<SUBMISSION>
<ACCESSION-NUMBER>0001035398-02-000035
<TYPE>424B3
<PUBLIC-DOCUMENT-COUNT>1
<FILING-DATE>20021018
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>USURF AMERICA INC
<CIK>0001035398
<ASSIGNED-SIC>7370
<IRS-NUMBER>721346591
<STATE-OF-INCORPORATION>NV
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>424B3
<ACT>33
<FILE-NUMBER>333-97549
<FILM-NUMBER>02791990
</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>MEDIA ENTERTAINMENT INC
<DATE-CHANGED>19980729
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>INTERNET MEDIA CORP
<DATE-CHANGED>19980729
</FORMER-COMPANY>
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<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>pros424b3.htm
<TEXT>
<html>

<head>
<meta name="generator" content="Corel WordPerfect 10">
<meta equiv="content-Type" content="text/html; charset=utf-8">


</head>

<body>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>PROSPECTUS</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="69%" valign="top"><p>&#160;</p>
</td>
<td width="31%" align="right" valign="top"><p>Filed Pursuant to Rule 424(b)(3)
Registration No. 333-97549</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="33%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="35%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Up to 14,618,333 Shares USURF
America, Inc.</p>
</td>
<td width="32%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="39%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="21%" style="border-top: none" align="center" valign="top"><p>Common Stock
$.0001 par value</p>
</td>
<td width="40%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>This prospectus relates to 14,618,333 shares our common stock offered for sale by persons other than USURF
America, who are referred to as the selling shareholders. 9,093,333 of these shares have been issued by us, and
5,525,000 of these shares will be issued by us upon exercise of common stock purchase warrants.  We are paying
nearly all of the expenses of this offering.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>Our common stock is traded on the American Stock Exchange under the symbol &#8220;UAX&#8221;.  On October 15, 2002,
the last reported sale price of our common stock, as reported by AMEX, was $.05 per share.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>Investing in our common stock involves risk. Please see &#8220;Risk Factors&#8221;, beginning on page 6, for an explanation
of some of these risks.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>The selling shareholders are &#8220;underwriters&#8221; within the meaning of the Securities Act of 1933, as amended.  Any
broker executing sell orders on behalf of a selling shareholder may be deemed to be an &#8220;underwriter&#8221; of this
offering.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>The date of this Prospectus is October 16, 2002</p>
</td>
</tr>
</table>
<br>
<br>
<p>&lt;PAGE&gt;</p>
<br>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>TABLE OF CONTENTS</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>&#160;</p>
</td>
<td width="8%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Page</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>SUMMARY</p>
</td>
<td width="8%" align="right" valign="top"><p>3</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>THE OFFERING</p>
</td>
<td width="8%" align="right" valign="top"><p>5</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>SUMMARY FINANCIAL DATA</p>
</td>
<td width="8%" align="right" valign="top"><p>5</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>RISK FACTORS</p>
</td>
<td width="8%" align="right" valign="top"><p>6</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</p>
</td>
<td width="8%" align="right" valign="top"><p>14</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>DILUTION</p>
</td>
<td width="8%" align="right" valign="top"><p>14</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>USE OF PROCEEDS</p>
</td>
<td width="8%" align="right" valign="top"><p>15</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>TRADING AND MARKET PRICES</p>
</td>
<td width="8%" align="right" valign="top"><p>16</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>DIVIDENDS</p>
</td>
<td width="8%" align="right" valign="top"><p>16</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>CAPITALIZATION</p>
</td>
<td width="8%" align="right" valign="top"><p>17</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>SELECTED FINANCIAL DATA</p>
</td>
<td width="8%" align="right" valign="top"><p>17</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS</p>
</td>
<td width="8%" align="right" valign="top"><p>18</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>REGULATION</p>
</td>
<td width="8%" align="right" valign="top"><p>33</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>BUSINESS</p>
</td>
<td width="8%" align="right" valign="top"><p>34</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>THE FUSION CAPITAL TRANSACTION</p>
</td>
<td width="8%" align="right" valign="top"><p>47</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>MANAGEMENT</p>
</td>
<td width="8%" align="right" valign="top"><p>51</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>CERTAIN TRANSACTIONS</p>
</td>
<td width="8%" align="right" valign="top"><p>57</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>PRINCIPAL SHAREHOLDERS</p>
</td>
<td width="8%" align="right" valign="top"><p>60</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>LITIGATION</p>
</td>
<td width="8%" align="right" valign="top"><p>62</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>PLAN OF DISTRIBUTION</p>
</td>
<td width="8%" align="right" valign="top"><p>63</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>SELLING SHAREHOLDERS</p>
</td>
<td width="8%" align="right" valign="top"><p>64</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>DESCRIPTION OF SECURITIES</p>
</td>
<td width="8%" align="right" valign="top"><p>66</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>LEGAL MATTERS</p>
</td>
<td width="8%" align="right" valign="top"><p>67</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>EXPERTS</p>
</td>
<td width="8%" align="right" valign="top"><p>67</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>ABOUT THIS PROSPECTUS</p>
</td>
<td width="8%" align="right" valign="top"><p>67</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>WHERE YOU CAN FIND MORE INFORMATION</p>
</td>
<td width="8%" align="right" valign="top"><p>68</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="88%" valign="top"><p>INDEX TO FINANCIAL STATEMENTS</p>
</td>
<td width="8%" align="right" valign="top"><p>69</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>SUMMARY</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Our Business</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We own a proprietary wireless Internet access system, known as &#8220;Quick-Cell(TM)&#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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We operate Quick-Cell systems in Del Rio, Texas, and Santa Fe, New Mexico.  Our Del Rio system has
been operating since September 2001 and our Santa Fe system has been operating since March 2000.
Currently, we provide wireless Internet access to approximately 50 customers.  We have lacked the capital
needed to expand our business more rapidly.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In May 2002, we entered into an Internet services provision agreement with SunWest Communications, Inc.,
a Colorado Springs, Colorado-based competitive local telephone company.  Together with SunWest, we will
market our Quick-Cell wireless Internet access service to all 6,000 of SunWest&#8217;s customers, as well as
throughout the Greater Colorado Springs area.  With Sunwest, we have completed the construction of our
first Quick-Cell system in Colorado Springs, one that provides service to a 310-unit apartment complex.
This system is in final testing and is expected to be fully operational in the very near future.  The SunWest
agreement represents the type of agreements that our new president is attempting to secure, as a means of
accelerating growth of our customer base.  We cannot assure you that we will be successful in this regard.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In September 2002, we reached agreements to acquire two Colorado Springs, Colorado-based private
companies, as follows: (1) we signed a letter of intent to acquire High Plains Internet, Inc., a small Internet
service provider, for shares of our stock, and we expect to enter into a definitive acquisition agreement in the
near future; and (2) we sign a definitive agreement to acquire NeighborLync, Inc., a start-up company
specializing in providing video and data services to Multiple Dwelling Unit (MDU) properties, for
1,000,000 shares of our common stock; we expect that a closing under this agreement will occur by the end
of October 2002.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We intend to commit all available resources to the development and exploitation of our Quick-Cell wireless
Internet access products.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In September 2000, our CyberHighway subsidiary, a provider of dial-up Internet access, was forced into
involuntary bankruptcy.  CyberHighway has lost all of its customers.  We do not intend to commit any
capital to restore CyberHighway&#8217;s business.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We have had substantial losses since our inception in 1996.  At June 30, 2002, our accumulated deficit was
$38,751,519 (unaudited), our net loss for the six months ended June 30, 2002, was $1,750,891 (unaudited),
and our operating activities used $344,180 (unaudited) in cash for the six months ended June 30, 2002.  At
December 31, 2001, our accumulated deficit was $37,000,628, our net loss for 2001 was $2,498,468 and our
operating activities used $707,569 in cash for all of 2001.  We have a limited operating history upon which
to evaluate our prospects.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our independent auditor has, in its opinion relating to our December 31, 2001, financial statements,
expressed substantial doubt about our ability to continue as a going concern.  This means that our
independent auditor, when issuing its opinion, could not be certain that we would be able to continue as a
going business concern.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>You should read the risk factors, beginning on page 6, before you buy our common stock.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Our Market and Strategy</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We designed our Quick-Cell wireless Internet access products to provide high-speed (broadband), high-quality wireless Internet access at prices below local market prices for comparable hard-wire Internet access.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our new president has expanded the scope of our original Quick-Cell business plan, which called for the
construction of Quick-Cell systems in small and medium-sized cities.  In addition to our original plan, we are
now attempting to develop working partnerships with companies who need to create or extend broadband
Internet connectivity for their customers, employees and partners.  The companies with which we seek to do
business operate in the following market segments, among others: hospitality, education, aviation, multiple
dwelling unit, planned community development, independent local exchange, utility and municipality.  Our
strategy is not based on any formal market survey, however.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Historically, we have lacked capital with which to pursue our full business plan and we continue to be in that
position.  We cannot assure you that we will ever possess sufficient capital to accomplish our objectives.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Evergreen Agreement</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>On June 14, 2002, we completed a securities purchase agreement with Evergreen Venture Partners, LLC,
whereby we issued  securities for cash in the amount of $250,000 (including a $10,000 stock subscription
receivable).   We sold  Evergreen a total of 3,645,833 shares of our common stock,  3,125,000 common
stock purchase warrants to purchase a like number of shares at an exercise price of $.15 per share and
3,125,000 common stock purchase warrants to purchase a like number of shares at an exercise price of $.30
per share.  Also pursuant to this agreement, we hired a new president and chief executive officer, Douglas O.
McKinnon, who also became a director, and who received, as a signing bonus, 3,000,000 shares of common
stock; David M. Lofin, our former president, became our Chairman of the Board, reduced the term of his
remaining term of employment from approximately 4 years to six months, waived the payment of all accrued
and unpaid salary and waived the repayment of all loans made by him to us, in consideration of 2,000,000
shares of our common stock; two of our vice presidents reduced the terms of their remaining terms of
employment from approximately 4 years to six months and one year to six months, respectively, and waived
the payment of all accrued and unpaid salary, in consideration of 2,000,000 shares of our common stock; and
our other vice president terminated his employment with us.  Also, under this agreement, Evergreen has the
right to name two persons to become directors of USURF America.  To date, Evergreen has not named any
person as a director.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Fusion Capital Agreement</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.
Since the commencement of this agreement in July 2001, we have obtained only  $395,000, which has
impaired our ability to implement our full business plan.  Please see &#8220;The Fusion Capital Transaction&#8221; below
for a detailed description of this agreement, as well as &#8220;Management&#8217;s Discussion and Analysis of Financial
Condition and Results of Operations&#8221;.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Our Address</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 3333 S. Bannock, Suite 790, Englewood, Colorado
80110.  Our telephone number is (303) 789-7100; our fax number is (303) 660-6784.  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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>THE OFFERING</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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 63 and 64, respectively.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="58%" valign="top"><p>Common Stock offered by Selling Shareholders(1):</p>
</td>
<td width="34%" valign="top"><p>Up to 14,618,333 shares(2)</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="58%" valign="top"><p>Common Stock Outstanding Prior to Offering:</p>
</td>
<td width="34%" valign="top"><p>52,201,338 shares</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="58%" valign="top"><p>Common Stock Outstanding After this Offering:</p>
</td>
<td width="34%" valign="top"><p>69,864,930 shares(3)</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="58%" valign="top"><p>American Stock Exchange Trading Symbol:</p>
</td>
<td width="34%" valign="top"><p>UAX</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="92%" style="border-top: 0.01in solid" valign="top"><p>(1) Specific information concerning each of the selling shareholders and the securities offered by them
is included under &#8220;Selling Shareholders&#8221; on page 64.</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="92%" valign="top"><p>(2) 9,093,333 of these shares are currently issued and outstanding and will be offered and sold by the
selling shareholders; and 5,525,000 of these shares may be purchased from us upon the exercise of
outstanding warrants and thereafter offered and sold by the selling shareholders.</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="92%" valign="top"><p>(3) Assumes the exercise of all 14,583,250 outstanding warrants and the issuance of an additional
2,859,865 shares under the Fusion Capital agreement.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>SUMMARY FINANCIAL DATA</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>Set forth below is our summary consolidated statements of operations data for the years ended December 31,
2001, 2000 and 1999, as well as the six months ended June 30, 2002 and 2001 (unaudited).  Also set forth below
is our summary balance sheet data as of December 31, 2001 and 2000, as well as June 30, 2002 (unaudited).</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>This summary financial information should be read in conjunction with the consolidated financial statements
appearing elsewhere in this prospectus.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>STATEMENT OF OPERATIONS DATA:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="24%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="45%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Year Ended December 31,</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="30%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Six Months Ended June 30,</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="24%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2001</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1999</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2002
(unaudited)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2001
(unaudited)</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="24%" valign="top"><p>Revenues</p>
</td>
<td width="15%" align="center" valign="top"><p>$7,446</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$1,872,629</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$2,547,225</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$9,302</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>$15,891</p>
</td>
</tr>
<tr>
<td width="24%" valign="top"><p>Internet access costs,
cost of goods sold</p>
</td>
<td width="15%" align="center" valign="top"><p>11,999</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>2,145,955</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>1,152,721</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>17,151</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>5,343</p>
</td>
</tr>
<tr>
<td width="24%" valign="top"><p>Operating expenses</p>
</td>
<td width="15%" align="center" valign="top"><p>2,852,110</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>14,975,583</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>11,860,758</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>1,742,866</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>1,595,954</p>
</td>
</tr>
<tr>
<td width="24%" valign="top"><p>Net loss</p>
</td>
<td width="15%" align="center" valign="top"><p>(2,498,468)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>(21,885,330)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>(10,930,163)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>(1,750,891)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>(1,585,406)</p>
</td>
</tr>
<tr>
<td width="24%" valign="top"><p>Loss per share</p>
</td>
<td width="15%" align="center" valign="top"><p>(0.13)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>(1.68)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>(0.96)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>(0.05)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>(0.11)</p>
</td>
</tr>
<tr>
<td width="24%" valign="top"><p>Weighted average
number of shares
outstanding</p>
</td>
<td width="15%" align="center" valign="top"><p>18,616,434</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>13,000,391</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>11,419,641</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>35,044,692</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>14,564,873</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>BALANCE SHEET DATA:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="47%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="35%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>As at December 31,</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>As at June 30,</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2001</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2000</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2002
(unaudited)</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Working Capital (Deficit)</p>
</td>
<td width="16%" align="center" valign="top"><p>$(1,254,897)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$(1,517,164)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>$(1,001,299)</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Total Assets</p>
</td>
<td width="16%" align="center" valign="top"><p>229,528</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>410,316</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>252,417</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Total Current Liabilities</p>
</td>
<td width="16%" align="center" valign="top"><p>1,389,653</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>1,764,973</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>1,171,765</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Total Liabilities</p>
</td>
<td width="16%" align="center" valign="top"><p>1,389,653</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>1,764,973</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>1,171,765</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Total Redeemable Common Stock</p>
</td>
<td width="16%" align="center" valign="top"><p>1,192,700</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>3,323,552</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Stockholders&#8217; Equity (Deficit)</p>
</td>
<td width="16%" align="center" valign="top"><p>(2,352,825)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>(4,678,209)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>(919,348)</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>RISK FACTORS</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><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>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>We were incorporated in 1996 and have only a limited operating history upon which you 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>gain access to sufficient capital with which to support anticipated growth;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>achieve customer acceptance of our Quick-Cell wireless Internet access products;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>expand our wireless Internet access subscriber base and subscriber-related revenues;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>compete successfully in a highly competitive market; and</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>recruit and train qualified employees.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>We cannot assure you that we will successfully address any of these risks and uncertainties.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Our independent auditor has expressed substantial doubt about our
ability to continue as a going concern.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>In its opinion on our financial statements for the year ended December 31, 2001, our independent auditor,
Postlethwaite &amp; Netterville, expressed substantial doubt about our ability to continue as a going concern.  This
means that, when issuing its opinion relating to our December 31, 2001, financial statements, given our then-current and historical lack of capital, our independent auditor had substantial doubt that we would be able to
continue as a going business concern.  Please review the Independent Auditor&#8217;s Report and Note 16 to the
consolidated financial statements appearing elsewhere in this prospectus.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Unless we obtain $300,000 in new capital, we will be unable to remain
in business.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>We had an accumulated deficit of $37,000,628 as of December 31, 2001,
and an accumulated deficit of $38,751,519 (unaudited) as of June 30,
2002, and we expect to continue to incur losses for the foreseeable
future.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>We have had substantial losses since our inception and our operating losses may continue in the future.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>We had an operating loss for the six months ended June 30, 2002.  As a result, at June 30, 2002, we had an
accumulated deficit of $38,751,519 (unaudited).  Our gross revenues for the six- month period were $9,302
(unaudited), with a loss from operations of $1,750,715 (unaudited) and a net loss of $1,750,891 (unaudited).</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>We have incurred annual operating losses since our inception. As a result, at December 31, 2001, we had an
accumulated deficit of $37,000,628.  Our gross revenues for the years ended December 31, 2001 and 2000, were
$7,446 and $1,872,629, respectively, with losses from operations of $2,954,189 and $15,248,909, respectively.
Our net losses for the years ended December 31, 2001 and 2000, were $2,498,468 and $21,885,330, respectively.
We cannot assure you that we will experience revenue growth, or that we will be profitable in the future.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>You will suffer substantial dilution in the net tangible book value of the
common stock you purchase.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>The market price of our common stock will continue to be extremely
volatile, and it may drop unexpectedly.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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 $.04 per share
to $11.00 per share.  The closing price of our common stock on October 15, 2002, was $.05.  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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>To date, we have not obtained the maximum amount of funds under the
Fusion Capital agreement; we may not obtain enough funds under the
Fusion Capital agreement to achieve our primary business objectives.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>Since the commencement of the Fusion Capital agreement in July 2001, we have not obtained the maximum
funding amount possible under this agreement.  To date, we have obtained only $395,000 under the Fusion
Capital agreement, which has significantly impeded our ability to expand our Quick-Cell business operations.
We will remain in this position unless and until our stock price increases significantly or we secure funding from
a source other than Fusion Capital, of which there is no assurance.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>We must obtain approximately $1.2 million under the Fusion Capital agreement, or from other sources, in order
to achieve the primary objectives of our business plan:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>entering into several working partnerships with companies who need to create or extend broadband
Internet connectivity for their customers, employees and partners;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>placing at least 10,000 customers on our Quick-Cell systems in the next year; and</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>proving the commercial viability of our Quick-Cell wireless Internet access service.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>It is a distinct possibility that we will not obtain the $1.2 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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Our common stock could be delisted from the American Stock
Exchange, should we fail to regain continued listing standards by the end
of 2003.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>In July 2002, we were notified by AMEX that we have fallen below the continued listing standards of AMEX.
