa Fe Trail Internet Plus, Inc., a Santa Fe, New
Mexico-based ISP, by issuing 100,000 shares of stock valued at approximately $400,000. This
acquisition was accounted for as a purchase business combination.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In July 1999, USURF acquired all of the stock of Premier Internet Services, Inc., an Idaho-based
ISP, by issuing 127,000 shares of stock valued at approximately $508,000. This acquisition was
accounted for as a purchase business combination.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In November 1999, the Company acquired the customer base of Cyber Mountain, Inc. a Denver,
Colorado-based ISP, for 25,000 shares of stock valued at approximately $75,000.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In December 1999, USURF acquired a portion of the ISP-related equipment and customer base
of Cyber Highway of North Georgia, Inc., a Demorest, Georgia-based ISP for 54,000 shares of
stock valued at approximately $212,000.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In February 2000, the Company acquired Spinning Wheel, Inc., an Idaho Springs, Idaho-based
ISP, for 81,063 shares of stock valued at approximately $325,000. This acquisition has been
accounted for as a purchase business combination. </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In February 2000, the Company acquired Internet Innovations, LLC, a Baton Rouge, Louisiana
based web design company, for 50,000 shares of common stock valued at approximately
$437,000. This acquisition has been accounted for as a purchase business combination.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">None of the acquisitions described above, with the exception of Cyberhighway which was near
the beginning of 1999, had significant operations at the time they were acquired by the Company.
Therefore, proforma disclosure of what operations would have been as if the transactions had
occurred at the beginning of the period are not shown due to the transactions being immaterial to
the financial statements taken as a whole.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Principles of Consolidation</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The accompanying consolidated financial statements include all the accounts of USURF and all
wholly owned subsidiaries. Intercompany transactions and balances have been eliminated in the
consolidation. </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Use of Estimates</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">A material estimate that is particularly susceptible to significant change is the amortization of
intangibles. In estimating the period over which to amortize the acquired customer bases,
management obtains information from industry data.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Cash Equivalents</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The Company considers all highly liquid investments with original maturities of three months or
less from the date of purchase to be cash equivalents.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Inventory</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Inventories are stated at the lower of cost or market, and represents modems purchased from
suppliers.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Property and Equipment</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Property and equipment are stated at cost and are depreciated principally by the straight-line
method over the estimated useful lives of the assets, ranging from 3 to 15 years.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Revenue Recognition</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Until September 2000, the Company maintained license agreements with affiliate ISP's to
provide internet access to affiliates' customers. License fees were typically billed in the month the
services were provided. The Company charges direct customers (residential and business
subscribers) monthly access fees to the internet and recognizes the revenue in the month the
access is provided. For certain subscribers billed in advance, the Company recognizes the
revenue over the period the billing covers. Revenue for other services provided, including set-up
fees charged to customers and affiliates, and equipment sales are recognized as the service is
performed or the equipment is delivered.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Costs of Access Revenues</p>
<p style="line-height: 0.197919in">&#160;</p>
<br>
<p style="line-height: 0.197919in">Costs of access revenues primarily consist of telecommunications expenses inherent in the
network infrastructure. Costs of access expenses also include fees paid for lease of the
Company's backbone, as well as license fees for Web browser software based on a per-user
charge, other license fees paid to third-party software vendors, product costs, and contractor fees
for distribution of software to new subscribers.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Income Taxes<br>
<br>
Deferred income tax assets and liabilities are computed for differences between financial
statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the period in which the differences
are expected to affect taxable income. Valuation allowances are established when realization is
less than 50% probable. Income tax expense is the tax payable or refundable for the period plus
or minus the change during the period in deferred tax assets and liabilities.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Financial Instruments and Concentration of Credit Risk</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Financial instruments, which potentially subject the Company to concentrations of credit risk,
consist principally of cash and trade receivables. The Company maintains its cash in bank deposit
accounts, which, at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts and believes it is not exposed to any significant credit
risk on cash.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Fair Values of Financial Instruments</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The carrying amounts of financial instruments including cash, trade receivables, accounts
payable and accrued expenses approximate fair value because of the immediate or short-term
maturities of these instruments. The difference between the carrying amount and fair value of the
Company's long-term debt is not significant. </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Loss Per Common Share</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Basic loss per common share has been computed by dividing the net loss by the weighted
average number of shares of common stock outstanding throughout the period. Calculation of
diluted loss per common share is not presented because the effects of potential common stock
issuable upon exercise of stock options and contingently issuable or redeemable shares would be
antidilutive.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Goodwill and Other Intangible Assets</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Goodwill and other intangible assets, primarily acquired customer bases, are stated on the basis
of cost and are amortized, principally on a straight-line basis, over the estimated future periods to
be benefited (generally 3 years). Goodwill and other intangible assets are periodically reviewed
for impairment to ensure they are appropriately valued. Conditions which may indicate an
impairment issue exists include a negative economic downturn or a change in the assessment of
future operations. In the event that a condition is identified which may indicate an impairment
issue exists, an assessment is performed using a variety of methodologies, including cash flow
analysis, estimates of sales proceeds and independent appraisals. Where applicable, an
appropriate interest rate is utilized, based on location specific economic factors.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Due to the demise of the business of the dial-up Internet access business of the CyberHighway
subsidiary, associated goodwill and other intangibles were impaired at December 31, 2000, and
were written-down in the amounts of $4,425,037 and $4,814,272 (net of deferred taxes of
$2,531,497), respectively.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Advertising</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The Company expenses advertising costs as incurred. During the years ended December 31, 2000
and 1999, the Company incurred approximately $25,000 and $125,000, in advertising costs,
respectively.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Investments</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Investments include minority interests held in three non-public companies recorded at cost,
which approximates fair value.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Stock for Services</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The Company has issued stock pursuant to various consulting agreements. Deferred consulting
costs, which are valued at the stock price on the date of the agreements, are recorded as a
reduction of stockholders' equity and will be amortized over the respective lives of the
agreements. </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">2. NET 1, INC. ACQUISITION</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">On August 23, 1999, the Company acquired Net 1, Inc. (Net 1) in a business combination
accounted for as a purchase. Net 1 was primarily engaged as an ISP in Alabama. In September,
1999 the Company tendered the shares of capital stock obtained in the acquisition of Net 1 for
rescission of the transaction. However, legally the Company was still the owner of the
outstanding shares of Net 1 at December 31, 1999, and is required by generally accepted
accounting principles to record Net 1 as a wholly owned subsidiary from the date of acquisition.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">It was discovered during arbitration proceedings that no activity occurred in the newly acquired
subsidiary, Net 1, after the acquisition. The customer base was moved to an unrelated company
by a former owner, and all activity was transacted in the unrelated company. Therefore, no
revenues or expenses were incurred by Net 1 from the date of acquisition, August 23, 1999
through December 31, 1999.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The total cost of the acquisition was $1,164,561, which exceeded fair value of the net assets of
Net 1 by $1,164,561. The excess was deemed to be impaired at December 31, 1999 due to the
change in the operating environment and was recorded in the accompanying financial statements
as an impairment loss.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">On October 12, 2000 the acquisition of Net 1 was rescinded. Included in the terms of the
settlement agreement was the return of the 250,000 shares issued in the original transaction to the
Company. The Company then issued 250,000 shares of stock in settlement of the arbitration. The
agreement also called for one of the former owners to assume a $50,000 liability, that was
recorded by USURF upon the acquisition. The total gain on the recission of the transaction was