We have 18 months in which to regain compliance with AMEX&#8217;s continued listing standards.  We have fallen
below certain of AMEX&#8217;s continued listing standards: (1) losses from operations in its two most recent fiscal
years with shareholders&#8217; equity below $2 million; and (2) sustained losses so substantial in relation to the
company&#8217;s overall operations or its existing financial resources, or its financial condition in relation to its overall
operations or its existing financial resources, or its financial condition has become so impaired that it appears
questionable, the opinion of AMEX, as to whether the company will be able to continue operations and/or meet
its obligations as they mature.  After AMEX reviewed our plan for regaining compliance, we were granted an
extension of time (18 months) to regain compliance with the continued listing standards.  We will be subject to
periodic review by the AMEX staff during the extension period.  Failure to make progress consistent with the
plan or to regain compliance with the continued listing standards by the end of the extension period could result
in our being delisted from AMEX.  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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>The sale of shares by the selling shareholders, as well as the resale of
shares purchased by Fusion Capital, could cause the price of our stock to
decline, which could impair our ability to obtain needed capital in the
future.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>All of the shares of our common stock issuable to Fusion Capital, up to 6,800,000 shares in total, 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 approximately July 31, 2003.  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.  Likewise, the selling shareholders in this
offering may sell none, some or all of their shares from time to time.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><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>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>We have registered 6,000,000 shares of our common stock for issuance under the Fusion Capital agreement &#8211;
SEC File No. 333-63846.  Since the commencement date of this agreement, July 10, 2001, we have issued
3,140,135 shares, for a total proceeds of $395,000.  Should the market price of our common stock remain
depressed, you can expect that we would issue all 6,000,000 shares, due to our need for capital with which to
implement our plan of business.  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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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 $.05 per share and Fusion Capital would have been
able to purchase all of the remaining portion of the 6,000,000 shares of our common stock reserved for issuance
under the Fusion Capital agreement.  Assuming Fusion Capital&#8217;s purchase of these remaining shares 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 10% of our
outstanding common stock as of October 15, 2002.  This would result in significant dilution to the ownership
interests of other holders of our common stock.  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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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 $.05 per share, the closing sale price of the common stock on October 15, 2002,
and the purchase by Fusion Capital of the remaining portion of the 6,000,000 shares under the Fusion Capital
agreement, total proceeds to us would only be approximately $600,000, unless we choose to issue more than
6,000,000 shares, which we have the right, but not the obligation, to do.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>The lower our stock price at the time Fusion Capital makes a purchase,
the more shares of stock Fusion Capital will receive.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>Given the low market price of our common stock since the commencement date of the Fusion Capital agreement,
it appears likely that we will be unable to obtain $10 million under that agreement, unless we elect to issue more
than the 6,000,000 shares reserved for issuance under that agreement, which we have the right, but not the
obligation, to do, or the market price of our common stock increases significantly in the near future.  We cannot
assure you that the market price of our common stock will increase at all.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Fusion Capital may purchase more than 9.9% of our common stock.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>The existence of our agreement with Fusion Capital could cause
downward pressure on the market price of our common stock.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>We may be unable to obtain sufficient capital to sustain our business or
pursue our growth strategy.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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 further
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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>Even if we are able to access significant funds under the Fusion Capital agreement, we will need additional
capital to implement fully our growth plans.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>We may not be able to secure enough Quick-Cell customer installation
personnel to keep up with demand.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><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 continue to
inhibit our ability to obtain funds under the Fusion Capital agreement or
otherwise.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>access to funds for expansion-related capital expenditures, including Quick-Cell equipment purchases;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>market acceptance of our Quick-Cell wireless Internet access products;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>the rates of new wireless Internet access subscriber acquisition and retention;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>changes in our pricing policies or those of our competitors; and</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>potential competition from large, well-funded national telecommunications companies.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>Our future personnel costs, marketing programs and overhead cannot be adjusted quickly and are, therefore,
relatively fixed in the short term.  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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>Period-to-period comparisons of our results of operations will likely not provide reliable indications of our future
performance.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>Price fluctuations of our common stock could negatively impact our ability to obtain needed capital.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Because we depend heavily on outside suppliers, our business may
suffer, should our suppliers fail to perform in a timely manner.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>We have not purchased insurance that covers our Quick-Cell wireless
Internet access operations.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>We have not purchased any insurance that would cover property loss or loss of income with respect to any of our
Quick-Cell operations.  Damage to our Quick-Cell equipment, or the towers to which it is affixed, could cause an
interruption in our Wireless Internet access service.  It is possible that we would be unable to afford to repair any
items of damaged equipment, due to our extreme lack of capital.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Our failure to manage future growth would hinder our efforts in earning
a profit.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>Without additional capital, we will be unable to expand significantly our operations.  As we obtain additional
funds under the Fusion Capital agreement or from other sources, 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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Our future success will depend on our ability to keep pace with the
Internet industry&#8217;s  rapid technological changes, evolving industry
standards and changing customer needs.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Our Quick-Cell wireless Internet access products are new and consumer
acceptance may not be achieved.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><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>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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
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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><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>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>Our future success will depend on the continued services and on the performance of our senior management and
other key employees.  While we have entered into employment agreements with each of our officers, the loss of
their 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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><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>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>Our directors and executive officers own approximately 22% 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 15% 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 57.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Our business plan is not based on independent market studies, so we
cannot assure you that our strategy will be successful.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>We may not be able to protect our intellectual property rights, which
could dramatically reduce our ability to earn a profit.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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;, &#8220;Quick-Cell Broadband Internet&#8221; and
&#8220;USURF Wireless Internet&#8221; brand names.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Nearly all of our shares are eligible for future sale, which could cause
the market price for our common stock to decline.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>DILUTION</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>As of June 30, 2002, we had a total of 45,258,005 shares of common stock outstanding and a net tangible book
value of negative $(0.018) per share.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>A purchase of our common stock will result in substantial and immediate dilution in your investment.  Dilution is
the reduction of a purchaser&#8217;s investment measured by the difference between the price paid per share of
common stock and the net tangible book value per share at the time of purchase.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>The following table depicts the potential dilution to purchasers of our common stock, without taking into account
any other changes in our net tangible book value since June 30, 2002, assuming various purchase prices:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Public Offering Price
Per Share</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="30%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Net Tangible Book Value Per
Share At Time of Offering</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="22%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Dilution per Share to
Purchasers</p>
</td>
<td width="8%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>$.05</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="30%" align="center" valign="top"><p>$(0.018)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="22%" align="center" valign="top"><p>$.068</p>
</td>
<td width="8%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>$.20</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="30%" align="center" valign="top"><p>$(0.018)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="22%" align="center" valign="top"><p>$.218</p>
</td>
<td width="8%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>$1.50</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="30%" align="center" valign="top"><p>$(0.018)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="22%" align="center" valign="top"><p>$1.518</p>
</td>
<td width="8%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>$2.00</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="30%" align="center" valign="top"><p>$(0.018)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="22%" align="center" valign="top"><p>$2.018</p>
</td>
<td width="8%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>$5.00</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="30%" align="center" valign="top"><p>$(0.018)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="22%" align="center" valign="top"><p>$5.018</p>
</td>
<td width="8%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>$10.00</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="30%" align="center" valign="top"><p>$(0.018)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="22%" align="center" valign="top"><p>$10.018</p>
</td>
<td width="8%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>USE OF PROCEEDS</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>We will not receive any of the proceeds of sales of stock by the selling shareholders.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Purchase of Quick-Cell Equipment</p>
</td>
<td width="27%" align="center" valign="top"><p>$6,000,000</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Construction of Quick-Cell Systems</p>
</td>
<td width="27%" align="center" valign="top"><p>1,300,000</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Marketing</p>
</td>
<td width="27%" align="center" valign="top"><p>1,000,000</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>General and Administrative Expenses</p>
</td>
<td width="27%" align="center" valign="top"><p>200,000</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Finder&#8217;s Fee</p>
</td>
<td width="27%" align="center" valign="top"><p>800,000</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Working Capital</p>
</td>
<td width="27%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>700,000</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="42%" align="center" valign="top"><p>Total</p>
</td>
<td width="27%" align="center" valign="top"><p>$10,000,000</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>Should all of our outstanding warrants be exercised, we would receive cash proceeds of approximately
$3,863,487.  The funds received from the exercise of warrants would be used as follows:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Purchase of Quick-Cell Equipment</p>
</td>
<td width="27%" align="center" valign="top"><p>$2,500,000</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Construction of Quick-Cell Systems</p>
</td>
<td width="27%" align="center" valign="top"><p>500,000</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Marketing</p>
</td>
<td width="27%" align="center" valign="top"><p>400,000</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>General and Administrative Expenses</p>
</td>
<td width="27%" align="center" valign="top"><p>100,000</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Working Capital</p>
</td>
<td width="27%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>863,487</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="42%" align="center" valign="top"><p>Total</p>
</td>
<td width="27%" align="center" valign="top"><p>$3,863,487</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>TRADING AND MARKET PRICES</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="36%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Quarter/Period Ended</p>
</td>
<td width="4%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="12%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>High</p>
</td>
<td width="4%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="12%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Low</p>
</td>
<td width="24%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="36%" style="border-bottom: 0.01in solid" valign="top"><p>10/15/99 thru 12/31/99</p>
</td>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>5.875</p>
</td>
<td width="4%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>2.50</p>
</td>
<td width="24%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="36%" valign="top"><p>March 31, 2000</p>
</td>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>11.00</p>
</td>
<td width="4%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>3.625</p>
</td>
<td width="24%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="36%" valign="top"><p>June 30, 2000</p>
</td>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>6.00</p>
</td>
<td width="4%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>2.25</p>
</td>
<td width="24%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="36%" valign="top"><p>September 30, 2000</p>
</td>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>2.50</p>
</td>
<td width="4%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>.875</p>
</td>
<td width="24%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="36%" style="border-bottom: 0.01in solid" valign="top"><p>December 31, 2000</p>
</td>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>1.25</p>
</td>
<td width="4%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>.1875</p>
</td>
<td width="24%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="36%" valign="top"><p>March 31, 2001</p>
</td>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>.80</p>
</td>
<td width="4%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>.22</p>
</td>
<td width="24%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="36%" valign="top"><p>June 30, 2001</p>
</td>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>.78</p>
</td>
<td width="4%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>.33</p>
</td>
<td width="24%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="36%" valign="top"><p>September 30, 2001</p>
</td>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>.50</p>
</td>
<td width="4%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>.17</p>
</td>
<td width="24%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="36%" style="border-bottom: 0.01in solid" valign="top"><p>December 31, 2001</p>
</td>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>.27</p>
</td>
<td width="4%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>.08</p>
</td>
<td width="24%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="36%" valign="top"><p>March 31, 2002</p>
</td>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>.25</p>
</td>
<td width="4%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>.08</p>
</td>
<td width="24%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="36%" valign="top"><p>June 30, 2002</p>
</td>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>.12</p>
</td>
<td width="4%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="12%" align="center" valign="top"><p>.04</p>
</td>
<td width="24%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>On October 10, 2002, the number of record holders of our common stock, excluding nominees and brokers, was
1,150 holding 52,201,338 shares.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>DIVIDENDS</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>We have never paid cash dividends on our common stock.  We intend to re-invest any future earnings for the
foreseeable future.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>Our board of directors has declared property dividends, the values of which have been written-off in our
financial statements, 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., acquired by us in exchange for all of our community-television-related assets; 400,000 shares of Argo Petroleum Corporation, acquired by us in exchange for 10,000
shares of our common stock; and 800,000 shares of Woodcomm International, Inc., acquired by us in exchange
for 7,500 shares of our common stock.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>CAPITALIZATION</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>The following table sets forth our capitalization as of June 30, 2002.  This table should be read in conjunction
with our consolidated financial statements included elsewhere in this prospectus.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>As of June 30 , 2002
(unaudited)</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>Long-Term Liabilities</p>
</td>
<td width="23%" align="center" valign="top"><p>$0</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>Stockholders' Equity (Deficit):</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>Common Stock - $.0001 par value; 100,000,000
shares authorized, 45,258,005 shares issued</p>
</td>
<td width="23%" align="center" valign="top"><p>4,526</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>Additional Paid-in Capital</p>
</td>
<td width="23%" align="center" valign="top"><p>38,623,626</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>Accumulated Deficit</p>
</td>
<td width="23%" align="center" valign="top"><p>(38,751,519)</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>Subscriptions Receivable</p>
</td>
<td width="23%" align="center" valign="top"><p>120,000</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>Deferred Consulting</p>
</td>
<td width="23%" align="center" valign="top"><p>(915,981)</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>Total Capitalization</p>
</td>
<td width="23%" align="center" valign="top"><p>(919,348)</p>
</td>
<td width="16%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>SELECTED FINANCIAL DATA</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>This summary financial information should be read in conjunction with the consolidated financial statements
appearing elsewhere in this prospectus.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>STATEMENT OF OPERATIONS DATA:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="24%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="45%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Year Ended December 31,</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="30%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Six Months Ended June 30,</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="24%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2001</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1999</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2002
(unaudited)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2001
(unaudited)</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="24%" valign="top"><p>Revenues</p>
</td>
<td width="15%" align="center" valign="top"><p>$7,446</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$1,872,629</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$2,547,225</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$9,302</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>$15,891</p>
</td>
</tr>
<tr>
<td width="24%" valign="top"><p>Internet access costs,
cost of goods sold</p>
</td>
<td width="15%" align="center" valign="top"><p>11,999</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>2,145,955</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>1,152,721</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>17,151</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>5,343</p>
</td>
</tr>
<tr>
<td width="24%" valign="top"><p>Operating expenses</p>
</td>
<td width="15%" align="center" valign="top"><p>2,852,110</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>14,975,583</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>11,860,758</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>1,742,866</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>1,595,954</p>
</td>
</tr>
<tr>
<td width="24%" valign="top"><p>Net loss</p>
</td>
<td width="15%" align="center" valign="top"><p>(2,498,468)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>(21,885,330)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>(10,930,163)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>(1,750,891)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>(1,585,406)</p>
</td>
</tr>
<tr>
<td width="24%" valign="top"><p>Loss per share</p>
</td>
<td width="15%" align="center" valign="top"><p>(0.13)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>(1.68)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>(0.96)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>(0.05)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>(0.11)</p>
</td>
</tr>
<tr>
<td width="24%" valign="top"><p>Weighted average
number of shares
outstanding</p>
</td>
<td width="15%" align="center" valign="top"><p>18,616,434</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>13,000,391</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>11,419,641</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>35,044,692</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>14,564,873</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>BALANCE SHEET DATA:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="47%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="35%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>As at December 31,</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>As at June 30,</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2001</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2000</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2002
(unaudited)</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Working Capital (Deficit)</p>
</td>
<td width="16%" align="center" valign="top"><p>$(1,254,897)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$(1,517,164)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>$(1,001,299)</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Total Assets</p>
</td>
<td width="16%" align="center" valign="top"><p>229,528</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>410,316</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>252,417</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Total Current Liabilities</p>
</td>
<td width="16%" align="center" valign="top"><p>1,389,653</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>1,764,973</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>1,171,765</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Total Liabilities</p>
</td>
<td width="16%" align="center" valign="top"><p>1,389,653</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>1,764,973</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>1,171,765</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Total Redeemable Common Stock</p>
</td>
<td width="16%" align="center" valign="top"><p>1,192,700</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>3,323,552</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Stockholders&#8217; Equity (Deficit)</p>
</td>
<td width="16%" align="center" valign="top"><p>(2,352,825)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>(4,678,209)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>(919,348)</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="19%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="62%" align="center" valign="top"><p>MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS</p>
</td>
<td width="19%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Background</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Current Overview</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our new president has expanded the scope of our original Quick-Cell business plan, which called for the
construction of Quick-Cell systems in small and medium-sized cities.  In addition to our original plan, we are
now attempting to develop working partnerships with companies who need to create or extend broadband
Internet connectivity for their customers, employees and partners.  The companies with which we seek to do
business operate in the following market segments, among others: hospitality, education, aviation, multiple
dwelling unit, planned community development, independent local exchange, utility and municipality.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>On June 14, 2002, we completed a securities purchase agreement with Evergreen Venture Partners, LLC,
whereby we issued securities for cash in the amount of $250,000 (including a $10,000 stock subscription
receivable).  We sold to Evergreen a total of 3,645,833 shares of our common stock, 3,125,000 common
stock purchase warrants to purchase a like number of shares at an exercise price of $.15 per share and
3,125,000 common stock purchase warrants to purchase a like number of shares at an exercise price of $.30
per share.  Also pursuant to this agreement, we hired a new president and chief executive officer, Douglas O.
McKinnon, who also became a director, and who received, as a signing bonus, 3,000,000 shares of our
common stock; David M. Lofin, our former president, became our Chairman of the Board, reduced the term
of his remaining term of employment from approximately 4 years to six months, waived the payment of all
accrued and unpaid salary and waived the repayment of all loans made by him to us, in consideration of
2,000,000 shares of our common stock; two of our vice presidents reduced the terms of their remaining
terms of employment from approximately 4 years to six months and one year to six months, respectively, and
waived the payment of all accrued and unpaid salary, in consideration of 2,000,000 shares of our common
stock; and our other vice president terminated his employment with us.  Also, under this agreement,
Evergreen has the right to name two persons to become directors of USURF America.  To date, Evergreen
has not named any person as a director.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>As a result of the transactions with these four officers arising out of the Evergreen agreement, we incurred a
charge against our earnings during the second quarter of 2002 of $567,180 (unaudited).</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.  The shares of our
common stock being issued under this agreement are the subject of an effective registration statement.  To
date, we have received only $395,000 under our agreement with Fusion Capital.  Fusion Capital has not
purchased the maximum shares possible under this agreement.  This lack of significant funding has impeded
our ability to expand our Quick-Cell business operations.  We will remain in this position unless and until
(1) our stock price increases significantly or (2) we secure funding from a source other than Fusion Capital,
of which there is no assurance.  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 more substantial funding, we would be able to begin to pursue our wireless
Internet business plan.  With the funds provided by the Evergreen agreement transaction, we have been able
to begin to implement our newly expanded business plan, our agreement with SunWest Communications
being the first positive result of these efforts.  We expect to have the first customer in Colorado Springs on
line during September 2002 and that our fourth quarter operating results will begin to reflect the
implementation of our agreement with SunWest.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In October 2001, we began company-owned Quick-Cell operations in Del Rio, Texas, and have agreements
with two resellers there.  We have approximately 50 customers in Del Rio, and consumer response has been
excellent.  However, our customer growth will continue to be slowed by a lack of capital.  We have also
completed engineering efforts in four other South Texas towns.  We will not begin marketing our Quick-Cell
service in these towns, until we stabilize our working capital situation.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>As the level of funding under the Fusion Capital agreement has been lower than we had earlier anticipated,
$55,000 during the first half of 2002, during 2002 we have obtained additional funds through sales of our
securities, as follows:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$57,500 (last quarter of 2001) from the sale of 575,000 shares of our common stock and a total of
1,150,000 warrants;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$30,000 from the exercise of outstanding warrants - 200,000 shares at $.15 per share;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$13,000 from the exercise of outstanding warrants - 162,500 shares at $.08 per share;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$98,000 from the exercise of options - 2,000,000 shares at $.049 per share (a 38.75% discount to the
market price on the date of exercise);</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$240,000 ($115,000 plus a subscription of $10,000 in April and $125,000 in June) from the sale of
3,645,833 shares and a total of 6,250,000 warrants, pursuant to the Evergreen transaction; and</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$66,000 from the sale of 1,135,000 shares of our common stock.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>The majority of these funds were used for operating expenses.  Approximately $100,000 of these funds has
been applied toward the expansion of our wireless Internet access business.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We will need further capital, as we continue to expand our wireless Internet access business.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>CyberHighway Bankruptcy</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In September 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.  A joint motion to dismiss the bankruptcy proceeding was unsuccessful
because some of CyberHighway&#8217;s creditors believe 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.  These 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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>The January 1999 acquisition of CyberHighway fundamentally altered our company.  Our annual revenues
went from nearly zero to about $2.5 million.  However, the involuntary bankruptcy proceeding caused the
demise of CyberHighway&#8217;s business.  CyberHighway&#8217;s company-owned dial-up customer base went from
approximately 8,500 to 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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>This sudden and permanent demise of CyberHighway&#8217;s customer base rendered our intangible assets relating
to those customers 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 decreased substantially, and, accordingly, goodwill was impaired.  The
write-down of goodwill totaled $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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Shareholder Loans - Conversion to Equity</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In August 2000, our former 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 December 31, 2001, we owed Mr. Loflin $18,521.  At June 30,
2002,  we did not owe Mr. Loflin any amount.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Results of Operations</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>General.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>By the end of February 2001, CyberHighway had lost 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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>During the first half of 2001, we derived no revenue from CyberHighway&#8217;s business.  For the first six
months of 2001 and 2002, our small amounts of revenues were dervied from our Quick-Cell wireless
Internet access operations.  We currently lack the capital necessary to pursue our complete 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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Beginning in March 2000, we began initial Quick-Cell wireless Internet access operations in Santa Fe, New
Mexico.  Throughout 2000, our customers in Santa Fe were in their one-year &#8220;free-use&#8221; period.  During
most of 2001, we did not charge our Santa Fe customers for service, due to our commencing an upgrade to
the system.  We were forced to suspend the upgrade of the system and have only a few customers remaining.