approximately $960,000. </p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">3. PROPERTY AND EQUIPMENT</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Classifications of property and equipment and accumulated depreciation were as follows at
December 31, 2000 and 1999:</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table54column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table54column2" width="33%" valign="middle"><p>2000</p>
</td>
<td class="table54column3" width="34%" valign="middle"><p>1999</p>
</td>
</tr>
<tr>
<td class="table54column1" width="33%" valign="middle"><p>Wireless cable equipment</p>
</td>
<td class="table54column2" width="33%" valign="middle"><p>$0</p>
</td>
<td class="table54column3" width="34%" valign="middle"><p>$188,091</p>
</td>
</tr>
<tr>
<td class="table54column1" width="33%" valign="middle"><p>Equipment</p>
</td>
<td class="table54column2" width="33%" valign="middle"><p>138,954</p>
</td>
<td class="table54column3" width="34%" valign="middle"><p>540,452</p>
</td>
</tr>
<tr>
<td class="table54column1" width="33%" valign="middle"><p>Furniture and fixtures</p>
</td>
<td class="table54column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table54column3" width="34%" valign="middle"><p>37,487</p>
</td>
</tr>
<tr>
<td class="table54column1" width="33%" valign="middle"><p>Office equipment</p>
</td>
<td class="table54column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table54column3" width="34%" valign="middle"><p>338,531</p>
</td>
</tr>
<tr>
<td class="table54column1" width="33%" valign="middle"><p>Leasehold improvements</p>
</td>
<td class="table54column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table54column3" width="34%" valign="middle"><p>31,077</p>
</td>
</tr>
<tr>
<td class="table54column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table54column2" width="33%" valign="middle"><p>-----------</p>
</td>
<td class="table54column3" width="34%" valign="middle"><p>-----------</p>
</td>
</tr>
<tr>
<td class="table54column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table54column2" width="33%" valign="middle"><p>138,954</p>
</td>
<td class="table54column3" width="34%" valign="middle"><p>1,135,638</p>
</td>
</tr>
<tr>
<td class="table54column1" width="33%" valign="middle"><p>Accumulated depreciation</p>
</td>
<td class="table54column2" width="33%" valign="middle"><p>(69,476)</p>
</td>
<td class="table54column3" width="34%" valign="middle"><p>(421,786)</p>
</td>
</tr>
<tr>
<td class="table54column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table54column2" width="33%" valign="middle"><p>-----------</p>
</td>
<td class="table54column3" width="34%" valign="middle"><p>-----------</p>
</td>
</tr>
<tr>
<td class="table54column1" width="33%" valign="middle"><p>Property and equipment, net</p>
</td>
<td class="table54column2" width="33%" valign="middle"><p>$69,478</p>
</td>
<td class="table54column3" width="34%" valign="middle"><p>$713,852</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">4. INTANGIBLES</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Classification of intangibles and accumulated amortization at December 31st were as follows:</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table55column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table55column2" width="33%" valign="middle"><p>2000</p>
</td>
<td class="table55column3" width="34%" valign="middle"><p>1999</p>
</td>
</tr>
<tr>
<td class="table55column1" width="33%" valign="middle"><p>Acquired customer base</p>
</td>
<td class="table55column2" width="33%" valign="middle"><p>$0</p>
</td>
<td class="table55column3" width="34%" valign="middle"><p>$16,676,433</p>
</td>
</tr>
<tr>
<td class="table55column1" width="33%" valign="middle"><p>Goodwill</p>
</td>
<td class="table55column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table55column3" width="34%" valign="middle"><p>8,126,616</p>
</td>
</tr>
<tr>
<td class="table55column1" width="33%" valign="middle"><p>Other</p>
</td>
<td class="table55column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table55column3" width="34%" valign="middle"><p>940,186</p>
</td>
</tr>
<tr>
<td class="table55column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table55column2" width="33%" valign="middle"><p>-----------</p>
</td>
<td class="table55column3" width="34%" valign="middle"><p>-----------</p>
</td>
</tr>
<tr>
<td class="table55column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table55column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table55column3" width="34%" valign="middle"><p>25,743,235</p>
</td>
</tr>
<tr>
<td class="table55column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table55column2" width="33%" valign="middle"><p>(0)</p>
</td>
<td class="table55column3" width="34%" valign="middle"><p>(7,514,013)</p>
</td>
</tr>
<tr>
<td class="table55column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table55column2" width="33%" valign="middle"><p>-----------</p>
</td>
<td class="table55column3" width="34%" valign="middle"><p>-----------</p>
</td>
</tr>
<tr>
<td class="table55column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table55column2" width="33%" valign="middle"><p>$0</p>
</td>
<td class="table55column3" width="34%" valign="middle"><p>$18,229,222</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">5. WIRELESS CABLE ASSETS</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Property and equipment includes wireless cable station equipment, which is operational but has
not been put into use. The equipment was determined to be impaired at December 31, 2000 and
its cost of approximately $188,000 was written off. In addition, the Company owns licenses in
the wireless cable markets, which operate on the same frequencies and will be used in the
wireless Internet market.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">6. LICENSES AND RIGHTS TO LEASES OF LICENSES</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The Company owns licenses or rights to leases of licenses in the following wireless cable and
community television markets:</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table56column1" width="50%" valign="middle"><p>Wireless Cable Market</p>
</td>
<td class="table56column2" width="50%" valign="middle"><p>Expiration Date</p>
</td>
</tr>
<tr>
<td class="table56column1" width="50%" valign="middle"><p>Poplar Bluff, Missouri</p>
</td>
<td class="table56column2" width="50%" valign="middle"><p>October 16, 2006</p>
</td>
</tr>
<tr>
<td class="table56column1" width="50%" valign="middle"><p>Lebanon, Missouri</p>
</td>
<td class="table56column2" width="50%" valign="middle"><p>October 16, 2006</p>
</td>
</tr>
<tr>
<td class="table56column1" width="50%" valign="middle"><p>Port Angeles, Washington</p>
</td>
<td class="table56column2" width="50%" valign="middle"><p>December 21, 2003</p>
</td>
</tr>
<tr>
<td class="table56column1" width="50%" valign="middle"><p>Astoria, Oregon</p>
</td>
<td class="table56column2" width="50%" valign="middle"><p>December 21, 2003</p>
</td>
</tr>
<tr>
<td class="table56column1" width="50%" valign="middle"><p>Sand Point, Idaho</p>
</td>
<td class="table56column2" width="50%" valign="middle"><p>August 09, 2006</p>
</td>
</tr>
<tr>
<td class="table56column1" width="50%" valign="middle"><p>The Dalles, Oregon</p>
</td>
<td class="table56column2" width="50%" valign="middle"><p>August 09, 2006</p>
</td>
</tr>
<tr>
<td class="table56column1" width="50%" valign="middle"><p>Fallon, Nevada</p>
</td>
<td class="table56column2" width="50%" valign="middle"><p>August 09, 2006</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Application for renewal of licenses must be filed within a certain period prior to expiration.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">7. NOTE PAYABLE TO STOCKHOLDER</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table57column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table57column2" width="33%" valign="middle"><p>2000</p>
</td>
<td class="table57column3" width="34%" valign="middle"><p>1999</p>
</td>
</tr>
<tr>
<td class="table57column1" width="33%" valign="middle"><p>Note payable to stockholder,
interest accrues at 8%, due on
demand and unsecured.</p>
</td>
<td class="table57column2" width="33%" valign="middle"><p>$6,638</p>
</td>
<td class="table57column3" width="34%" valign="middle"><p>$356,239</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">8. LOAN CONVERSION - STOCKHOLDER</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">As of August 21, 2000, the Company owed its president, David M. Loflin, a total of $967,703
($916,045 in principal, $51,658 in interest), the result of cash loans made to the Company by Mr.
Loflin during the previous approximately two years. On August 21, 2000, the Company entered
into a letter of agreement with Mr. Loflin, whereby Mr. Loflin agreed to convert all sums owed
to him into shares of Company common stock.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Pursuant to the letter agreement, Mr. Loflin received one share of common stock for every $1.25
of debt converted, for a total of 774,162 shares. The $1.25 price was agreed upon as that price
was the low price for the Company's common stock on Friday, August 18, 2000, as reported by
the American Stock Exchange. The Company's board of directors, in authorizing the transaction
described above, found the transaction to be in the best interest of USURF America. The
issuance of shares was not complete until the first quarter of 2001, therefore, the substance of this
transaction has been reflected as stock subscription in the accompanying financial statements.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">9. NOTE PAYABLE</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The note payable of $5,910 at December 31, 1999, consists of a note payable to a bank with
interest at 9.25%, due in monthly payments of $2,887, with final payment due February 25, 2000,
secured by accounts receivable, inventory and equipment.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">10. INCOME TAXES</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The significant components of deferred tax assets and liabilities were as follows at December 31:</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table58column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table58column2" width="33%" valign="middle"><p>2000</p>
</td>
<td class="table58column3" width="34%" valign="middle"><p>1999</p>
</td>
</tr>
<tr>
<td class="table58column1" width="33%" valign="middle"><p>Deferred tax liabilities</p>
</td>
<td class="table58column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table58column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table58column1" width="33%" valign="middle"><p>Amortization of intangibles</p>
</td>
<td class="table58column2" width="33%" valign="middle"><p>$0</p>
</td>
<td class="table58column3" width="34%" valign="middle"><p>$3,883,210</p>
</td>
</tr>
<tr>
<td class="table58column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table58column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table58column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table58column1" width="33%" valign="middle"><p>Deferred tax assets</p>
</td>