We have yet to derive significant revenue from our Santa Fe market.  In the last quarter of 2001, we began to
derive revenues from the first customers in Del Rio, Texas.  We have lacked capital with which to expand
either of these markets.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In September 2001, we began Quick-Cell operations in Del Rio, Texas.  We have approximately 50
customers online, but our growth there has been slowed significantly due to our lack of capital.  We cannot
predict the number of customers we will secure in any specific time frame, due to our lack of capital.  In Del
Rio, we have chosen to make sustained slow progress in customer acquisition, rather than to have begun full-scale marketing activities only to suspend them soon after their start due to our lack of capital.  Should we
begin to derive greater amounts of funds under the Fusion Capital agreement or from another source, of
which there is no assurance, we plan to construct additional Quick-Cell systems throughout the remainder of
2002.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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, 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 the first
six months of 2001 and 2002, we derived no significant revenues from customer modem sales to these
Quick-Cell purchasers, and we do not expect to do so during 2002.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 be incorrect.  Our Quick-Cell business will not be
able to succeed without additional capital.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our revenues for the first six months of 2001 and 2002 were significantly below those of the comparable
2000 period, since we no longer derive revenues from the operations of CyberHighway and we have lacked
capital with which to commence a full-scale implementation of our Quick-Cell business plan.  In 2002, we
will produce significant revenues only if we are able to be successful in placing Quick-Cell service
customers online, of which there is no assurance, due to the uncertainty surrounding our level of
capitalization to be derived under the Fusion Capital agreement or any other sources.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We have taken steps towards the preparation of tax returns for all years since our inception, though none has
been filed.  Because we have never earned a profit, there is no tax liability that would arise from this
circumstance.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Potential Rescission Claims.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>At December 31, 2001, 2,138,726 shares of our common stock with an aggregate assigned value of
$1,192,700 may have been issued in violation of Section 5 of the Securities Act.  Our December 31, 2001,
balance sheet reflects a Redeemable Common Stock line item with this assigned value, since each of the
issuees of these shares may have had a potential claim for rescission of their respective issuance
transactions.  None of these issuees made such a claim within the various statute of limitations periods and,
consequently, at June 30, 2002, none of our shares remained subject to potential rescission claims, which
circumstance is reflected in the Redeemable Common Stock line item of our June 30, 2002, balance sheet.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Six Months Ended June 30, 2002, versus Six
Months Ended June 30, 2001.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>During both periods, our small amounts of revenues were derived from our wireless Internet access business.
Without additional capital, our revenues will remain at these levels.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our operating results for the first six months of 2002 and 2001 are summarized in the following table:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="40%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="25%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>First Six Months of 2002
(unaudited)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="25%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>First Six Months of 2001
(unaudited)</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="40%" valign="top"><p>Revenues</p>
</td>
<td width="25%" align="center" valign="top"><p>$9,302</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="25%" align="center" valign="top"><p>$15,891</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="40%" valign="top"><p>Internet Access Costs, Cost of Goods Sold</p>
</td>
<td width="25%" align="center" valign="top"><p>(17,151)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="25%" align="center" valign="top"><p>(5,343)</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="40%" valign="top"><p>Gross Profit (Loss)</p>
</td>
<td width="25%" align="center" valign="top"><p>(7,849)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="25%" align="center" valign="top"><p>10,548</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="40%" valign="top"><p>Operating Expenses</p>
</td>
<td width="25%" align="center" valign="top"><p>1,742,866</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="25%" align="center" valign="top"><p>1,595,954</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="40%" valign="top"><p>Loss from Operations</p>
</td>
<td width="25%" align="center" valign="top"><p>(1,750,891)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="25%" align="center" valign="top"><p>(1,585,406)</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="40%" valign="top"><p>Net Loss</p>
</td>
<td width="25%" align="center" valign="top"><p>(1,750,891)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="25%" align="center" valign="top"><p>(1,585,406)</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our net loss of $1,750,891 (unaudited) for the first six months of 2002 was slightly higher than our net loss
for the 2001 period of $1,585,406 (unaudited).  Certain line items in our statements of operations changed
materially from the 2001 period to the 2002 period.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Professional fees decreased from $1,139,606 in the 2001 period to $693,057 in the 2002 period.  This
decrease is a result of our not having required professional services during the 2002 period at the levels
required during the 2001 period.  Also, during the 2002, we did not have a charge against our earnings
similar to the $248,000 amount that occurred during the 2001 period, the result of the issuance of
800,000 shares as a commitment fee under a common stock purchase agreement.  Should we continue to
lack cash reserves, it is likely that, during the remainder of 2002, we would issue shares of our common
stock in payment of certain professional fees.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>During the 2001 period, we incurred no advertising expense.  However, during the 2002 period, we
incurred advertising expenses of $68,845.  Substantially all of our advertising expenses during the
current period are attributable to the exercise of options to acquire shares of our common stock by a
consultant at a 38.75% discount to the market price on the date of exercise.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Salaries and commissions increased from $376,568 in the 2001 period to $815,163 in the 2002 period.
This increase in salaries and commissions is attributable to issuances of shares of our common stock to
our officers under their employment agreements, in connection with the Evergreen transaction, as
described in the following paragraph.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>As a result of the Evergreen transaction, we incurred a one-time charge against our earnings during the
second quarter of 2002 in the amount of $567,180 (net of forgiven accrued and unpaid salaries and unpaid
loans to certain of our officers), due to the following stock issuances:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>3,000,000 shares issued to our new president and chief executive officer as a signing bonus under his
employment agreement.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>2,000,000 shares to our former president (current Chairman of the Board) in consideration of his
agreeing to reduce the term of his employment agreement, waive the payment of accrued salary and
waive the repayment of unpaid loans made by him to us.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>2,000,000 shares to one of our vice presidents in consideration of his agreeing to reduce the term of his
employment agreement and waive the payment of accrued salary.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>2,000,000 shares to our vice president of corporate development in consideration of his agreeing to
reduce the term of his employment agreement and waive the payment of accrued salary.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We expect that our results of operations for the third quarter of 2002 will be similar to those of the first two
quarters of 2002.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Due to our severe lack of capital during the 2001 and 2002 periods, we issued 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 shares of our common 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>during the first six months of 2001, we issued 630,000 shares of our common stock under consulting
agreements; these shares were valued for financial accounting purposes at approximately $300,000, in
the aggregate.  This amount was expensed in monthly amounts during 2001.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>during the first six months of 2002, we issued 4,170,000 shares of our common stock under consulting
agreements and in payment of professional fees; these shares were valued for financial accounting
purposes at approximately $610,000, in the aggregate.  This amount is being expensed in equal monthly
amounts over periods ranging from one month to one year.  Nearly all of this total amount will be
expensed during 2002.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Year Ended December 31, 2001, versus Year
Ended December 31, 2000.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>During 2000, 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 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.
During 2001, our small amount of revenues were derived from our Quick-Cell wireless Internet access
operations.  We charged residential customers $50 and business customers $100 in monthly Internet access
fees.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Due to the demise of CyberHighway, our revenues for 2001 were significantly below our revenue levels of
2000.  Due to the uncertainty of our obtaining additional capital, we cannot predict our revenues for all of
2002.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our operating results for 2001 and 2000 are summarized in the following table:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="24%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2001</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="24%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2000</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Revenues</p>
</td>
<td width="24%" align="center" valign="top"><p>$7,446</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>$1,872,629</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Internet Access Costs, Cost of Goods Sold</p>
</td>
<td width="24%" align="center" valign="top"><p>109,525</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>2,145,955</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Gross Profit (Loss)</p>
</td>
<td width="24%" align="center" valign="top"><p>(102,079)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>(273,326)</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Operating Expenses</p>
</td>
<td width="24%" align="center" valign="top"><p>2,852,110</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>14,975,583</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Loss from Operations</p>
</td>
<td width="24%" align="center" valign="top"><p>(2,954,189)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>(15,248,909)</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Other Income (Expense)</p>
</td>
<td width="24%" align="center" valign="top"><p>(34,184)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>(9,193,281)</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Extraordinary Items</p>
</td>
<td width="24%" align="center" valign="top"><p>489,905</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>961,436</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Income Tax Benefit</p>
</td>
<td width="24%" align="center" valign="top"><p>0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>1,595,424</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="42%" valign="top"><p>Net Loss</p>
</td>
<td width="24%" align="center" valign="top"><p>(2,498,468)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>(21,855,330)</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In general, our 2001 statement of operations reflects the demise of the business of CyberHighway.  It also
reflects a $97,526 charge against our earnings, which is attributable to a write-down of the value of certain
inventory items.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In 2001, we recorded a gain on debt forgiveness of $489,905, which arose from a reduction in the liabilities
of CyberHighway, pursuant to the bankruptcy proceedings.  At December 31, 2001, our balance sheet
included $953,561 in &#8220;permitted claims&#8221; against CyberHighway, the total claims submitted by creditors of
CyberHighway during 2001, including the statutory notification period.  This notification period began on
December 6, 2001, and ended on March 6, 2002.  The $489,905 reduction in CyberHighway&#8217;s liabilities
from 2000 to 2001 is reflected in our consolidated statements of operations as an extraordinary item.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our 2000 statement of operations reflects the following significant charges against our earnings:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" valign="top"><p style="text-align: right">-</p>
</td>
<td width="92%" valign="top"><p>each of the following amounts relates to the demise of the business of CyberHighway:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="12%" align="right" valign="top"><p>-</p>
</td>
<td width="88%" valign="top"><p>$4,814,272 - amount of intangible assets written off attributable to acquired customers bases, net of
deferred taxes; and</p>
</td>
</tr>
<tr>
<td width="12%" align="right" valign="top"><p>-</p>
</td>
<td width="88%" valign="top"><p>$4,425,037 - amount of intangible assets written off attributable to goodwill.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" valign="top"><p style="text-align: right">-</p>
</td>
<td width="92%" valign="top"><p>$875,000 - 750,000 shares of our common stock were issued to three vice presidents, 250,000 shares as
an employment agreement signing bonus valued at $3.00 per share and 500,000 shares as employment
bonuses valued at $125,000 - this expense is included in the &#8220;Salary and Commissions&#8221; statement of
operations line item.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Certain statements of operations line items changed significantly from 2000 to 2001.  These changes are
summarized below:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Revenues and Internet Access Costs, Cost of Goods Sold - our revenues decreased from $1,872,629 in
2000 to $7,446 in 2001.  This decrease is due to the demise of the business of CyberHighway.
Likewise, our substantially reduced internet access costs and cost of goods sold is attributable to the
demise of the business of CyberHighway.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Inventory Write-down - as we determined that certain items of our inventory had become impaired, we
recorded a write-down of these items of inventory in the amount of $97,526.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Amortization - the large reduction in this line item from 2000 to 2001 is due to the write-down of all
intangible assets associated with CyberHighway caused by the demise of the business of
CyberHighway.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Professional Fees - the reduced total of professional fees, $1,803,751 in 2001 compared to $4,168,610
in 2000, is due to the lower market price of our stock, inasmuch as substantially all of our professional
fees were paid by issuing shares of stock.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Rent - our substantially reduced rent expense for 2001 is attributable to the demise of the business of
CyberHighway and the abandonment of the CyberHighway facilities in Boise, Idaho.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Salaries and Commissions - our salaries and commissions were substantially reduced from 2000 to 2001
due to the dramatic reduction in staff caused by the demise of the business of CyberHighway.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Due to our severe lack of capital during 2000 and 2001, 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>&#160;-</p>
</td>
<td width="92%" valign="top"><p>in 2001, we issued 3,539,500 shares of our common stock under consulting agreements; these shares
were valued for financial accounting purposes at $892,360, in the aggregate.  This amount was
expensed in equal monthly amounts over periods based on the terms of the consulting agreements.
Nearly all of this total amount was expensed during 2001.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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 was
expensed in equal monthly amounts over periods ranging from four months to one year.  Nearly all of
this total amount was expensed during 2000.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our net loss for 2001 is attributable to several large non-standard items:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$97,526 is attributable to a write-down of the value of certain inventory items;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$1,803,751 in professional fees, substantially all of which is attributable to stock issuances under
various consulting agreements;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$856,124 in salary and commissions was expensed, $303,947 of which was paid or is payable in shares
of our common stock; and</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Offsetting a portion of our net loss was a $489,905 &#8220;Gain on debt forgiveness&#8221;, which is the result of a
reduction of CyberHighway liabilities determined pursuant to the CyberHighway bankruptcy
proceeding.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our net loss for 2000 is attributable to several large non-standard items:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>the depreciation and amortization of acquired customer bases, goodwill and other intangibles of
$7,618,755;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$4,168,610 in professional fees, substantially all of which is attributable to stock issuances under
various consulting agreements;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$2,060,528 in salary and commissions was expensed, $875,000 of which is the result of stock bonuses
to three officers; and</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In October 2000, the prior acquisition of Net 1, Inc. was rescinded.  Included in the 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 rescission 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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>For 2000, our statement of operations reflects an income tax benefit of $1,595,424, 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 does not contain a similar tax benefit.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Wireless Cable Segment.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Liquidity and Capital Resources</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>General.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Since our inception, we have had a significant working capital deficit.  Currently, we are substantially
illiquid, although we do possess enough cash to continue our current level of business activities, through the
result of recent securities sales.  As the level of funding under the Fusion Capital agreement has been lower
than we had earlier anticipated, $55,000 during the first half of 2002, during 2002, we have obtained
additional funds through sales of our securities, as follows:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$57,500 (last quarter of 2001) from the sale of 575,000 shares of our common stock and a total of
1,150,000 warrants;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$30,000 from the exercise of outstanding warrants - 200,000 shares at $.15 per share;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$13,000 from the exercise of outstanding warrants - 162,500 shares at $.08 per share;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$98,000 from the exercise of options - 2,000,000 shares at $.049 per share (a 38.75% discount to the
market price on the date of exercise);</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$240,000 ($115,000 plus a subscription of $10,000 in April and $125,000 in June) from the sale of
3,645,833 shares and a total of 6,250,000 warrants, pursuant to the Evergreen transaction; and</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$66,000 from the sale of 1,135,000 shares of our common stock.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>The majority of these funds were used for operating expenses.  Approximately $100,000 of these funds has
been applied toward the expansion of our wireless Internet access business.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We will need further capital, as we continue to expand our wireless Internet access business.  It is possible
that we will not be able to secure adequate capital as we need it.  Also, without additional capital, it is
possible that we would be forced to cease operations.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In July 2002, we became aware of an existing default judgment against us, dated June 7, 2001, in the
approximate amount of $22,000.  The lawsuit went unchallenged as a result of administrative error.  We
intend to seek to set aside this judgment, as we have a valid defense to the underlying claims.  However, we
cannot predict the outcome of our efforts in this regard.  Should we fail to set aside this judgment, we will be
required to pay this judgment amount.  In August 2002, an arbitrator ruled against us in an arbitration
proceeding against our former chief financial officer, in the amount of $75,000.  It is likely that we will be
required to pay this amount; however, the terms of this payment have not yet been determined.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Our Capital Needs.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 $1.2 million.  If we are unable to obtain this needed capital, we could be forced to cease our operations.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>A single Quick-Cell cell site, including a Quick-Cell server modem, parts and configuration - projected
average cost: $25,000;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Tower lease site - projected average cost: $500 per month;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Direct T1 telephone line connection to the Internet - projected average cost: $2,000 per month; and</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Initial inventory of customer modems - approximate cost: $70,000.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>However, in Del Rio, due to our lack of large sums of capital, we were able to re-design our Quick-Cell
system to achieve significant cost savings and built the first portion of that system, which included two
server cells - the original plan having called for one server cell - for approximately $18,000, and we have
added a third server cell to this system, in response to consumer demand.  However, we continue to lack
capital with which to market our Quick-Cell service aggressively.  Rather, in Del Rio, we have chosen to
make sustained slow progress in customer acquisition, rather than to have begun full-scale marketing
activities only to suspend them soon after their start due to our lack of capital.  Should we begin to derive
greater amounts of funds under the Fusion Capital agreement, of which there is no assurance, we plan to
construct additional Quick-Cell systems throughout 2002.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>If and when we begin to obtain the maximum amount of funds available pursuant to the Fusion Capital
agreement, we expect, then, to 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 or that we will ever possess adequate capital with which to engage in this level of
activities.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 30 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Proceeds from the Fusion Capital Agreement.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Beginning in July 2001, we began to receive the first funds of up to $10 million under our agreement with
Fusion Capital.  Since then, we have received only $395,000 in payment of a total of 3,100,000 shares under
this agreement.  Fusion Capital has not purchased the maximum funding amount possible under this
agreement.  This lack of significant funding has impeded our ability to expand our Quick-Cell business
operations.  We will remain in this position unless and until (1) our stock price increases significantly or (2)
we secure funding from a source other than Fusion Capital, of which there is no assurance.  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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>Purchase of Quick-Cell Equipment</p>
</td>
<td width="13%" align="right" valign="top"><p>$6,000,000</p>
</td>
<td width="26%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>Construction of Quick-Cell Systems</p>
</td>
<td width="13%" align="right" valign="top"><p>1,300,000</p>
</td>
<td width="26%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>Marketing</p>
</td>
<td width="13%" align="right" valign="top"><p>1,000,000</p>
</td>
<td width="26%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>General and Administrative Expenses</p>
</td>
<td width="13%" align="right" valign="top"><p>200,000</p>
</td>
<td width="26%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>Finder&#8217;s Fee</p>
</td>
<td width="13%" align="right" valign="top"><p>800,000</p>
</td>
<td width="26%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p>Working Capital</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="right" valign="top"><p>700,000</p>
</td>
<td width="26%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="46%" valign="top"><p style="text-align: center">Total</p>
</td>
<td width="13%" style="border-bottom: 0.01in double" align="right" valign="top"><p style="text-align: right">$10,000,000</p>
</td>
<td width="26%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.  Currently, we are in
compliance with these criteria and expect to remain in compliance for the foreseeable future. </p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 $3,863,487.