<td class="table58column2" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table58column3" width="34%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table58column1" width="33%" valign="middle"><p>Net operating loss
carryforwards</p>
</td>
<td class="table58column2" width="33%" valign="middle"><p>3,739,588</p>
</td>
<td class="table58column3" width="34%" valign="middle"><p>2,313,159</p>
</td>
</tr>
<tr>
<td class="table58column1" width="33%" valign="middle"><p>Less - valuation allowance</p>
</td>
<td class="table58column2" width="33%" valign="middle"><p>(3,739,588)</p>
</td>
<td class="table58column3" width="34%" valign="middle"><p>(2,313,159)</p>
</td>
</tr>
<tr>
<td class="table58column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table58column2" width="33%" valign="middle"><p>-----------</p>
</td>
<td class="table58column3" width="34%" valign="middle"><p>-----------</p>
</td>
</tr>
<tr>
<td class="table58column1" width="33%" valign="middle"><p>&#160;</p>
</td>
<td class="table58column2" width="33%" valign="middle"><p>0</p>
</td>
<td class="table58column3" width="34%" valign="middle"><p>0</p>
</td>
</tr>
<tr>
<td class="table58column1" width="33%" valign="middle"><p>Net deferred tax liability</p>
</td>
<td class="table58column2" width="33%" valign="middle"><p>$0 </p>
</td>
<td class="table58column3" width="34%" valign="middle"><p>$3,883,210</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The net changes in the valuation allowance for the periods ended December 31, 2000 and 1999
were $1,426,429 and $1,739,692, respectively.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The deferred tax liability results from the acquisitions of Cyberhighway, Inc., Santa Fe Trail
Internet Plus, Inc., and Premier Internet Services, Inc. in tax free reorganizations, in which there
is no tax basis in the acquired customer base.<br>
<br>
The Company has a net operating loss carry forward of approximately $11,000,000 available to
offset future income for income tax reporting purposes, which will ultimately expire between
2011 and 2014 if not utilized.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">11. SOURCES OF SUPPLIES</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The Company relies on local telephone companies and other companies to provide data
communications. Although management believes alternative telecommunications facilities could
be found in a timely manner, any disruption of these services could have an adverse effect on
operating results.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The Company maintains various vendors for required products, such as modems, terminal
services and high-performance routers, which are important components of its network. Some of
the Company's suppliers have limited resources and production capacity. If the suppliers are
unable to meet the Company's needs as it is building out its network infrastructure, then delays
and increased costs in the expansion of the Company's network infrastructure could result,
having an adverse effect on operating results.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">During 2000, the Company purchased all of its network radios from one supplier. Additionally,
the Company has purchased its modems principally from two suppliers. Additional changes in
suppliers could cause a delay in manufacturing which would affect operation results adversely.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">12. COMMITMENTS</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The Company has contracts with various telephone companies and other companies to provide
data communication services. The terms on these agreements range from month-to-month to five
years. Future obligations under these agreements as of December 31, 2000 are as follows for the
years ending December 31:</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table59column1" width="50%" valign="middle"><p>2001</p>
</td>
<td class="table59column2" width="50%" valign="middle"><p>$540,000</p>
</td>
</tr>
<tr>
<td class="table59column1" width="50%" valign="middle"><p>2002</p>
</td>
<td class="table59column2" width="50%" valign="middle"><p>330,000</p>
</td>
</tr>
<tr>
<td class="table59column1" width="50%" valign="middle"><p>2003</p>
</td>
<td class="table59column2" width="50%" valign="middle"><p>140,000</p>
</td>
</tr>
<tr>
<td class="table59column1" width="50%" valign="middle"><p>2004</p>
</td>
<td class="table59column2" width="50%" valign="middle"><p>100,000</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">13. RELATED PARTY</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In December 2000, a total of 500,000 shares of common stock were issued to two officers as
bonuses for their services as officers. Compensation expense of approximately $125,000 was
recorded based on the fair value of the common stock on the date of issue.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">14. WARRANTS</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">During 2000, the Company issued warrants to purchase 480,000 shares of common stock at
various share prices. The remaining warrants expire between 2001 and 2004. Warrants at
December 31, 2000 consist of the following:</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;56,667 issued on May 18, 1999, pursuant to an Investment Banking Agreement, with an exercise
price of $1.25, exercisable for a period of four years from issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;56,667 issued on May 18, 1999, pursuant to an Investment Banking Agreement, with an exercise
price of $1.50, exercisable for a period of four years from issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;34,000 issued on May 18, 1999, pursuant to a Selling Agreement, with an exercise price of
$1.25, exercisable for a period of five years from issuance, of which 21,857 were exercised
during 1999.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;60,000 issued on January 20, 1999, pursuant to a private offering, with an exercise price of
$7.00, exercisable for a period of three years from issuance, redeemable by the Company at any
time the bid price of the Company's common stock has been at or above $8.50 per share for five
consecutive trading days.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;35,000 issued on June 4, 1999, pursuant to a private offering, with an exercise price of $7.00,
exercisable for a period of two years from issuance, redeemable by the Company at any time the
bid price of the Company's common stock has been at or above $10.00 per share for five
consecutive trading days.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;60,000 issued on December 1, 1999, pursuant to a Consulting Agreement, with an exercise price
of $3.50, exercisable for a period of five years from issuance. The Company does apply SFAS
No. 123, Accounting for Stock-Based Compensation, in accounting for the stock warrants issued
to non-employees in connection with the original stock issuance. The Company has recorded
expense of $145,298 pursuant to the issuance of these warrants. The fair value of the warrants
granted to non-employees is estimated on the date of the grant using the assumption of an
expected life of five years, and a risk-free interest rate of 5.0%.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;50,000 issued on August 27, 1999, pursuant to a Subscription Agreement, with an exercise price
of $6.00, exercisable for a period of three years from issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;65,000 issued in April 2000, pursuant to a private offering, with an exercise price of $7.50,
exercisable for a period of two years from issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;35,000 issued in November 2000, pursuant to a Consulting Agreement, with an exercise price of
$1.00, exercisable for a period of three years from issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;380,000 issued in December 2000, as a finder's fee, an exercise price of $.20, exercisable for a
period of three years from issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">15. SETTLEMENT AGREEMENT</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">On November 30, l999, the Company entered into a settlement agreement and mutual release,
which settled certain legal proceedings in which USURF and CyberHighway had been involved.
The parties to the settlement agreement were: USURF, CyberHighway, the former operating
officer and a former director, and two former owner-employees (collectively the plaintiffs) of
CyberHighway.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Pursuant to this settlement agreement, certain legal proceedings were settled in full by issuance
of 340,000 shares of USURF common stock to the plaintiffs. The Company is paying the total
sum of $43,325 for reimbursement of attorneys' fees paid by the plaintiffs.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The 340,000 shares issued were valued at $2.6875 per share, or $913,750, in the aggregate. The
price per share assigned to the issued shares was the closing price of the common stock, as
reported by the American Stock Exchange. The total charge against earnings in 1999 resulting
from the settlement agreement was $957,075.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">16. CONTINGENCIES<br>
<br>
On September 29, 2000, three creditors of CyberHighway filed an involuntary petition in the
Idaho Federal Bankruptcy Court, styled In Re:CyberHighway, Inc., Case No. 00-02454. In
December 2000, CyberHighway and the petitioning creditors filed a joint motion to dismiss this
proceeding. The joint motion to dismiss requires the approval of CyberHighway's creditors.
However, some of CyberHighway's creditors objected to the dismissal of the proceeding. The
objecting creditors desire that all claims be adjudicated in the bankruptcy court. The Company
believes it is likely that, at some time in the future, a final order of bankruptcy will be entered
with respect to CyberHighway.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Subsequent to the involuntary bankruptcy, CyberHighway lost nearly all of its customers. Due to
this loss of customer base, the Company's intangible assets relating to those customers are
worthless. The write-off of the intangible assets reflected on the Company's December 31, 2000
balance sheet was $4,814,272 (net of deferred taxes). Due to this change in operating
environment, the Company's revenues have decreased substantially as well as a decrease in
expenses associated with the elimination of personnel previously required to operate the
Company's network operations center, and accordingly goodwill has been impaired. The
write-down of goodwill reflected on the Company's December 31, 2000, balance sheet was
$4,425,037.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">17. SEGMENT DISCLOSURE</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The Company adopted SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information," during the fourth quarter of 2000. SFAS No. 131 established standards for
reporting information about operating segments in annual financial statements and requires
selected information about operating segments in interim financial reports issued to stockholders.