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.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Potential Rescission Claims.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>At December 31, 2001, 2,138,726 shares of our common stock with an aggregate assigned value of
$1,192,700 may have been issued in violation of Section 5 of the Securities Act.  Our December 31, 2001,
balance sheet reflects a Redeemable Common Stock line item with this assigned value, since each of the
issuees of these shares may have had a potential claim for rescission of their respective issuance
transactions.  None of these issuees made such a claim within the various statute of limitations periods and,
consequently, at June 30, 2002, none of our shares remained subject to potential rescission claims, which
circumstance is reflected in the Redeemable Common Stock line item of our June 30, 2002, balance sheet.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>June 30, 2002.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Historically, we have had a significant working capital deficit.  At June 30, 2002, our working capital deficit
was $1,001,299 (unaudited) which is only slightly lower than our $1,254,897 deficit at December 31, 2001.
Our receipt of funds through sales of our securities during the first six months of 2002 permitted us to
improve moderately our working capital deficit by the end of the period.  Approximately 85% of our
accounts payable are accounts payable of CyberHighway and are subject to the pending Chapter 7
bankruptcy proceeding of CyberHighway.  Without additional capital, our working capital deficit can be
expected to become larger each quarter.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>The following table sets forth our current assets and current liabilities at June 30, 2002, and December 31,
2001:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="31%" valign="top"><p>&#160;</p>
</td>
<td width="20%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>June 30, 2002
(unaudited)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>December 31, 2001
(audited)</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>Current Assets</p>
</td>
<td width="31%" valign="top"><p>Cash</p>
</td>
<td width="20%" align="center" valign="top"><p>$71,409</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>$10</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" style="border-bottom: 0.01in solid" valign="top"><p>&#160;</p>
</td>
<td width="31%" style="border-bottom: 0.01in solid" valign="top"><p>Inventory</p>
</td>
<td width="20%" align="center" valign="top"><p>99,057</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>134,756</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>Current Liabilities</p>
</td>
<td width="31%" valign="top"><p>Disbursements in Excess of
Cash Balances</p>
</td>
<td width="20%" align="center" valign="top"><p>$0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>$15,539</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="31%" valign="top"><p>Accounts Payable</p>
</td>
<td width="20%" align="center" valign="top"><p>1,016,635</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>1,034,619</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="31%" valign="top"><p>Accrued Payroll</p>
</td>
<td width="20%" align="center" valign="top"><p>20,734</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>265,978</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="31%" valign="top"><p>Other Current Liabilities</p>
</td>
<td width="20%" align="center" valign="top"><p>134,396</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>54,996</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="31%" valign="top"><p>Notes Payable to Stockholder</p>
</td>
<td width="20%" align="center" valign="top"><p>0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>18,521</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our accrued payroll at June 30, 2002, as well as at December 31, 2001, is attributable to accrued salary of
our officers.  In connection with the Evergreen transaction described above, three of our officers waived
payment of all of their accrued salaries through April 15, 2002, in the approximate amount of $225,000,
which is reflected on our June 30, 2002, balance sheet.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We reduced our note payable to stockholder during the first quarter of 2002 by $18,521, and owed this
shareholder no amount at June 30, 2002.  We do not expect that we will again borrow funds from this
shareholder.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>As the level of funding under the Fusion Capital agreement has been lower than we had earlier anticipated,
$55,000 during the first half of 2002, during 2002, we have obtained additional funds through sales of our
securities, as follows:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$57,500 (last quarter of 2001) from the sale of 575,000 shares of our common stock and a total of
1,150,000 warrants;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$30,000 from the exercise of outstanding warrants - 200,000 shares at $.15 per share;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$13,000 from the exercise of outstanding warrants - 162,500 shares at $.08 per share;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$98,000 from the exercise of options - 2,000,000 shares at $.049 per share (a 38.75% discount to the
market price on the date of exercise);</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$240,000 ($115,000 plus a subscription of $10,000 in April and $125,000 in June) from the sale of
3,645,833 shares and a total of 6,250,000 warrants, pursuant to the Evergreen transaction; and</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>$66,000 from the sale of 1,135,000 shares of our common stock.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>The majority of these funds were used for operating expenses.  Approximately $100,000 of these funds has
been applied toward the expansion of our wireless Internet access business.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Without obtaining at least $1,200,000 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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>If we are unable to obtain significant additional capital, it is possible that we would be forced to cease
operations.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Cash Flows from Operating Activities.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>During the first half of 2002, our operations used $344,180 (unaudited) in cash compared to cash used of
$330,185 (unaudited) during the first half of 2001.  In both periods, the use of cash in operations was a
direct result of the lack of revenues compared to our operating expenses, particularly salaries and
commissions in 2001 and greater business development activities in 2002.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Cash Flows from Investing Activities.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our investing activities neither provided nor used cash in the first half of 2002 and used $1,600 in cash
during the first half of 2001.  Because we lack working capital, we cannot predict our cash flows from
investing activities for the remainder of 2002.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Cash Flows from Financing Activities.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>For the first half of 2002, our financing activities provided $415,579 (unaudited) in cash.  Our payments on
notes payable to stockholder of $18,521 and $4,900 in finder&#8217;s fees were offset by payments received on
subscriptions receivable of $237,000, $189,000 in cash from sales of our common stock and $13,000 in cash
obtained by the exercise of certain warrants.  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.  We continue to seek capital and cannot, therefore, predict future
levels of cash flows from financing activities.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>December 31, 2001.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>At December 31, 2001, our working capital deficit was $1,254,897, which is less than our deficit at
December 31, 2000, of  $1,517,164.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>The following table sets forth our current assets and current liabilities at December 31, 2001 and 2000:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="32%" valign="top"><p>&#160;</p>
</td>
<td width="19%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2001</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2000</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>Current Assets</p>
</td>
<td width="32%" valign="top"><p>Cash</p>
</td>
<td width="19%" align="center" valign="top"><p>$10</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>$1,088</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" style="border-bottom: 0.01in solid" valign="top"><p>&#160;</p>
</td>
<td width="32%" style="border-bottom: 0.01in solid" valign="top"><p>Inventory</p>
</td>
<td width="19%" align="center" valign="top"><p>134,756</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>246,721</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>Current Liabilities</p>
</td>
<td width="32%" valign="top"><p>Disbursements in Excess of Cash
Balances</p>
</td>
<td width="19%" align="center" valign="top"><p>$15,539</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>42,469</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="32%" valign="top"><p>Accounts Payable</p>
</td>
<td width="19%" align="center" valign="top"><p>1,034,619</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>1,472,030</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="32%" valign="top"><p>Accrued Payroll</p>
</td>
<td width="19%" align="center" valign="top"><p>265,978</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>158,262</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="32%" valign="top"><p>Other Current Liabilities</p>
</td>
<td width="19%" align="center" valign="top"><p>54,996</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>41,824</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="32%" valign="top"><p>Property Dividends Payable</p>
</td>
<td width="19%" align="center" valign="top"><p>0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>43,750</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="32%" valign="top"><p>Notes Payable to Stockholder</p>
</td>
<td width="19%" align="center" valign="top"><p>18,521</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>6,638</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Certain balance sheet line items changed significantly from 2000 to 2001.  These changes are summarized
below:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Accounts Payable - our accounts payable decreased to $1,034,619 from $1,472,030 in 2000.  This
decrease is due to a final determination in the CyberHighway bankruptcy proceeding of allowed claims,
which claims were $489,905 less than the amount recorded for 2000.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Subscriptions Receivable - the 2001 amount of $165,750 arises from the fact that shares issuable as of
December 31, 2001, were not, in fact, issued until January 2002; the 2000 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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Stockholders&#8217; Equity (Deficit) - at December 31, 2001, we had a stockholders&#8217; deficit of $2,352,825; at
December 31, 2000, we had a stockholders&#8217; deficit of $4,678,209.  This improvement is due to (1) the
value of shares no longer subject to potential rescission claims being moved from &#8220;Redeemable
Common Stock&#8221; and restored to &#8220;Stockholders&#8217; Equity&#8221; and (2) the reduction in liabilities of
CyberHighway, as determined pursuant to the CyberHighway bankruptcy proceeding.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Without obtaining at least $1,200,000 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 to ever earn a profit.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our accrued payroll at December 31, 2001, as well as at December 31, 2000, is primarily attributable to
accrued salary of our president and two of our vice presidents.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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, 2001, we owed Mr. Loflin $18,521.  All sums owed to Mr. Loflin were payable on
demand, with interest accruing at 8% per annum.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>During 2001, we obtained funds from private sales of our securities in the total amount of $359,750.  In
these transactions, we issued a total of 1,545,000 shares of our common stock and 3,318,000 common stock
purchase warrants.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>If we are unable to obtain significant additional capital, it is possible that we would be forced to cease
operations.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Cash Flows from Operating Activities.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>During the year ended December 31, 2001, our operations used $707,569 in cash compared to cash used of
$953,112 during 2000.  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 in
2000.  The demise of the business of CyberHighway 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 became apparent in our financial statements for 2001.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Cash Flows from Investing Activities.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>During the year ended December 31, 2001, our investing activities used cash of $12,681 compared to
$85,150 in 2000.  During 2000, in our investing activities, purchases of equipment used cash.  We purchased
a small amount of equipment during 2001.  Because we lack working capital, we cannot predict our cash
flows from investing activities for 2002.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Cash Flows from Financing Activities.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>For 2001, our financing activities provided $719,172 in cash, primarily from sales of securities, including
receipt of subscriptions receivable of $359,750 and receipt of cash on sales of securities of $340,000.  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.  We continue to seek capital and
cannot, therefore, predict future levels of cash flows from financing activities.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Non-Cash Investing and Financing Activities.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>During the year ended December 31, 2001, we issued a total of 3,539,500 shares of common stock under
consulting agreements; these shares have been valued at $892,360 in the aggregate.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In December 2001, we awarded 200,000 shares of our common stock as a bonus to one of our vice
presidents, which were valued at $.09 per share, the last closing price of our common stock prior to the
award, a value of $18,000.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Management&#8217;s Plans Relating to Future Liquidity</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>To sustain our current level of operations for the next twelve months, we will require additional capital of
approximately $300,000.  Our recent securities purchase agreement with Evergreen will provide a significant
portion of this capital requirement.  To accomplish our goals of expanding our Quick-Cell business, we will
require at least $1.2 million.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our best opportunity for obtaining needed funds is pursuant to the Fusion Capital agreement.  However, to
date, we have received only $395,000 under our agreement with Fusion Capital.  Fusion Capital has not
purchased the maximum shares possible under this agreement.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 $.05 per share, the
closing sale price of the common stock on October 15, 2002, and the purchase by Fusion Capital of the full
amount of shares purchasable under the Fusion Capital agreement, total proceeds to us would only be
approximately $600,000, unless we choose to issue more than 6,000,000 shares, which we have the right to
do.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Should we obtain at least $1.2 million under the Fusion Capital agreement, we believe that we will be able to
have accomplished our primary objectives:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>entering into several working partnerships with companies who need to create or extend broadband
Internet connectivity for their customers, employees and partners;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>placing at least 10,000 customers on our Quick-Cell systems during the next year; and</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>proving the commercial viability of our Quick-Cell wireless Internet access service.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We cannot assure you that we will accomplish these objectives.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Currently, we have no other sources for funding on the scale contemplated by the Fusion Capital transaction.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>If we do not obtain the necessary funding, we would be forced to cease operations.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Capital Expenditures</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>During the first six months of 2002, we made few capital expenditures and we currently have no capital with
which to make any significant capital expenditures.  Should we obtain significant funding, of which there is
no assurance, we would be able to make major expenditures on Quick-Cell-related equipment.  However,
without additional capital, we will make no capital expenditures.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>REGULATION</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Quick-Cell Wireless Internet Access.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Regulation of Internet Access Services.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Regulation of the Internet.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>BUSINESS</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>History</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.  We now focus on the exploitation of our Quick-Cell wireless Internet access products.  In
furtherance of this plan, we assigned all of our community (low power) television properties to New Wave
Media Corp.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Current Overview</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our new president has expanded the scope of our original Quick-Cell business plan, which called for the
construction of Quick-Cell systems in small and medium-sized cities.  In addition to our original plan, we are
now attempting to develop working partnerships with companies who need to create or extend broadband
Internet connectivity for their customers, employees and partners.  The companies with which we seek to do
business operate in the following market segments, among others: hospitality, education, aviation, multiple
dwelling unit, planned community development, independent local exchange, utility and municipality.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our dial-up Internet access business has lost all of its customers and, for the foreseeable future, we have
abandoned development of our e-commerce business.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Recent Developments</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>On June 14, 2002, we completed a securities purchase agreement with Evergreen Venture Partners, LLC,
whereby we issued  securities for cash in the amount of $250,000 (including a $10,000 stock subscription
receivable).   We sold  Evergreen a total of 3,645,833 shares of our common stock,  3,125,000 common
stock purchase warrants to purchase a like number of shares at an exercise price of $.15 per share and
3,125,000 common stock purchase warrants to purchase a like number of shares at an exercise price of $.30
per share.  Also pursuant to this agreement, we hired a new president and chief executive officer, Douglas O.
McKinnon, who also became a director, and who received, as a signing bonus, 3,000,000 shares of our
common stock; David M. Lofin, our former president, became our Chairman of the Board, reduced the term
of his remaining term of employment from approximately 4 years to six months, waived the payment of all
accrued and unpaid salary and waived the repayment of all loans made by him to us, in consideration of
2,000,000 shares of our common stock; two of our vice presidents reduced the terms of their remaining
terms of employment from approximately 4 years to six months and one year to six months, respectively, and
waived the payment of all accrued and unpaid salary, in consideration of 2,000,000 shares of our common
stock; and our other vice president terminated his employment with us.  Also, under this agreement,
Evergreen has the right to name two persons to become directors of USURF America.  To date, Evergreen
has not named any person as a director.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In May 2002, we entered into an Internet services provision agreement with SunWest Communications, Inc.,
a Colorado Springs, Colorado-based competitive local telephone company with approximately 6,000
customers.  Under our agreement with SunWest, together with SunWest, we will market our Quick-Cell
wireless Internet access service to SunWest&#8217;s customers, as well as throughout the Greater Colorado Springs
area.  With Sunwest, we have completed the construction of our first Quick-Cell system in Colorado
Springs, one that provides service to a 310-unit apartment complex.  This system is in final testing and is
expected to be fully operational in the very near future.  We expect that our fourth quarter operating results
will begin to reflect the implementation of this agreement.  This agreement with SunWest represents the type
of agreements that our new president is attempting to secure, as a means of accelerating the growth of our
customer base.  There is no assurance, however, that we will be successful in this regard.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In September 2002, we reached agreements to acquire two Colorado Springs, Colorado-based private
companies, as follows: (1) we signed a letter of intent to acquire High Plains Internet, Inc., a small Internet
service provider, for shares of our stock, and we expect to enter into a definitive acquisition agreement in the
near future; and (2) we sign a definitive agreement to acquire NeighborLync, Inc., a start-up company
specializing in providing video and data services to Multiple Dwelling Unit (MDU) properties, for
1,000,000 shares of our common stock; we expect that a closing under this agreement will occur by the end
of October 2002.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In September 2001, we began Quick-Cell operations in Del Rio, Texas, and have agreements with two
resellers there.  We have approximately 50 customers online, but our growth there has been slowed
significantly due to our lack of capital.  We cannot predict the number of customers we will secure in any
specific time frame, due to our lack of capital.  In Del Rio, we have chosen to make sustained slow progress
in customer acquisition, rather than to have begun full-scale marketing activities only to suspend them soon
after their start due to our lack of capital.  With the funds derived from the Evergreen agreement and, should
we begin to derive greater funds under our agreement with Fusion Capital (described below), of which there
is no assurance, we plan to construct additional Quick-Cell systems during the remainder of 2002.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We have also completed engineering efforts in four other South Texas towns, but will not begin marketing
our Quick-Cell service in these towns until we stabilize our working capital situation.  We cannot predict our
future capital position.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.  CyberHighway&#8217;s bankruptcy proceeding was not dismissed upon
such a motion, because some of CyberHighway&#8217;s creditors believe 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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Due primarily to the involuntary bankruptcy proceeding, CyberHighway lost all of its customers.  We do not
expect that CyberHighway will resume operations.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>On May 9, 2001, we executed a 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.  We have not obtained
the maximum funding amount possible under this agreement.   To date, we had received only $395,000
under our agreement with Fusion Capital.  Fusion Capital has not purchased the maximum shares possible
under this agreement, which has significantly impeded our ability to expand our Quick-Cell business
operations..  We will remain in this position unless and until our stock price increases significantly or we
secure funding from a source other than Fusion Capital, of which there is no assurance.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>The Fusion Capital Transaction</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>General.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Purchase of Shares Under the Fusion Capital
Agreement.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>the lowest sale price of our common stock on the purchase date; or</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="15%" style="border-bottom: none" align="center" valign="top"><p>Assumed Per</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" style="border-bottom: none" align="center" valign="top"><p>Total Shares Issuable Upon</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: none" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" style="border-bottom: none" align="center" valign="top"><p>Percent of Our Common Stock </p>
</td>
</tr>
<tr>
<td width="15%" style="border-top: none" align="center" valign="top"><p>Share</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" style="border-top: none" align="center" valign="top"><p>Purchase of Remaining Shares</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-top: none" align="center" valign="top"><p>Gross</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" style="border-top: none" align="center" valign="top"><p>Outstanding After Giving Effect</p>
</td>
</tr>
<tr>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Purchase Price</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Under Fusion Capital Agreement</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Proceeds</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>to the Issuance to Fusion Capital</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>$..04</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" align="center" valign="top"><p>6,000,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$500,000(2)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" align="center" valign="top"><p>11.81%</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>$.05(1)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" align="center" valign="top"><p>6,000,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$600,000(2)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" align="center" valign="top"><p>11.81%</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>$1.50</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" align="center" valign="top"><p>6,000,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$4,500,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" align="center" valign="top"><p>11.81%</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>$2.00</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" align="center" valign="top"><p>6,000,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$6,500,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" align="center" valign="top"><p>11.81%</p>
</td>
</tr>
<tr>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$5.00</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" align="center" valign="top"><p>4,500,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$10,000,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" align="center" valign="top"><p>8.86%</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>(1) Closing price on October 15, 2002, as reported by AMEX.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>(2) Estimate.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>To date, under the Fusion Capital agreement, we had received only $395,000 in purchase of a total of
3,140,135 shares.  This does not represent the maximum amount of funds under the Fusion Capital
agreement, and has significantly impeded our ability to expand our Quick-Cell business operations.  We may
never realize the maximum amount of proceeds under the Fusion Capital agreement.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.  Given the current and sustained depressed price
for our common stock, it appears unlikely that we will obtain $10 million under the Fusion Capital
agreement, although we cannot predict the ultimate amount that we will obtain under that agreement.
However, should our stock price remain at or near its current level, we would be able to obtain only
approximately $600,000, unless we choose to issue more than 6,000,000 shares, which we have the right to
do.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Our Right to Suspend Purchases.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.  Currently, we are not selling shares to Fusion Capital, due to the depressed market price of
our common stock.  In the future, should we require cash proceeds from 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Our Right to Increase and Decrease the Daily
Purchase Amount.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>To date, we have not obtained the maximum amount of funds under the Fusion Capital agreement, which has
significantly impeded our ability to expand our Quick-Cell business operations.  We may never realize the
maximum amount of proceeds under the Fusion Capital agreement.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Our Termination Rights.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Effect of Performance of the Fusion Capital
Agreement on our Shareholders.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>All shares issued to Fusion Capital have been registered for resale and will be freely tradable. It is
anticipated that these shares will be sold over a period of up to 25 months from July 2001. 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. 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>No Short-Selling or Hedging by Fusion Capital.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Events of Default.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>if for any legal reason the shares purchased cannot be sold 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 width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>(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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>a default of any payment obligation of USURF America in excess of $1.0 million; or</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>commencement of insolvency or bankruptcy proceedings by or against USURF America.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Shares and Warrants Issued to Fusion Capital.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 July 2001. 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>No Variable-Priced Financings.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Holdings of Fusion Capital Upon Termination of
the Offering.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Because Fusion Capital may sell all, some or none of the common stock issued to it, 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Registration Rights Agreement.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.  We are currently in
compliance with this provision.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Finder&#8217;s Fee.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In addition to the shares and warrants to be issued to Gruntal &amp; Co., we are 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Industry Background</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Growth of the Internet; the World Wide Web.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Internet Access.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 previously 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Wireless Internet Access</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>What is Wireless Internet?</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>&#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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>What is Quick-Cell?</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>&#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 $2,000, depending on the market.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>The number of Quick-Cell server modems needed for a particular system depends on a few factors:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>the geographic size of the city to be served - each server modem&#8217;s signal covers an area approximately
seven miles in diameter;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>the population density of the city to be served - 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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>the terrain of the city to be served - the hillier the terrain, the greater the number of server modems
required; and</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>&#160;the density of foliage of the city to be served - more densely foliated areas require a greater number of
server modems.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Quick-Cell Equipment and Facilities.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.  With these
changes, our future modem cost will be approximately $180 per modem.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 renegotiated our prior tower lease arrangement
with SBA Communications Corporation, a Boca Raton, Florida-based tower company, reducing the number
of single tower leases from 23 to three, two towers in Del Rio and one tower in Santa Fe.  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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In each market, we will obtain the necessary 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Quick-Cell System Control Software.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Current Markets.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We recently completed the construction of our first Quick-Cell system in Colorado Springs, Colorado, one
that provides service to a 310-unit apartment complex.  This system is in final testing and is expected to fully
operational by the end of September 2002.  This location of this system was secured as a result of our
business partner arrangement with SunWest Communciations.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In September 2001, we began company-owned Quick-Cell operations in Del Rio, Texas, and have
agreements with two resellers there.  We have approximately 50 customers in Del Rio and customer
response has been excellent, but our growth has been slowed significantly by a lack of capital.  In Del Rio,
we have chosen to make sustained slow progress in customer acquisition, rather than to have begun full-scale marketing activities only to suspend them soon after their start due to our lack of capital.  In Del Rio,
we charge residential customers $50 per month and business customers $100 per month for our Quick-Cell
service.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We have also completed engineering efforts in four other South Texas towns, but will not begin marketing
our Quick-Cell service in these towns, until we stabilize our working capital situation.  We cannot predict
our future capital position.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We also have a Quick-Cell system in Santa Fe, New Mexico.  Because we have been unable to complete a
system upgrade there, our customer base diminished from approximately 120 customers to a few that remain.
We expect that, if and when capital becomes available, we will complete the system upgrade and begin to
increase our customer base there.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Quick-Cell Marketing Strategies.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In May 2002, we announced that we have entered into an Internet services provision agreement with
SunWest Communications, Inc., a Colorado Springs, Colorado-based competitive local telephone company
with approximately 6,000 customers.  Under our agreement with SunWest, together with SunWest, we will
market our Quick-Cell wireless Internet access service to SunWest&#8217;s customers, as well as throughout the
Greater Colorado Springs area.  With Sunwest, we have completed the construction of our first Quick-Cell
system in Colorado Springs, one that provides service to a 310-unit apartment complex.  This system is in
final testing and is expected to be fully operational by the end of September 2002.  We expect that our fourth
quarter operating results will begin to reflect the implementation of this agreement.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>The SunWest agreement represents the type of agreements that our new president is attempting to secure, as
a means of accelerating the growth of our customer base.  We have reached a similar agreement with High
Plains Internet, a Colorado Springs-based Internet service provider and are actively pursuing similar
agreements with many other firms.  There is no assurance, however, that we will be successful in this regard.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Quick-Cell Sales and Marketing.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Without additional capital, we will not be able to construct another company-owned Quick-Cell system.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Reseller Agreements.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In April 2001, we entered into a Quick-Cell reseller agreement with Wireless WebConnect!, Inc., a Florida-based wireless Internet access reseller.   Our reseller agreement with WebConnect is for an initial term of 10
years.   However, due to issues within WebConnect that were beyond our control, to date, we have not
derived any benefit from this agreement.  It is possible that the terms of our agreement with WebConnect
might be amended in the future, but we cannot predict if or when such an amendment would occur or
whether we will ever derive any benefit from this agreement.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We have entered into reseller agreements with two entities in Del Rio, Texas.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Currently, our Del Rio resellers&#8217; sales efforts have been impeded significantly by our inability to obtain
needed equipment, including customer modems, due to our severe lack of capital, or ability to hire and train
qualified installation crews.  We may never be able to take full advantage of our resellers&#8217; abilities, thereby
limiting potential profits.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Competitive Features of Quick-Cell.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>While we believe Quick-Cell possesses some competitive advantages over other Internet access modes, it
currently has three significant competitive disadvantages:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>No wide-spread brand name recognition;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Professional installation usually required; and</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Internet access only available locally, compared to dial-up Internet access that is available from virtually
any telephone in any geographic location.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We believe Quick-Cell offers the following competitive advantages:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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 data transmission
remains within the Quick-Cell system&#8217;s coverage area.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Dial-up Internet Access</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.  By
the end of February 2001, we had lost all of our dial-up customers.  This rapid demise of CyberHighway&#8217;s
business was due primarily to three factors:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>In September 2000, we sold our affiliate-ISP business, due to its lack of profitability;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>In September 2000, an involuntary bankruptcy petition was filed against CyberHighway - we estimate
that we lost at least 6,000 customers due to this event; and</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Our November 2000 switch-over to a contracted Internet service company&#8217;s network - we estimate that
we lost at least 2,000 customers to due to this event.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We do not intend to commit any resources towards the revitalization of the business of CyberHighway.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Customers and Markets.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We have lost all of our dial-up Internet access customers.  We do not expect that we will ever reclaim any
dial-up customers.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Sales and Marketing.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>CyberHighway has ceased all sales and marketing activities.  We do not expect that these activities will be
resumed.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Affiliate-ISP Program.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Customer Service and Support</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Competition</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We face severe competition from other wireless Internet access providers, as well as large, national
providers of cellular telephone service providers.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Properties</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>General.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We own equipment, including office equipment, necessary to conduct our business.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In Baton Rouge, Louisiana, we lease approximately 1,600 square foot modem assembly facility, for a
monthly rental of approximately $720 (expiring October 2002).  After the expiration of this lease, all of our
assembly activities will be relocated to Colorado.  In Englewood, Colorado, we lease a small office for our
executive offices, for a small monthly rental.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Wireless Cable Properties.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Intellectual Property.</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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;, &#8220;Quick-Cell Broadband
Internet&#8221; and the &#8220;USURF Wireless Internet&#8221; brand names.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Employees</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We have five employees, all of whom are officers.  All of our officers have entered into employment
agreements.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>THE FUSION CAPITAL TRANSACTION</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>General.</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Purchase of Shares Under the Fusion Capital Agreement</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>the lowest sale price of our common stock on the purchase date; or</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="15%" style="border-bottom: none" align="center" valign="top"><p>Assumed Per</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" style="border-bottom: none" align="center" valign="top"><p>Total Shares Issuable Upon</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: none" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" style="border-bottom: none" align="center" valign="top"><p>Percent of Our Common Stock </p>
</td>
</tr>
<tr>
<td width="15%" style="border-top: none" align="center" valign="top"><p>Share</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" style="border-top: none" align="center" valign="top"><p>Purchase of Remaining Shares</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-top: none" align="center" valign="top"><p>Gross</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" style="border-top: none" align="center" valign="top"><p>Outstanding After Giving Effect</p>
</td>
</tr>
<tr>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Purchase Price</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Under Fusion Capital Agreement</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Proceeds</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>to the Issuance to Fusion Capital</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>$..04</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" align="center" valign="top"><p>6,000,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$500,000(2)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" align="center" valign="top"><p>11.81%</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>$.05(1)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" align="center" valign="top"><p>6,000,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$600,000(2)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" align="center" valign="top"><p>11.81%</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>$1.50</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" align="center" valign="top"><p>6,000,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$4,500,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" align="center" valign="top"><p>11.81%</p>
</td>
</tr>
<tr>
<td width="15%" align="center" valign="top"><p>$2.00</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" align="center" valign="top"><p>6,000,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$6,500,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" align="center" valign="top"><p>11.81%</p>
</td>
</tr>
<tr>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$5.00</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" align="center" valign="top"><p>4,500,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$10,000,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="34%" align="center" valign="top"><p>8.86%</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>(1) Closing price on October 15, 2002, as reported by AMEX.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>(2) Estimate.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>To date, we have obtained only $395,000 under the Fusion Capital agreement in purchase of a total of
3,140,135 shares, which is not the maximum amount of funds thereunder, which has significantly impeded
our ability to expand our Quick-Cell business operations.  We may never realize the maximum amount of
proceeds under the Fusion Capital agreement.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.  Given the current and sustained depressed price
for our common stock, it appears unlikely that we will obtain $10 million under the Fusion Capital
agreement, although we cannot predict the ultimate amount that we will obtain under that agreement.
However, should our stock price remain at or near its current level, we would be able to obtain a total of only
approximately $600,000, unless we choose to issue more than 6,000,000 shares, which we have the right to
do.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Our Right to Suspend Purchases</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.  Currently, we are not selling shares to Fusion Capital, due to the depressed market price of
our common stock.  In the future, should we require cash proceeds from 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Our Right to Increase and Decrease the Daily Purchase Amount</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>To date, we have not obtained the maximum amount of funds under the Fusion Capital agreement, which has
significantly impeded our ability to expand our Quick-Cell business operations.  We may never realize the
maximum amount of proceeds under the Fusion Capital agreement.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Our Termination Rights</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Effect of Performance of the Fusion Capital Agreement on our
Shareholders</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>No Short-Selling or Hedging by Fusion Capital</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Events of Default</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><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 width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>(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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>a default of any payment obligation of USURF America in excess of $1.0 million; or</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>commencement of insolvency or bankruptcy proceedings by or against USURF America.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Shares and Warrants Issued to Fusion Capital</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>No Variable-Priced Financings</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Holdings of Fusion Capital Upon Termination</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Because Fusion Capital may sell all, some or none of the common stock issued to it, no estimate can be
given as to the amount of common stock that will be held by Fusion Capital upon early termination of the
Fusion Capital agreement.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Registration Rights Agreement</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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.  We are currently in
compliance with this provision.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Finder&#8217;s Fee</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>MANAGEMENT</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Directors and Officers</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>The following table sets forth the officers and directors of USURF America.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="30%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Name</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Age</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="52%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Position(s)</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="30%" valign="top"><p>Douglas O. McKinnon</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>52</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="52%" valign="top"><p>President and Chief Executive Officer and Director</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="30%" valign="top"><p>David M. Loflin</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>45</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="52%" valign="top"><p>Chairman of the Board and Principal Accounting Officer</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="30%" valign="top"><p>Waddell D. Loflin</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>52</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="52%" valign="top"><p>Vice President, Secretary and Director</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="30%" valign="top"><p>James Kaufman</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>37</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="52%" valign="top"><p>Vice President of Corporate Development</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="30%" style="border-bottom: none" valign="top"><p>Kenneth J. Upcraft</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>57</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="52%" valign="top"><p>Vice President of Sales and Marketing</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="30%" style="border-top: none; border-bottom: 0.01in solid" valign="top"><p>Ross S. Bravata</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>43</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="52%" valign="top"><p>Director</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="92%" valign="top"><p>(1)  David M. Loflin and Waddell D. Loflin are brothers.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Douglas O. McKinnon</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>President and Chief Executive Officer, has, during the past five years, served as chief executive officer of IP
Services, Inc., a next-generation communications services provider using broadband Internet Protocol (IP)
and Asynchronous Transfer Mode (ATM) based networks; executive vice president and chief financial
officer of AVIRNEX Communications Group, Inc., a provider of retail telecommunications service
including domestic and international long distance and enhanced services to small and medium-sized
business customers; and vice-president of ICG Communications, Inc, one of the country&#8217;s largest
competitive local exchange carriers offering local, long distance, ATM and frame relay services with a
nationwide fiber optic infrastructure. Mr. McKinnon is a former practicing CPA with the SEC practice
section of Coopers &amp; Lybrand.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>David M. Loflin</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Chairman of the Board and Principal Accounting Officer, 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.  Mr. Loflin is a member of the Wireless
Cable Association International and the Community Broadcasters Association.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Waddell D. Loflin</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>James Kaufman</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Kenneth J. Upcraft</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Vice President for Sales and Marketing, has, for more than the past five years, owned and operated Pantel, a
consultancy focused on providing professional services to telecommunications and Internet service
providers, including wireless Internet access providers.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="46%" style="border-bottom: 0.01in solid" valign="top"><p>Ross S. Bravata</p>
</td>
<td width="50%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Executive Committee</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our bylaws provide that the Executive Committee has the authority to exercise all powers of the board of
directors, except the power:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Declare dividends;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Sell or otherwise dispose of all or substantially all of our assets;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Recommend to our shareholders any action requiring their approval; and</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Change the membership of any committee, fill the vacancies thereon or discharge any committee.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>The Executive Committee, in general, acts on all matters requiring approval of our board of directors.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Audit Committee</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In September 1999, our board of directors created an Audit Committee, consisting of three members, the
majority of whom must be outside directors.  There are two vacancies on this committee, due to the recent
resignations of Richard N. Gill and Michael Cohn as directors.  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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Executive Compensation</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 four fiscal years.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="28%" style="border-bottom: 0.01in solid" align="center" valign="top"><br>
<br>
<br>
<br>
<br>
<p>Name and Principal Position</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" style="border-bottom: 0.01in solid" align="center" valign="top"><br>
<br>
<br>
<br>
<br>
<p>Year</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="center" valign="top"><br>
<br>
<br>
<br>
<br>
<p>Salary $</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><br>
<br>
<br>
<br>
<br>
<p>Bonus $</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" style="border-bottom: 0.01in solid" align="center" valign="top"><br>
<p>Other
Annual
Com-pen-sation</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Long-term
Compen-sation
Awards of
Stock
Options</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" style="border-bottom: 0.01in solid" align="center" valign="top"><br>
<p>All
other
com-pen-sation</p>
</td>
</tr>
<tr>
<td width="28%" style="border-bottom: none" valign="top"><p>David M. Loflin [President -
Principal Executive Officer]</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>2001</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>$150,000(1)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$133,000(10)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>0</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
<tr>
<td width="28%" style="border-top: none; border-bottom: none" valign="top"><p>&#160;</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>2000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>$150,000(2)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>0</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
<tr>
<td width="28%" style="border-top: none; border-bottom: 0.01in solid" valign="top"><p>&#160;</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" valign="top"><p>&#160;</p>
</td>
<td width="8%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1999</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$150,000(3)</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
<tr>
<td width="28%" style="border-bottom: none" valign="top"><p>Waddell D. Loflin [Vice
President and Secretary]</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>2001</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>$100,000(4)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$18,000(11)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>0</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
<tr>
<td width="28%" style="border-top: none; border-bottom: none" valign="top"><p>&#160;</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>2000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>$100,000(5)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$48,000(12)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>0</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
<tr>
<td width="28%" style="border-top: none; border-bottom: 0.01in solid" valign="top"><p>&#160;</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" valign="top"><p>&#160;</p>
</td>
<td width="8%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1999</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$100,000(6)</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
<tr>
<td width="28%" style="border-bottom: none" valign="top"><p>James Kaufman [Vice
President of Corporate
Development]</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>2001</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>$120,000(7)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>0</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
<tr>
<td width="28%" style="border-top: none; border-bottom: none" valign="top"><p>&#160;</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>2000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>$120,000(8)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$72,000(13)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>0</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
<tr>
<td width="28%" style="border-top: none; border-bottom: 0.01in solid" valign="top"><p>&#160;</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" valign="top"><p>&#160;</p>
</td>
<td width="8%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1999</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$120,000(9)</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
<tr>
<td width="28%" style="border-bottom: none" valign="top"><p>Julius W. Basham, II
[Former Chief Operating
Officer]</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>2001</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>0</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
<tr>
<td width="28%" style="border-top: none; border-bottom: none" valign="top"><p>&#160;</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>2000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>0</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
<tr>
<td width="28%" style="border-top: none; border-bottom: 0.01in solid" valign="top"><p>&#160;</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" valign="top"><p>&#160;</p>
</td>
<td width="8%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1999</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$133,762</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
<td width="1%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
<tr>
<td width="28%" style="border-bottom: none" valign="top"><p>Robert A. Hart, IV [Vice
President of Technology]</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>2001</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>0</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
<tr>
<td width="28%" style="border-top: none; border-bottom: none" valign="top"><p>&#160;</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>2000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>$750,000(14)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>0</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
<tr>
<td width="28%" style="border-top: none; border-bottom: 0.01in solid" valign="top"><p>&#160;</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>1999</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="10%" align="center" valign="top"><p>$-0-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>0</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="8%" align="center" valign="top"><p>$-0-</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>(1)</p>
</td>
<td width="92%" valign="top"><p>$53,612 of this amount was accrued; in connection with the Evergreen agreement, Mr. Loflin waived
payment of this amount.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(2)</p>
</td>
<td width="92%" valign="top"><p>$34,083 of this amount was accrued; in connection with the Evergreen agreement, Mr. Loflin waived
payment of this amount.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(3)</p>
</td>
<td width="92%" valign="top"><p>$27,083 of this amount was accrued; in connection with the Evergreen agreement, Mr. Loflin waived
payment of this amount.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(4)</p>
</td>
<td width="92%" valign="top"><p>$24,423 of this amount was accrued; in connection with the Evergreen agreement, Mr. Loflin waived
payment of this amount.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(5)</p>
</td>
<td width="92%" valign="top"><p>$35,417 of this amount was accrued; in connection with the Evergreen agreement, Mr. Loflin waived
payment of this amount.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(6)</p>
</td>
<td width="92%" valign="top"><p>$10,412 of this amount was accrued; in connection with the Evergreen agreement, Mr. Loflin waived
payment of this amount.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(7)</p>
</td>
<td width="92%" valign="top"><p>$106,270 of this amount was accrued; $96,000 of this amount was payable in shares of our stock; was
accrued; in connection with the Evergreen agreement, Mr. Kaufman waived payment of this amount.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(8)</p>
</td>
<td width="92%" valign="top"><p>$26,667 of this amount was accrued; $96,000 of this amount was payable in shares of our stock; was
accrued; in connection with the Evergreen agreement, Mr. Kaufman waived payment of this amount.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(9)</p>
</td>
<td width="92%" valign="top"><p>$26,667 of this amount was accrued; in connection with the Evergreen agreement, Mr. Kaufman waived
payment of this amount; $82,666 of this amount was paid in shares of our stock.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(10)</p>
</td>
<td width="92%" valign="top"><p>This bonus was paid by the issuance of 700,000 shares to Mr. Loflin, which were valued at $.19 per
share, the last closing price of our common stock prior to the issuance.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(11)</p>
</td>
<td width="92%" valign="top"><p>This bonus was paid by the issuance of 200,000 shares to Mr. Loflin, which were valued at $.09 per
share, the last closing price of our common stock prior to the issuance.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(12)</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(13)</p>
</td>
<td width="92%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(14)</p>
</td>
<td width="92%" valign="top"><p>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 $3.00 per share.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 $3.00 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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In October 2001, our president, David M. Loflin, was issued 700,000 shares of our common stock as a
bonus.  These shares were valued at $.19 per share, which was the closing sale price of our common stock
on the day immediately preceding their issuance.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In December 2001, one of our vice presidents , Waddell D. Loflin, was issued 200,000 shares of our
common stock as a bonus.  These shares were valued at $.09 per share, which was the closing sale price of
our common stock on the day immediately preceding their issuance.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Compensation of Directors</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>During the past three years, no compensation was 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Employment Contracts and Termination of Employment and Change-in-Control Agreements</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Each of our officers has entered into employment agreements, as well as confidentiality agreements and
agreements not to compete.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="22%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Name of Officer</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="24%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Position(s)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Term</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Annual Salary</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="21%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Date</p>
</td>
</tr>
<tr>
<td width="22%" valign="top"><p>Douglas O.