It also established standards for related disclosures about products and services and geographic
areas. Operating segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by chief operating decision makers
or decision making groups, in deciding how to allocate resources and in assessing performance.
The Company considers internet service providing and wireless internet service providing to be a
similar industry; as such, there are no individual segments that are required to be reported
pursuant to SFAS 131.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">18. GOING CONCERN</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">These financial statements are presented on the basis that the Company is a going concern. Going
concern contemplates the realization of assets and the satisfaction of liabilities in the normal
course of business over a reasonable length of time. The accompanying financial statement
shows that current liabilities exceed current assets by approximately $1.5 million at December
31, 2000. The Company's president loaned the Company approximately $568,571 during fiscal
2000 and loaned an additional $26,590 subsequent to year-end. The appropriateness of using the
going concern basis is dependent upon continued funding by the Company's president, obtaining
additional financing or equity capital and, ultimately, to achieve profitable operations. The
uncertainty about these conditions raises substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">Management plans to raise capital by obtaining financing and eventually, through public
offerings. Management intends to use the proceeds from any borrowings to acquire and develop
markets to implement its Wireless Internet Access System and sell its service. The Company
believes that these actions will enable it to carry out its business plan and ultimately to achieve
profitable operations.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">19. FINANCING TRANSACTION</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">On October 9, 2000, the Company signed a common stock purchase agreement with an unrelated
company to sell up to 6,000,000 shares of common stock and 645,000 common warrants for up
to $10,000,000. The purchase price of the shares under this agreement will vary, based on future
market prices of the Company's common stock. The agreement calls for the Company to meet
certain requirements and maintain certain criteria with respect to its common stock in order to
avoid an event of default. Upon the occurrence of the event of default the buyer is no longer
obligated to purchase any additional shares of stock. The agreement will terminate on April 30,
2001, if all of the circumstances necessary to effect the transaction have not occurred by that
date, including completion of a registration statement with respect thereto.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">20. SIGNIFICANT BUSINESS COMBINATION</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">On January 29, 1999, the Company acquired all of the capital stock of CyberHighway, Inc.
(CyberHighway), an Idaho corporation.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The acquisition was effected pursuant to a Plan and Agreement of Reorganization dated January
20, 1999 between the Company and CyberHighway. The Company paid the shareholders of
CyberHighway approximately $15,940,000 through the issuance of 2,000,000 shares of common
stock. The purchase price was based upon the weighted average closing price of the Company's
common stock for five days prior and subsequent to the acquisition date.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The transaction was accounted for as a purchase. The purchase price was allocated to the
underlying assets purchased and liabilities assumed based on their fair market values at the
acquisition date.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The following table summarizes the net assets purchased in connection with the CyberHighway
acquisition and the amount attributable to cost in excess of net assets acquired:</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table60column1" width="50%" valign="middle"><p>Net assets acquired</p>
</td>
<td class="table60column2" width="50%" valign="middle"><p>$372,472</p>
</td>
</tr>
<tr>
<td class="table60column1" width="50%" valign="middle"><p>Acquired customer base</p>
</td>
<td class="table60column2" width="50%" valign="middle"><p>15,566,787</p>
</td>
</tr>
<tr>
<td class="table60column1" width="50%" valign="middle"><p>Other assets</p>
</td>
<td class="table60column2" width="50%" valign="middle"><p>5,260,690</p>
</td>
</tr>
<tr>
<td class="table60column1" width="50%" valign="middle"><p>Deferred tax liability</p>
</td>
<td class="table60column2" width="50%" valign="middle"><p>(5,260,690)</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The following unaudited pro forma condensed statements of operations assumes the
CyberHighway acquisition occurred on January 1, 1998. In the opinion of management, all
adjustements necessary to present fairly such unaudited pro forma condensed statements of
operations have been made.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td class="table61column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>Historical</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>Historical</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>Proforma</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>Proforma</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>USURF</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>CyberHighway</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>Adjustments</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>Consolidated</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>Revenues</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>$5,440</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>$2,449,156</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>$0</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>$2,454,596</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>Expenses</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>Internet access cost</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>0</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>510,036</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>0</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>510,036</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>Equipment cost</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>0</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>326,488</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>0</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>326,488</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>Depreciation and
amortization</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>4,394</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>138,674</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>6,918,262</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>7,061,330</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>General and