McKinnon</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="24%" valign="top"><p>President and Chief
Executive Officer</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>3 years</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$180,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="21%" align="center" valign="top"><p>4/15/02</p>
</td>
</tr>
<tr>
<td width="22%" valign="top"><p>David M. Loflin</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="24%" valign="top"><p>Chairman of the Board</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>6 months(1)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$150,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="21%" align="center" valign="top"><p>6/1/99, amended
4/15/02</p>
</td>
</tr>
<tr>
<td width="22%" valign="top"><p>Waddell D. Loflin</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="24%" valign="top"><p>Vice President and
Secretary</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>6 months</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$100,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="21%" align="center" valign="top"><p>6/1/99, amended
4/15/02</p>
</td>
</tr>
<tr>
<td width="22%" style="border-bottom: none" valign="top"><p>James Kaufman</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="24%" valign="top"><p>Vice President of
Corporate Development</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>6 months</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$120,000(2)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="21%" align="center" valign="top"><p>3/22/99, amended
4/15/02</p>
</td>
</tr>
<tr>
<td width="22%" style="border-top: none; border-bottom: 0.01in solid" valign="top"><p>Kenneth J. Upcraft</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="24%" valign="top"><p>Vice President for Sales
and Marketing</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>3 years</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$150,000(2)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="21%" align="center" valign="top"><p>7/31/02</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="center" valign="top"><p>(1)</p>
</td>
<td width="92%" valign="top"><p>Renewable for an additional six months, at our sole discretion.</p>
</td>
</tr>
<tr>
<td width="8%" align="center" valign="top"><p>(2)</p>
</td>
<td width="92%" valign="top"><p>80% of this officer&#8217;s salary may be paid with shares of our common stock.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Option/SAR Grants in Last Fiscal Year</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>We did not grant any options to any person during the fiscal year ended December 31, 2001.  In March
2002, we adopted a stock ownership plan for consultants and employees.  To date, we have granted options
to purchase up to $600,000 of our common stock to one consultant; this consultant has exercised options to
purchase 2,000,000 shares.  We have never granted any stock appreciation rights (SARs), nor do we expect
to grant any SARs in the foreseeable future.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Section 16(a) Beneficial Ownership Reporting Compliance</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 the past three years 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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Indemnification of Directors and Officers</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>CERTAIN TRANSACTIONS</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Evergreen Agreement</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>On June 14, 2002, we completed a securities purchase agreement with Evergreen Venture Partners, LLC,
whereby we issued  securities for cash in the amount of $250,000 (including a $10,000 stock subscription
receivable).   We sold  Evergreen a total of 3,645,833 shares of our common stock,  3,125,000 common
stock purchase warrants to purchase a like number of shares at an exercise price of $.15 per share and
3,125,000 common stock purchase warrants to purchase a like number of shares at an exercise price of $.30
per share.  Also pursuant to this agreement, we hired a new president and chief executive officer, Douglas O.
McKinnon, who also became a director, and who received, as a signing bonus, 3,000,000 shares of our
common stock; David M. Lofin, our former president, became our Chairman of the Board, reduced the term
of his remaining term of employment from approximately 4 years to six months, waived the payment of all
accrued and unpaid salary and waived the repayment of all loans made by him to us, in consideration of
2,000,000 shares of our common stock; two of our vice presidents reduced the terms of their remaining
terms of employment from approximately 4 years to six months and one year to six months, respectively, and
waived the payment of all accrued and unpaid salary, in consideration of 2,000,000 shares of our common
stock; and our other vice president terminated his employment with us.  Also, under this agreement,
Evergreen has the right to name two persons to become directors of USURF America.  To date, Evergreen
has not named any person as a director.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Our president, Douglas O. McKinnon, is a manager of Evergreen.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Conversion of Loans to Stock by Officer</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>As of August 21, 2000, we owed our former president, David M. 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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Securities Purchases</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In December 2001, Michael Cohn, a former director, purchased 75,000 units of our securities in a private
offering, at a purchase of $.10 per unit, or $7,500 in the aggregate.  Each unit purchased by Mr. Cohn
consisted of one share of our common stock, one common stock purchase warrant to purchase one share of
our common stock at an exercise price of $.20 per share and one common stock purchase warrant to
purchase one share of our common stock at an exercise price of $.30 per share.  Mr. Cohn purchased units
on the same terms and conditions as were offered to unaffiliated investors.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In December 2001, Ross S. Bravata, a director, purchased 35,000 units of our securities in a private offering,
at a purchase of $.10 per unit, or $3,500 in the aggregate.  Each unit purchased by Mr. Bravata consisted of
one share of our common stock, one common stock purchase warrant to purchase one share of our common
stock at an exercise price of $.20 per share and one common stock purchase warrant to purchase one share of
our common stock at an exercise price of $.30 per share.  Mr. Bravata purchased units on the same terms and
conditions as were offered to unaffiliated investors.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Stock Bonus - Officers</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 $750,000, or $3.00 per
share, pursuant to the terms of the Mr. Hart&#8217;s employment agreement.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In October 2001, our President, David M. Loflin, was issued shares of our common stock as a bonus.  Mr.
Loflin was issued 700,000 shares.  These shares were valued at $133,000, or $.19 per share, which was the
closing sale price of our common stock on the date immediately preceding their issuance.  When this
issuance was approved by our board of directors, Mr. Loflin abstained from the voting.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In December 2001, one of our vice presidents, Waddell D. Loflin, was awarded shares of our common stock
as a bonus.  Mr. Loflin was awarded 200,000 shares.  These shares were valued at $18,000, or $.09 per
share, which was the closing sale price of our common stock on the date immediately preceding their award.
These shares were issued in January 2002.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In August 2002, one of our vice presidents, Kenneth J. Upcraft, was issued 600,000 shares of our common
stock as an employment agreement signing bonus.  These shares were valued at $42,000, or $.07 per share,
pursuant to the terms of the Mr. Upcraft&#8217;s employment agreement.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Employment Agreements</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Each of our officers have entered into employment agreement, as well as confidentiality agreements and
agreements not to compete.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="22%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Name of Officer</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="24%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Position(s)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Term</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Annual Salary</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Date</p>
</td>
</tr>
<tr>
<td width="22%" valign="top"><p>Douglas O.
McKinnon</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="24%" valign="top"><p>President and Chief
Executive Officer</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>3 years</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>$180,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>4/15/02</p>
</td>
</tr>
<tr>
<td width="22%" valign="top"><p>David M. Loflin</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="24%" valign="top"><p>Chairman of the Board</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>6 months(1)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>$150,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>6/1/99, amended
4/15/02</p>
</td>
</tr>
<tr>
<td width="22%" valign="top"><p>Waddell D. Loflin</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="24%" valign="top"><p>Vice President and
Secretary</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>6 months</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>$100,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>6/1/99, amended
4/15/02</p>
</td>
</tr>
<tr>
<td width="22%" style="border-bottom: none" valign="top"><p>James Kaufman</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="24%" valign="top"><p>Vice President of
Corporate Development</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>6 months</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>$120,000(2)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>3/22/99, amended
4/15/02</p>
</td>
</tr>
<tr>
<td width="22%" style="border-top: none; border-bottom: 0.01in solid" valign="top"><p>Kenneth J. Upcraft</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="24%" valign="top"><p>Vice President for Sales
and Marketing</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>3 years</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="center" valign="top"><p>$150,000(2)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="center" valign="top"><p>7/31/02</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="center" valign="top"><p>(1)</p>
</td>
<td width="92%" valign="top"><p>Renewable for an additional six months, at our sole discretion.</p>
</td>
</tr>
<tr>
<td width="8%" align="center" valign="top"><p>(2)</p>
</td>
<td width="92%" valign="top"><p>80% of this officer&#8217;s salary may be paid with shares of our common stock.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Stock Issuances to Officers</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Pursuant to the Evergreen agreement, on April 15, 2002, the following occurred:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>We hired a new president and chief executive officer, Douglas O. McKinnon, who also became a
director.  In consideration of Mr. McKinnon&#8217;s executing his employment agreement, we issued him
3,000,000 shares of our common stock.  These shares were valued at approximately $330,000, which
amount was charged against our earnings during the second quarter of 2002.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Our former president, David M. Lofin, became our Chairman of the Board, reduced the term of his
remaining term of employment from approximately 4 years to six months, waived the payment of all
accrued and unpaid salary and waived the repayment of all loans made by him to us.  In consideration of
Mr. Loflin&#8217;s executing an amendment to his employment agreement that reflected the foregoing
provisions, we issued him 2,000,000 shares of our common stock.  These shares were valued at
approximately $200,000, which amount was charged against our earnings during the second quarter of
2002.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Our vice president and secretary, Waddell D. Loflin, reduced the term of his remaining term of
employment from approximately 4 years to six months and waived the payment of all accrued and
unpaid salary.  In consideration of Mr. Loflin&#8217;s executing an amendment to his employment agreement
that reflected the foregoing provisions, we issued him 2,000,000 shares of our common stock.  These
shares were valued at approximately $200,000, which amount was charged against our earnings during
the second quarter of 2002.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>Our vice president of corporate development, James Kaufman, reduced the term of his remaining term
of employment from one year to six months and waived the payment of all accrued and unpaid salary.
In consideration of Mr. Kaufman&#8217;s executing an amendment to his employment agreement that reflected
the foregoing provisions, we issued him 2,000,000 shares of our common stock.  These shares were
valued at approximately $200,000, which amount was charged against our earnings during the second
quarter of 2002.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Voting Agreement</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 8,850,000 shares are subject to this voting agreement.  This amount of stock
represents approximately 20% of our currently outstanding shares.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>H + N Partners</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Fusion Capital Consulting Agreements</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In January 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 received a
total of 120,000 shares of our common stock during the term of this agreement and reimbursement for
expenses.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In January 2002, we entered another into a one-year consulting agreement with Fusion Capital, pursuant to
which Fusion Capital agreed to provide operational and strategic consulting services.  Fusion Capital
received 120,000 shares of our common stock pursuant to this agreement and is to be reimbursed for
expenses. </p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>PRINCIPAL SHAREHOLDERS</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>There are 52,201,338 shares of our common stock issued and outstanding.  The following table sets forth certain
information regarding the current beneficial ownership of our common stock, after giving effect to the issuance
of the remaining 2,859,865 shares of common stock reserved for issuance under the Fusion Capital agreement
and all 14,803,727 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 3333 S. Bannock, Suite 790, Englewood, Colorado 80110.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="35%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>Shares</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>Percent</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>Shares</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>Percent</p>
</td>
</tr>
<tr>
<td width="35%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>Owned Benefi-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>Owned</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>Owned Benefi-</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>Owned</p>
</td>
</tr>
<tr>
<td width="35%" align="center" valign="top"><p>Name and Address</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>cially Before</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>Before This</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>cially After</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>After This</p>
</td>
</tr>
<tr>
<td width="35%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>of Beneficial Owner</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="18%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>This Offering</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Offering(1)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>This Offering</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Offering(1)</p>
</td>
</tr>
<tr>
<td width="35%" valign="top"><p>David M. Loflin(2)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>5,950,960</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>8.51%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>5,250,960(3)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>7.51%</p>
</td>
</tr>
<tr>
<td width="35%" valign="top"><p>8748 Quarters Lake Road</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="35%" style="border-bottom: 0.01in solid" valign="top"><p>Baton Rouge, Louisiana 70809</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="35%" valign="top"><p>Waddell D. Loflin(2)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>2,490,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>3.56%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>1,990,000(3)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>2.85%</p>
</td>
</tr>
<tr>
<td width="35%" valign="top"><p>8748 Quarters Lake Road</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="35%" style="border-bottom: 0.01in solid" valign="top"><p>Baton Rouge, Louisiana 70809</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="35%" style="border-bottom: 0.01in solid" valign="top"><p>James Kaufman</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>2,425,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>3.47%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>2,425,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>3.47%</p>
</td>
</tr>
<tr>
<td width="35%" style="border-bottom: 0.01in solid" valign="top"><p>Douglas O. McKinnon(5)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>3,000,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>4.29%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>2,500,000(6)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>3.58%</p>
</td>
</tr>
<tr>
<td width="35%" valign="top"><p>Ross S. Bravata</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>144,500(7)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>less than 1%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>32,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>less than 1%</p>
</td>
</tr>
<tr>
<td width="35%" valign="top"><p>8748 Quarters Lake Road</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="35%" style="border-bottom: 0.01in solid" valign="top"><p>Baton Rouge, Louisiana 70809</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="35%" valign="top"><p>Fusion Capital Fund II, LLC</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>3,646,335</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>5.22%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>3,646,335</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>5.22%</p>
</td>
</tr>
<tr>
<td width="35%" valign="top"><p>222 Merchandise Mart Plaza</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="35%" valign="top"><p>Suite 9-112</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="35%" style="border-bottom: 0.01in solid" valign="top"><p>Chicago, Illinois 60654</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="35%" valign="top"><p>Evergreen Venture Partners, LLC(3)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>5,583,333(9)(10)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>7.99%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>0(11)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>0%</p>
</td>
</tr>
<tr>
<td width="35%" valign="top"><p>2104 Ridge Plaza</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="35%" style="border-bottom: 0.01in solid" valign="top"><p>Castle Rock, Colorado 80104</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="35%" style="border-bottom: 0.01in solid" valign="top"><p>Kenneth J. Upcraft</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>600,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>less than 1%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>400,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>less than 1%</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="35%" style="border-bottom: 0.01in solid" valign="top"><p>All officers and directors as a group
(5 persons)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>14,610,460(7)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>20.91%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>13,217,960</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>18.92%</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>(1)</p>
</td>
<td width="92%" valign="top"><p>Based on 69,864,930 shares outstanding, assuming the issuance of 2,859,865 shares reserved for
issuance under the Fusion Capital agreement and 14,803,727 shares underlying currently outstanding
and exercisable warrants.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(2)</p>
</td>
<td width="92%" valign="top"><p>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.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(3)</p>
</td>
<td width="92%" valign="top"><p>Assumes 700,000 shares owned by Mr. Loflin are sold pursuant to this prospectus.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(4)</p>
</td>
<td width="92%" valign="top"><p>Assumes 500,000 shares owned by Mr. Loflin are sold pursuant to this prospectus.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(5)</p>
</td>
<td width="92%" valign="top"><p>Douglas O. McKinnon is a manager of Evergreen and may be deemed to be a beneficial owner of all of
the shares owned by Evergreen.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(6)</p>
</td>
<td width="92%" valign="top"><p>Assumes 500,000 shares owned are sold by Mr. McKinnon, pursuant to a prospectus forming a part of
an effective registration statement (SEC File No. 333-87830).</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(7)</p>
</td>
<td width="92%" valign="top"><p>75,000 of these shares have not been issued, but underlie currently exercisable warrants; assumes
75,000 shares underlying warrants are purchased and sold and 37,500 shares currently owned are sold
by Mr. Bravata , pursuant to a prospectus forming a part of an effective registration statement (SEC File
No. 333-87830).</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(8)</p>
</td>
<td width="92%" valign="top"><p>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 18 months from
the date hereof.  645,000 of these shares have not been issued, but underlie currently exercisable
warrants.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(9)</p>
</td>
<td width="92%" valign="top"><p>2,208,333 of these shares have been issued; 3,375,000 of these shares have not been issued, but underlie
currently exercisable warrants.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(10)</p>
</td>
<td width="92%" valign="top"><p>Of the 2,208,333 issued shares included in this ownership amount, 125,000 shares have been registered
for sale and, of the 3,375,000 unissued shares included in this ownership amount, 250,000 shares have
been registered for sale under a prospectus forming a part of an effective registration statement (SEC
File No. 333-87830); the balance of such shares are being offered pursuant to this prospectus.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(11)</p>
</td>
<td width="92%" valign="top"><p>Assumes the sale of all shares being offered pursuant to this prospectus and the sale of all shares
registered pursuant the effective registration statement described above in footnote 10.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>LITIGATION</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>CyberHighway Involuntary Bankruptcy</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 was
denied because the creditors believe 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.  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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Other Litigation</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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 future.  In addition, we are seeking monetary damages in this action.  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>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In January 2000, we instituted arbitration proceedings against Christopher L. Wiebelt, our former vice
president of finance and chief financial officer.  At the recent hearing, we alleged that Mr. Wiebelt violated
certain terms of his employment agreement and sought damages resulting from those violations, while Mr.
Wiebelt claimed wrongful termination under his employment agreement.  The arbitrator has awarded Mr.
Wiebelt $75,000.  We expect to negotiate payment terms in the near future. This case is styled: USURF
America, Inc. versus Christopher L. Wiebelt, American Arbitration Association, Case No. 71-160-00087-01.
Patrick F. McGrew, Esquire, is our counsel in this case.</p>
</td>
</tr>
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>In July 2002, we became aware of an existing default judgment against us, dated June 7, 2001, in the
approximate amount of $22,000.  The lawsuit, filed by a law firm in Boise, Idaho, went unchallenged as a
result of administrative error.  We intend to seek to set aside this judgment, as we have a valid defense to the
underlying claims.  However, we cannot predict the outcome of our efforts in this regard.  Should we fail to
set aside this judgment, we will be required to pay this judgment amount.  This case is styled: Marcus,
Merrick, Montgomery, Christian &amp; Hardee, LLP vs. USURF America, Inc., District Court of the Fourth
Judicial District of the State of Idaho, in and for the County of Ada, Case No. CV OC 0101693D.  We have
not yet retained legal counsel in this matter.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Possible Claim</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Potential Legal Proceeding</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>PLAN OF DISTRIBUTION</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>The shares of common stock offered by this prospectus are being offered by selling shareholders.  Specific
information concerning each of the selling shareholders and the securities offered by them is included under
&#8220;Selling Shareholders&#8221; on page 64.  The common stock may be resold or distributed from time to time by the
selling shareholders, or by donees or transferees of, or other successors in interests to, 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>ordinary brokers' transactions;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>transactions involving cross or block trades or otherwise on the American Stock Exchange;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>purchases by brokers, dealers or underwriters as principal and resale by such purchasers for their own
accounts pursuant to this prospectus;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>"at the market" to or through market makers or into an existing market for the common stock;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>in other ways not involving market makers or established trading markets, including direct sales to
purchasers or sales effected through agents;</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>in privately negotiated transactions; or</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>any combination of the foregoing.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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. Commissions received by any broker may be deemed to be underwriting commissions.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>Each selling shareholder is an "underwriter" within the meaning of the Securities Act.  Any broker-dealers who
act in connection with the sale of the shares hereunder will be "underwriters" within the meaning of the
Securities Act, and any commissions they receive and proceeds of any sale of the shares will be underwriting
discounts and commissions under the Securities Act.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>We know of no existing arrangements between any selling shareholder, any other shareholder, broker, dealer,
underwriter or agent relating to the sale or distribution of their respective shares.  Neither we nor any selling
shareholder can presently estimate the amount of compensation that any agent will receive.  At a time a particular
offer of shares is made by a selling shareholder, a prospectus supplement, if required, will be distributed that will
set forth the names of any agents, underwriters or dealers and any compensation from a selling shareholder and
any other required information.  We will pay all of the expenses incident to the registration, offering and sale of
the shares of stock to the public other than commissions or discounts of underwriters, broker-dealers or agents.  </p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>We have advised the selling shareholders that while they are engaged in a distribution of shares of our common
stock included in this prospectus, they are required to comply with Regulation M promulgated under the
Exchange Act.  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 of our common stock offered by this prospectus.  This offering will
terminate on the date on which all shares included in this prospectus and offered hereby have been sold by the
selling shareholders.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>SELLING SHAREHOLDERS</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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).  Except as noted below,
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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="38%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>Shares of</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>Percentage</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>Percentage</p>
</td>
</tr>
<tr>
<td width="38%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>Common Stock</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>Shares of</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>Ownership</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>Ownership</p>
</td>
</tr>
<tr>
<td width="38%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>Beneficially</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>Common
Stock</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>Before</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>After</p>
</td>
</tr>
<tr>
<td width="38%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Name of Beneficial Owner</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Owned</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Being
Offered</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Offering(1)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Offering(1)</p>
</td>
</tr>
<tr>
<td width="38%" valign="top"><p>Newlan &amp; Newlan(2)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>1,900,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>1,900,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>3.74%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>0%</p>
</td>
</tr>
<tr>
<td width="38%" valign="top"><p>Evergreen Venture Partners, LLC(3)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>5,583,333(4)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>5,208,333</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>10.99%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>less than 1%</p>
</td>
</tr>
<tr>
<td width="38%" valign="top"><p>David M. Loflin(5)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>5,950,960</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>700,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>11.72%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>10.34%</p>
</td>
</tr>
<tr>
<td width="38%" valign="top"><p>Waddell D. Loflin(6)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>2,490,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>500,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>4.90%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>3.92%</p>
</td>
</tr>
<tr>
<td width="38%" valign="top"><p>Peter Rochow(7)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>1,750,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>1,300,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>3.35%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>less than 1%</p>
</td>
</tr>
<tr>
<td width="38%" style="border-bottom: none" valign="top"><p>Regency Capital, LLC(8)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>300,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>300,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>less than 1%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>0%</p>
</td>
</tr>
<tr>
<td width="38%" style="border-top: none; border-bottom: none" valign="top"><p>JF Mills/Worldwide (9)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>300,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>300,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>less than 1%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>0%</p>
</td>
</tr>
<tr>
<td width="38%" style="border-top: none; border-bottom: none" valign="top"><p>Precise Directions LLC(10)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>375,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>375,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>less than 1%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>0%</p>
</td>
</tr>
<tr>
<td width="38%" style="border-top: none; border-bottom: none" valign="top"><p>Heyer Capital Fund(11)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>2,400,000(12)</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>2,400,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>4.72%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>0%</p>
</td>
</tr>
<tr>
<td width="38%" style="border-top: none; border-bottom: none" valign="top"><p>John Pritzlaff Revocable Trust(13)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>1,000,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>1,000,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>1.91%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>0%</p>
</td>
</tr>
<tr>
<td width="38%" style="border-top: none; border-bottom: none" valign="top"><p>Christopher K. &amp; Janice B. Brenner(14)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>135,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>135,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>less than 1%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>0%</p>
</td>
</tr>
<tr>
<td width="38%" style="border-top: none; border-bottom: none" valign="top"><p>Philip A. Samuels(15)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>300,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>300,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>less than 1%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>0%</p>
</td>
</tr>
<tr>
<td width="38%" style="border-top: none; border-bottom: none" valign="top"><p>Kenneth J. Upcraft(16)</p>
</td>
<td width="1%" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>600,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="14%" align="center" valign="top"><p>200,000</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>less than 1%</p>
</td>
<td width="1%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>less than 1%</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>(1)</p>
</td>
<td width="92%" valign="top"><p>Based on 52,201,338 shares outstanding as of the date of this prospectus.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(2)</p>
</td>
<td width="92%" valign="top"><p>The shares offered by this selling shareholder were issued in payment of legal services.  The voting and
investing control over these shares is held by the partners of the law firm, L. A. Newlan, Jr. and Eric
Newlan.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(3)</p>
</td>
<td width="92%" valign="top"><p>Our president, Douglas O. McKinnon, is a manager of this selling shareholder.  Mr. McKinnon
possesses voting and investment control over these securities, but disclaims beneficial ownership of any
of these securities.  On June 14, 2002, we completed a securities purchase agreement with this selling
shareholder, whereby we issued securities for cash in the amount of $250,000 (including a $10,000
stock subscription receivable).  We sold to Evergreen a total of 3,645,833 shares of our common stock,
3,125,000 common stock purchase warrants to purchase a like number of shares at an exercise price of
$.15 per share and 3,125,000 common stock purchase warrants to purchase a like number of shares at an
exercise price of $.30 per share.  Also pursuant to this agreement, we hired a new president and chief
executive officer, Douglas O. McKinnon, who also became a director, and who received, as a signing
bonus, 3,000,000 shares of our common stock; David M. Lofin, our former president, became our
Chairman of the Board, reduced the term of his remaining term of employment from approximately 4
years to six months, waived the payment of all accrued and unpaid salary and waived the repayment of
all loans made by him to us, in consideration of 2,000,000 shares of our common stock; two of our vice
presidents reduced the terms of their remaining terms of employment from approximately 4 years to six
months and one year to six months, respectively, and waived the payment of all accrued and unpaid
salary, in consideration of 2,000,000 shares of our common stock; and our other vice president
terminated his employment with us.  Also, under this agreement, upon the final closing scheduled for
June 14, 2002, Evergreen has the right to name two persons to become directors of USURF America.
To date, Evergreen has not named any person as a director.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(4)</p>
</td>
<td width="92%" valign="top"><p>2,208,333 of these shares have been issued; 3,375,000 of these shares underlie currently issued and
exercisable warrants.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(5)</p>
</td>
<td width="92%" valign="top"><p>Mr. Loflin is our current Chairman of the Board and principal financial officer and is our founder.  He
obtained the shares offered by him in connection with our original capitalization in 1996.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(6)</p>
</td>
<td width="92%" valign="top"><p>Mr. Loflin is currently a director, vice president and secretary and has served in those capacities since
our inception.  He obtained 10,000 of the shares offered by him as part of the Evergreen transaction
described above in Note 3, 200,000 of the shares offered by him as an employment bonus in December
2001, 200,000 of the shares offered by him as an employment bonus in December 2000 and 90,000 of
the shares offered by him in connection with our original capitalization in 1996.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(7)</p>
</td>
<td width="92%" valign="top"><p>The shares offered by this selling shareholder were issued in payment of consulting services.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(8)</p>
</td>
<td width="92%" valign="top"><p>The shares offered by this selling shareholder were issued in payment of consulting services.  The
voting and investing control over these shares is held by Scott F. Gelbard, a principal of this selling
shareholder.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(9)</p>
</td>
<td width="92%" valign="top"><p>The shares offered by this selling shareholder were issued in payment of consulting services.  The
voting and investing control over these shares is held by James Mills, the principal of this selling
shareholder.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(10)</p>
</td>
<td width="92%" valign="top"><p>The shares offered by this selling shareholder were issued in payment of consulting services.  The
voting and investing control over these shares is held by Joseph N. Williams, a principal of this selling
shareholder.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(11)</p>
</td>
<td width="92%" valign="top"><p>The shares offered by this selling shareholder underlie 2,400,000 common stock purchase warrants
issued pursuant to a consulting agreement.  All of these warrants are exercisable currently and have a
term of three years. The respective exercise prices are: 400,000 shares at $.15 per share; 400,000 shares
at $.20 per share; 400,000 shares at $.25 per share; 400,000 shares at $.30 per share; 400,000 shares at
$.35 per share; and 400,000 shares at $.40 per share.  Peter Rochow, president of this selling
shareholder, possesses voting and investment control over these securities, and is the beneficial owner
of these securities.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(12)</p>
</td>
<td width="92%" valign="top"><p>None of these shares has been issued, but underlie currently exercisable warrants.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(13)</p>
</td>
<td width="92%" valign="top"><p>The shares offered by this selling shareholder were purchased from us for $60,000 in cash.  John
Pritzlaff, as trustee of this selling shareholder, possesses voting and investment control over these
securities, and is the beneficial owner of these securities.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(14)</p>
</td>
<td width="92%" valign="top"><p>The shares offered by this selling shareholder were purchased from us for $6,000 in cash.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(15)</p>
</td>
<td width="92%" valign="top"><p>The shares offered by this selling shareholder were issued in payment of consulting services.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>(16)</p>
</td>
<td width="92%" valign="top"><p>Mr. Upcraft is our vice president for sales and marketing.   He obtained the shares offered by him as a
bonus upon the execution of his employment agreement with us, which occurred in July 2002.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>DESCRIPTION OF SECURITIES</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Authorized Capital Stock</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Description of Common Stock</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>There are 52,201,338 shares of our common stock outstanding.  An additional 14,803,727 shares of common
stock have been reserved for issuance pursuant to various warrants and up to additional 2,859,865 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>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Transfer Agent and Registrar</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="4%" valign="top"><p>&#160;</p>
</td>
<td width="96%" valign="top"><p>Securities Transfer Corporation, Frisco, Texas, is the transfer agent and registrar for our common stock.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>LEGAL MATTERS</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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 1,900,000 shares of our common stock.  Newlan &amp; Newlan is a selling
shareholder pursuant to this prospectus.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>EXPERTS</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>Our financial statements for the years ended December 31, 1999, 2000 and 2001, 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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>ABOUT THIS PROSPECTUS</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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 may sell up to an aggregate of 14,618,333 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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>WHERE YOU CAN FIND MORE INFORMATION</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>INDEX TO FINANCIAL STATEMENTS</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>Six Months Ended June 30, 2002 and 2001</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="8%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Page</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="62%" valign="top"><p>Consolidated Balance Sheets at June 30, 2002, and December 31,
2001 (audited)</p>
</td>
<td width="8%" align="center" valign="top"><p>F-1</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="62%" valign="top"><p>Consolidated Statements of Operations for the Three Months Ended
June 30, 2002 and 2001, and the Six Months Ended June 30, 2002
and 2001</p>
</td>
<td width="8%" align="center" valign="top"><p>F-4</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="62%" valign="top"><p>Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2002 and 2001</p>
</td>
<td width="8%" align="center" valign="top"><p>F-6</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="62%" valign="top"><p>Notes to Consolidated Financial Statements</p>
</td>
<td width="8%" align="center" valign="top"><p>F-9</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>Years Ended December 31, 2001, 2000 and 1999</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="62%" valign="top"><p>Report of Independent Auditor</p>
</td>
<td width="8%" align="center" valign="top"><p>F-12</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="62%" valign="top"><p>Consolidated Balance Sheets at December 31, 2001 and 2000</p>
</td>
<td width="8%" align="center" valign="top"><p>F-13</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="62%" valign="top"><p>Consolidated Statements of Operations for the Years Ended
December 31, 2001, 2000 and 1999</p>
</td>
<td width="8%" align="center" valign="top"><p>F-16</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="62%" valign="top"><p>Consolidated Statements of Changes in Stockholders&#8217; Equity for the
Years Ended December 31, 2001, 2000 and 1999</p>
</td>
<td width="8%" align="center" valign="top"><p>F-18</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="62%" valign="top"><p>Consolidated Statements of Cash Flows for the Years Ended
December 31, 2001, 2000 and 1999</p>
</td>
<td width="8%" align="center" valign="top"><p>F-23</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="62%" valign="top"><p>Notes to Consolidated Financial Statements</p>
</td>
<td width="8%" align="center" valign="top"><p>F-25</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<br>
<br>
<p>&lt;PAGE&gt;</p>
<br>
<br>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" style="border-top: 0.0266667in solid" align="center" valign="top"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>ENGLEWOOD, COLORADO</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>CONSOLIDATED BALANCE SHEETS</p>
</td>
</tr>
<tr>
<td width="100%" style="border-bottom: 0.0266667in solid" align="center" valign="top"><p>JUNE 30, 2002 (UNAUDITED), AND DECEMBER 31, 2001</p>
</td>
</tr>
</table>
<br>
<p style="text-align: center">ASSETS</p>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="52%" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>June 30, 2002
(unaudited)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>December 31, 2001
(audited)</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>CURRENT ASSETS</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;Cash and cash equivalents</p>
</td>
<td width="23%" align="center" valign="top"><p>$71,409</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>$10</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;Inventory</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>99,057</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>134,746</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>170,466</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>134,756</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>PROPERTY AND EQUIPMENT</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;Cost</p>
</td>
<td width="23%" align="center" valign="top"><p>204,387</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>203,141</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;Less: accumulated depreciation</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(134,936)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(125,036)</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>69,451</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>78,105</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>OTHER ASSETS</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>12,500</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>16,667</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>TOTAL ASSETS</p>
</td>
<td width="23%" style="border-bottom: 0.01in double" align="center" valign="top"><p>$252,417</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in double" align="center" valign="top"><p>$229,528</p>
</td>
</tr>
</table>
<br>
<p style="text-align: center">LIABILITIES AND STOCKHOLDERS&#8217; DEFICIT</p>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="52%" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>June 30, 2002
(unaudited)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>December 31, 2001
(audited)</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>CURRENT LIABILITIES</p>
</td>
<td width="23%" valign="top"><p>&#160;</p>
</td>
<td width="2%" valign="top"><p>&#160;</p>
</td>
<td width="23%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;Disbursements in excess of cash balances</p>
</td>
<td width="23%" align="center" valign="top"><p>$0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>$15,539</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;Accounts payable</p>
</td>
<td width="23%" align="center" valign="top"><p>1,016,635</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>1,034,619</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;Accrued payroll</p>
</td>
<td width="23%" align="center" valign="top"><p>20,734</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>265,978</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;Other current liabilities</p>
</td>
<td width="23%" align="center" valign="top"><p>134,396</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>54,996</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;Notes payable to stockholder</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>18,521</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1,171,765</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1,389,653</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>LONG-TERM LIABILITIES</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>TOTAL LIABILITIES</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1,171,765</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1,389,653</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>REDEEMABLE COMMON STOCK</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>Common stock subject to rescission: no shares
outstanding at June 30, 2002, $.0001 par value per share,
and 2,138,726 shares outstanding at December 31, 2001</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1,192,700</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1,192,700</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>STOCKHOLDERS&#8217; DEFICIT</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>Common stock, $.0001 par value; Authorized:
100,000,000 shares; Issued and outstanding: 45,258,005
shares at June 30, 2002, and 23,848,108 at December 31,
2001</p>
</td>
<td width="23%" align="center" valign="top"><p>4,526</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>2,385</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>Additional paid-in capital</p>
</td>
<td width="23%" align="center" valign="top"><p>38,623,626</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>35,642,817</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>Accumulated deficit</p>
</td>
<td width="23%" align="center" valign="top"><p>(38,751,519)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>(37,000,628)</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>Subscriptions receivable</p>
</td>
<td width="23%" align="center" valign="top"><p>120,000</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>165,750</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>Deferred consulting</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(915,981)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(1,163,149)</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(919,348)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(2,352,825)</p>
</td>
</tr>
<tr>
<td width="52%" valign="top"><p>TOTAL LIABILITIES AND STOCKHOLDERS&#8217;
DEFICIT</p>
</td>
<td width="23%" style="border-bottom: 0.01in double" align="center" valign="top"><p>$252,417</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in double" align="center" valign="top"><p>&#160;$229,528</p>
</td>
</tr>
</table>
<br>
<p>The accompanying notes are an integral part of these statements.</p>
<br>
<br>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="19%" style="border-top: 0.0266667in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="62%" style="border-top: 0.0266667in solid" align="center" valign="top"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
<td width="19%" style="border-top: 0.0266667in solid" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="19%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="62%" align="center" valign="top"><p>ENGLEWOOD, COLORADO</p>
</td>
<td width="19%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="19%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="62%" align="center" valign="top"><p>CONSOLIDATED STATEMENTS OF OPERATIONS</p>
</td>
<td width="19%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="19%" style="border-bottom: 0.0266667in solid" align="center" valign="top"><p>&#160;</p>
</td>
<td width="62%" style="border-bottom: 0.0266667in solid" align="center" valign="top"><p>FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001,
AND THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001</p>
</td>
<td width="19%" style="border-bottom: 0.0266667in solid" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="33%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="33%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Three Months Ended June 30,</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="32%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Six Months Ended June 30,</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="33%" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2002
(unaudited)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2001
(unaudited)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2002
(unaudited)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>2001
(unaudited)</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>REVENUES</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;Revenues</p>
</td>
<td width="15%" align="center" valign="top"><p>$4,676</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>$15,507</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>$9,302</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>$15,891</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;Internet access costs, cost of
goods sold</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(8,669)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(5,343)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(17,151)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(5,343)</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;Gross profit (loss)</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(3,993)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>10,164</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(7,849)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>10,548</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>OPERATING EXPENSES</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;Depreciation and amortization</p>
</td>
<td width="15%" align="center" valign="top"><p>7,034</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>7,713</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>14,067</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>19,293</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;Professional fees</p>
</td>
<td width="15%" align="center" valign="top"><p>422,910</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>432,318</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>693,057</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>1,139,606</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;Rent</p>