administrative</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>1030070</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>1,292,526</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>0</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>2,322,596</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>Selling</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>0</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>110,397</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>0</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>110,397</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>-------------</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>-------------</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>-------------</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>-------------</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>Total operating
expense</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>1,034,464</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>2,378,121</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>6,918,262</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>10,330,847</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>-------------</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>-------------</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>-------------</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>-------------</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>Operating income
(loss) </p>
<p>Other income
(expense)</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>(1,019,024)</p>
<p>(8,602)</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>71,035</p>
<p>6,960</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>(6,918,262)</p>
<p>0</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>(7,876,251)</p>
<p>(1,642)</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>-------------</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>-------------</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>-------------</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>-------------</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>Income (loss)
before taxes</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>(1,037,626)</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>77,995</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>(6,918,262)</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>(7,877,893)</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>Income tax benefit</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>0</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>0</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>(1,753,563)</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>(1,753,563)</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>-------------</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>-------------</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>-------------</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>-------------</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>Net income (loss)</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>($1,037,626)</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>$77,995</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>($5,164,699)</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>($6,124,330)</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>========</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>========</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>========</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>========</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>Net income (loss)
per share</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>($0.14)</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>$31.51</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>($0.65)</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>========</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>========</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>========</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>Weighted average
number of shares
outstanding</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>7,361,275</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>2,475</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>9,361,275</p>
</td>
</tr>
<tr>
<td class="table61column1" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column2" width="20%" valign="middle"><p>========</p>
</td>
<td class="table61column3" width="20%" valign="middle"><p>========</p>
</td>
<td class="table61column4" width="20%" valign="middle"><p>&#160;</p>
</td>
<td class="table61column5" width="20%" valign="middle"><p>========</p>
</td>
</tr>
</TABLE>
</div>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">21. POTENTIAL RESCISSION CLAIMS</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">From January 24, 2000, to December 31, 2000, a total of 2,767,823 shares of the common stock
of the Company may have been issued in violation of Section 5 of the Securities Act of 1933, as
amended. The aggregate value assigned to these shares upon their issuance totaled $3,897,552. It
is possible that each of the issuees of these shares has a potential claim for rescission of their
respective issuance transactions. These shares have been reflected under the redeemable stock
caption on the accompanying balance sheet. Additionally 2,114,162 shares valued at $1,183,703
were issued subsequent to year-end, that may also be subject to rescission.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The Company believes that it is unlikely that any of these potential rescission claims will be
asserted against the Company.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">22. SUBSEQUENT EVENTS</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">The following events occurred subsequent to December 31, 2000:</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In January 2001, the Company issued 80,000 shares of its common stock as a commitment fee
under the common stock purchase agreement to the unrelated company.<br>
<br>
In February 2001, the Company sold, pursuant to a Securities Purchase Agreement, 840,000
shares of common stock and 840,000 warrants with an exercise price of $.15, exercisable for a
period of three years from issuance. These securities were sold for $126,000 in cash, with no
portion of the purchase price having been allocated to these warrants.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In February 2001, the Company issued, as a finder's fee, 84,000 shares of common stock and
336,000 warrants with an exercise price of $.15 per share, exercisable for a period of three years
from issuance.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In March 2001, the Company sold, pursuant a Securities Purchase Agreement, 500,000 shares of
common stock and 500,000 warrants with an exercise price of $.25, exercisable for a period of
three years from issuance. These securities were sold for $125,000 in cash, with no portion of the
purchase price having been allocated to the warrants.</p>
<p style="line-height: 0.197919in">&#160;</p>
<p style="line-height: 0.197919in">In March 2001, the Company issued, as a finder's fee, 50,000 shares of common stock and
200,000 warrants with an exercise price of $.25 per share, exercisable for a period of three years
from issuance.</p>
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