</td>
<td width="15%" align="center" valign="top"><p>7,682</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>7,131</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>15,363</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>12,492</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;Salaries and commissions</p>
</td>
<td width="15%" align="center" valign="top"><p>711,995</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>215,822</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>815,163</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>376,568</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;Advertising</p>
</td>
<td width="15%" align="center" valign="top"><p>2,845</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>64,845</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;Other</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>125,628</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>31,327</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>140,371</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>47,995</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1,278,094</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>694,311</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1,742,866</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>1,595,954</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>LOSS FROM OPERATIONS</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(1,282,087)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(684,147)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(1,750,715)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(1,585,406)</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>OTHER INCOME (EXPENSE)</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;Interest income</p>
</td>
<td width="15%" align="center" valign="top"><p>7</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>7</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;Interest expense</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(183)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>LOSS BEFORE INCOME TAX</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(1,282,080)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(684,147)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(1,750,891)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>(1,585,406)</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>INCOME TAX BENEFIT</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>0 </p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: none" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>NET LOSS</p>
</td>
<td width="15%" style="border-top: none; border-bottom: 0.01in double" align="center" valign="top"><p>$(1,282,080)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in double" align="center" valign="top"><p>$(684,147)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in double" align="center" valign="top"><p>$(1,750,891)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in double" align="center" valign="top"><p>$(1,585,406)</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>Net loss per common share</p>
</td>
<td width="15%" style="border-bottom: 0.01in double" align="center" valign="top"><p>$(.03)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in double" align="center" valign="top"><p>$(.05)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in double" align="center" valign="top"><p>$(.05)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in double" align="center" valign="top"><p>$(.11)</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="33%" valign="top"><p>Weighted average number of
shares outstanding</p>
</td>
<td width="15%" style="border-bottom: 0.01in double" align="center" valign="top"><p>41,190,086</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in double" align="center" valign="top"><p>15,188,697</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="15%" style="border-bottom: 0.01in double" align="center" valign="top"><p>35,044,692</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="16%" style="border-bottom: 0.01in double" align="center" valign="top"><p>14,564,873</p>
</td>
</tr>
</table>
<br>
<p>The accompanying notes are an integral part of these statements.</p>
<br>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" style="border-top: 0.0266667in solid" align="center" valign="top"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>BATON ROUGE, LOUISIANA</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>CONSOLIDATED STATEMENTS OF CASH FLOWS</p>
</td>
</tr>
<tr>
<td width="100%" style="border-bottom: 0.0266667in solid" align="center" valign="top"><p>SIX MONTHS ENDED JUNE 30, 2002 AND 2001</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="54%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="21%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Six Months Ended
June 30, 2002
(unaudited)</p>
</td>
<td width="4%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="21%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>Six Months Ended
June 30, 2001
(unaudited)</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>CASH FLOWS FROM OPERATING ACTIVITIES</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>Net loss</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>$(1,750,891)</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>$(1,585,406)</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>Adjustment to reconcile net loss to net cash used in
operating activities</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Depreciation and amortization</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>14,067</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>19,293</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Consulting fees paid with stock</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>509,993</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>1,053,110</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Legal fees paid with stock</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>101,000</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Compensation expense paid with stock</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>864,880639,880</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>47,947</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Advertising expense paid with stock</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>62,000</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>Changes in operating assets and liabilities</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Accounts receivable</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>0</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Inventory</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>(4,100)</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>5,343</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Other current liabilities</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>75,000</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>20,000</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Other assets and liabilities</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>0</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>7,400</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Deferred revenue</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>0</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Accounts payable</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>25,164</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>4,658</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Prepaid expenses and other current assets</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>0</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Accrued payroll</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-left: none; border-top: none; border-bottom: 0.01in solid" align="center" valign="top"><p>(241,29316,293)</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-left: none; border-right: none; border-top: none; border-bottom: 0.01in solid" align="center" valign="top"><p>97,470</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>Net cash used in operating activities</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-left: none; border-top: none; border-bottom: 0.01in solid" align="center" valign="top"><p>(344,180)</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-left: none; border-right: none; border-top: none; border-bottom: 0.01in solid" align="center" valign="top"><p>(330,185)</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>CASH FLOWS FROM INVESTING ACTIVITIES </p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Cash acquired in acquisitions</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>$0</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>$0</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Capital expenditures</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-left: none; border-top: none; border-bottom: 0.01in solid" align="center" valign="top"><p>$0</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-left: none; border-right: none; border-top: none; border-bottom: 0.01in solid" align="center" valign="top"><p>$(1,600)</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>Net cash used in investing activities</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-left: none; border-top: none; border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-left: none; border-right: none; border-top: none; border-bottom: 0.01in solid" align="center" valign="top"><p>(1,600)</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>CASH FLOWS FROM FINANCING ACTIVITIES</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Payments on notes payable and capital lease obligations</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>$0</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>$0</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Proceeds from subscriptions receivable</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>$237,000240,000</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>$302,000</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Proceeds from notes payable to stockholder</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>0</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>48,290</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Issuance of common stock for cash</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>189,000186,000</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Payment on note payable to stockholder</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>(18,521)</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Warrants exercised</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>13,000</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>&#160;Fee for stock issuances</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-left: none; border-top: none; border-bottom: 0.01in solid" align="center" valign="top"><p>(4,900)</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-left: none; border-right: none; border-top: none; border-bottom: 0.01in solid" align="center" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>Net cash provided by financing activities</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-left: none; border-top: none; border-bottom: 0.01in solid" align="center" valign="top"><p>415,579</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-left: none; border-right: none; border-top: none; border-bottom: 0.01in solid" align="center" valign="top"><p>350,290</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>Net increase (decrease) in cash and cash equivalents</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>71,399</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-bottom: none; border-left: none; border-right: none; border-top: none" align="center" valign="top"><p>18,505</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" valign="top"><p>Cash and cash equivalents, beginning of period</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-left: none; border-top: none; border-bottom: 0.01in solid" align="center" valign="top"><p>10</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-bottom: none; border-left: none; border-top: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-left: none; border-right: none; border-top: none; border-bottom: 0.01in solid" align="center" valign="top"><p>1,088</p>
</td>
</tr>
<tr>
<td class="table464column1" width="54%" style="border-right: none; border-left: none; border-top: none; border-bottom: none" valign="top"><p>Cash and cash equivalents, end of period</p>
</td>
<td class="table464column2" width="21%" style="border-right: none; border-left: none; border-top: none; border-bottom: 0.01in double" align="center" valign="top"><p>$71,409</p>
</td>
<td class="table464column3" width="4%" style="border-right: none; border-left: none; border-top: none; border-bottom: none" align="center" valign="top"><p>&#160;</p>
</td>
<td class="table464column4" width="21%" style="border-left: none; border-right: none; border-top: none; border-bottom: 0.01in double" align="center" valign="top"><p>$19,593</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="58%" style="border-bottom: 0.01in solid" valign="top"><p>SUPPLEMENTAL DISCLOSURE OF NON-CASH</p>
<p>INVESTING AND OTHER CASH FLOW INFORMATION</p>
</td>
<td width="42%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="33%" style="border-bottom: 0.01in solid" valign="top"><p>Six Months Ended June 30, 2002:</p>
</td>
<td width="67%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In January 2002, the Company entered into a one-year consulting agreement, by issuing 120,000 shares of
stock valued at $10,800.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In February 2002, the Company entered into a four-month consulting agreement, by issuing 300,000
shares of stock valued at $30,000.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In March 2002, the Company entered into a one-month consulting agreement, by issuing 75,000 shares of
stock valued at $7,500.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In March 2002, the Company issued 75,000 shares in payment of legal services, which shares of stock
were valued at $6,000.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In April 2002, the Company entered into a one-month consulting agreement, by issuing 75,000 shares of
stock valued at $6,000.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In April 2002, the Company issued 500,000 shares in payment of legal services, which shares of stock
were valued at $35,000.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In April 2002, the Company issued 500,000 shares of stock to a consultant valued at $35,000.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In April 2002, the Company issued a total of 9,000,000 shares to certain officers, in connection with their
respective employment agreements, which shares were valued at $960,000.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In April 2002, the Company issued 200,000 in payment of a $20,000 account payable.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In April 2002, the Company entered into a six-month consulting agreement, by issuing 900,000 shares of
stock valued at $99,000.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In April 2002, the Company entered into a six-month consulting agreement, by issuing 250,000 shares of
stock valued at $27,500.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In April 2002, the Company entered into a six-month consulting agreement, by issuing 250,000 shares of
stock valued at $27,500.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In April 2002, the Company entered into a six-month consulting agreement, by issuing 150,000 shares of
stock valued at $15,000.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In May 2002, the Company issued 900,000 shares in payment of legal services, which shares of stock
were valued at $60,000.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In May 2002, the Company entered into a one-month consulting agreement, by issuing 75,000 shares of
stock valued at $4,500.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="33%" style="border-bottom: 0.01in solid" valign="top"><p>Six Months Ended June 30, 2001:</p>
</td>
<td width="67%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><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 width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><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 width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><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 width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In April 2001, the Company issued 300,000 shares of stock valued at $183,000, under a consulting
agreement.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In May 2001, the Company issued 200,000 shares of stock valued at $62,000, in payment of a finder&#8217;s fee
arising out of a common stock purchase agreement.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In May 2001, the Company issued 60,000 shares of stock valued at $24,000, under a consulting
agreement.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>In June 2001, the Company issued 20,000 shares of stock valued at $7,400, pursuant to a settlement
agreement.</p>
</td>
</tr>
<tr>
<td width="6%" align="right" valign="top"><p>-</p>
</td>
<td width="94%" valign="top"><p>During the six months ended June 30, 2001, the Company issued a total of 70,000 shares of stock to a
consultant, which shares were issued under a consulting agreement at prices based on then-current market
price of the Company&#8217;s common stock.</p>
</td>
</tr>
</table>
<br>
<p>The accompanying notes are an integral part of these statements.</p>
<br>
<br>
<br>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" style="border-top: 0.0266667in solid" align="center" valign="top"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>ENGLEWOOD, COLORADO</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>SIX MONTHS ENDED JUNE 30, 2002</p>
</td>
</tr>
<tr>
<td width="100%" style="border-bottom: 0.0266667in solid" align="center" valign="top"><p>(Unaudited)</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Note 1.  Nature of Business, Organization and Basis of Presentation</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="38%" style="border-bottom: 0.01in solid" valign="top"><p>Basis of Presentation</p>
</td>
<td width="62%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>USURF America, Inc. (the &#8220;Company&#8221;), formerly Internet Media Corporation, was incorporated as Media
Entertainment, Inc. in the State of Nevada on November 1, 1996.  The Company currently provides wireless
Internet access services to a small number of customers in Del Rio, Texas, and Santa Fe, New Mexico.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="38%" style="border-bottom: 0.01in solid" valign="top"><p>Principles of Consolidation</p>
</td>
<td width="62%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>The accompanying consolidated financial statements include all the accounts of the Company and all wholly
owned subsidiaries. Inter-company transactions and balances have been eliminated in the consolidation.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="38%" style="border-bottom: 0.01in solid" valign="top"><p>Loss Per Common Share</p>
</td>
<td width="62%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>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 anti-dilutive.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Note 2. Interim Consolidated Financial Statements</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>In the opinion of management, the accompanying consolidated financial statements for the six months ended
June 30, 2002 and 2001, reflect all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial condition, results of operations and cash flows of the Company, including
subsidiaries, and include the accounts of the Company and all of its subsidiaries.  All material inter-company
transactions and balances are eliminated.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>The financial statements included herein have been prepared by the Company, 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 U.S. 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 the Company&#8217;s Annual Report on Form
10-KSB for the year ended December 31, 2001, 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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Note 3. Notes Payable to Shareholder</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="44%" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>June 30, 2002
(unaudited)</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" style="border-bottom: 0.01in solid" align="center" valign="top"><p>December 31, 2001</p>
</td>
</tr>
<tr>
<td width="8%" valign="top"><p>&#160;</p>
</td>
<td width="44%" valign="top"><p>Notes payable to majority stockholder, interest
accrues at 8%, due on demand and unsecured</p>
</td>
<td width="23%" align="center" valign="top"><p>$0</p>
</td>
<td width="2%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="23%" align="center" valign="top"><p>$18,521</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Note 4. Stock and Warrant Issuances</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>During the six months ended June 30, 2002, the Company issued shares of common stock and common stock
purchase warrants, as follows:</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>486,500 shares as finder&#8217;s fees.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>4,170,000 shares in payment of consulting and professional fees.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>7,369,600 warrants (400,000 warrants, exercise price $.049 per share; 560,000 warrants, exercise price
$.10 per share; 3,125,000 warrants, exercise price of $.15 per share; 666,000 warrants, exercise price of
$.20 per share; 3,218,000 warrants, exercise price of $.30 per share) were issued in payment of
consulting fees.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>9,000,000 shares issued to officers pursuant to employment agreements.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>3,645,833 shares sold for cash.</p>
</td>
</tr>
<tr>
<td width="8%" align="right" valign="top"><p>-</p>
</td>
<td width="92%" valign="top"><p>1,200,000 shares issued in payment of accounts payable and advertising expenses.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Note 5. Contingencies</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="38%" style="border-bottom: 0.01in solid" valign="top"><p>A. Bankruptcy</p>
</td>
<td width="62%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>On September 29, 2000, three creditors of CyberHighway filed an involuntary petition in the Idaho Federal
Bankruptcy Court, styled In Re: CyberHighway, Inc..  In December 2000, CyberHighway and the petitioning
creditors filed a joint motion to dismiss this proceeding.  However, some of CyberHighway&#8217;s creditors objected
to the joint motion to dismiss and the motion failed.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>Subsequent to the involuntary bankruptcy, CyberHighway lost all of its customers.  Due to this loss of customer
base, the Company's intangible assets relating to those customers became worthless and were written off in 2000.
Due to this change in operating environment, goodwill was impaired and, consequently, the goodwill associated
with these operations was written off in the 2000 statement of operations.</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="38%" style="border-bottom: 0.01in solid" valign="top"><p>B. Potential Rescission Claims</p>
</td>
<td width="62%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>From January 2000 through June 2001, a total of 4,906,549 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 $5,090,252.  For a period of one year from issuance, the
issuees of these shares had a potential claim for rescission of their respective issuance transactions.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>At December 31, 2001, 2,138,726 of these shares have been reflected under the redeemable stock caption on the
accompanying balance sheet with an assigned value of $1,192,700.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>At June 30, 2002, none of these shares remained subject to potential rescission claims.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>The diminishing number of shares subject to potential rescission claims was caused either by the expiration of
the respective statute of limitations periods or by the transfer of the subject shares by the original issuees.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>None of these potential rescission claims was ever asserted against the Company.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Note 6. Financing Transaction</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>On May 9, 2001, the Company signed an amended and restated common stock purchase agreement with an
unrelated company to sell up to 6,000,000 shares of common stock for up to $10,000,000.  The purchase price of
the shares under this purchase agreement varies, based on market prices of the Company's common stock.  The
purchase 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 common stock.  The registration statement filed with
respect to this financing transaction became effective on June 29, 2001.  The commencement date of the
purchase agreement was July 10, 2001. To date, the Company has received approximately $395,000 in proceeds
under the purchase agreement, approximately $55,000 of which was received by the Company during the first six
months of 2002.  The purchase agreement remains in effect.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Note 7. Stock Ownership Plan</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>In March 2002, the Company adopted a 2002 Stock Ownership Plan for employees and consultants, reserving
3,000,000 shares of its common stock for issuance thereunder.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>In March 2002, the Company entered into a consulting and marketing license agreement with a third party, under
which agreement the Company granted the consultant options, under its 2002 Stock Ownership Plan, to purchase
up to $600,000 of its common stock, up to $50,000 per month for ten years, the per share exercise price being
based on future market prices, with a 38.75% discount to the market price on the date of exercise.  In March and
April 2002, the consultant exercised options to purchase $98,000 of Company common stock.  2,000,000 shares
of common stock were issued pursuant to this option exercise.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>In May 2002, the Company issued to a consultant 75,000 shares of stock valued at $4,500, under its 2002 Stock
Ownership Plan.</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Note 8. AMEX Listing</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>Currently, we are not in compliance with the continued listing guidelines of AMEX.  During the second quarter
of 2001, AMEX first 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 stockholders&#8217; equity.  In July 2002, we were notified by
AMEX that we have fallen below the continued listing standards of AMEX.  We have 18 months in which to
regain compliance with AMEX&#8217;s continued listing standards.  We have fallen below certain of AMEX&#8217;s
continued listing standards: (1) losses from operations in its two most recent fiscal years with shareholders&#8217;
equity below $2 million; and (2) sustained losses so substantial in relation to the company&#8217;s overall operations or
its existing financial resources, or its financial condition in relation to its overall operations or its existing
financial resources, or its financial condition has become so impaired that it appears questionable, the opinion of
AMEX, as to whether the company will be able to continue operations and/or meet its obligations as they mature.
After AMEX reviewed our plan for regaining compliance, we were granted an extension of time (18 months) to
regain compliance with the continued listing standards.  We will be subject to periodic review by the AMEX
staff during the extension period.  Failure to make progress consistent with the plan or to regain compliance with
the continued listing standards by the end of the extension period could result in our being delisted from AMEX.
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>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="65%" style="border-bottom: 0.01in solid" valign="top"><p>Note 9. Significant Equity Purchase</p>
</td>
<td width="35%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" valign="top"><p>On June 14, 2002, the Company completed a securities purchase agreement with Evergreen Venture Partners,
LLC, whereby the Company issued units of its securities for cash in the amount of $250,000 ($115,000 in cash
plus a subscription of $10,000 in April and $125,000 in cash in June).  The Company sold to Evergreen a total of
3,645,833 shares of common stock, 3,125,000 common stock purchase warrants to purchase one a like number of
shares at an exercise price of $.15 per share and 3,125,000 common stock purchase warrants to purchase one a
like number of shares at an exercise price of $.30 per share.  Also pursuant to this agreement, the Company hired
a new president and chief executive officer, who received, as a signing bonus, 3,000,000 shares of common
stock; the Company&#8217;s former president, became Chairman of the Board, reduced the term of his remaining term
of employment from approximately 4 years to six months, waived the payment of all accrued and unpaid salary
and waived the repayment of all loans made by him to the Company, in consideration of 2,000,000 shares of
common stock; two of the Company&#8217;s vice presidents reduced the terms of their remaining terms of employment
from approximately 4 years to six months and one year to six months, respectively, and waived the payment of
all accrued and unpaid salary, in consideration of 2,000,000 shares of common stock; and the Company&#8217;s other
vice president terminated his employment with the Company.  Also, under this agreement, Evergreen has the
right to name two persons to become directors of the Company.  Evergreen has not yet named any person as a
director.</p>
</td>
</tr>
<tr>
<td width="100%" valign="top"><p>As a result of the transactions with these four officers arising out of the Evergreen agreement, the Company
incurred a charge against earnings during the second quarter of 2002 of $567,180.</p>
</td>
</tr>
</table>
<br>
<br>
<br>
<p>INDEPENDENT AUDITORS' REPORT</p>
<br>
<p>To the Board of Directors and Stockholders</p>
<p>USURF America, Inc. and Subsidiaries</p>
<p>Baton Rouge, Louisiana</p>
<br>
<p>We have audited the accompanying consolidated balance sheets of USURF America, Inc. and Subsidiaries as of
December 31, 2001 and 2000, and the related consolidated statements of operations, changes in stockholders&#8217; equity
and cash flows for each of the three years ended December 31, 2001.  These consolidated financial statements are
the responsibility of the Company&#8217;s management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.</p>
<br>
<p>We conducted our audits in accordance with auditing standards generally accepted in the United States of America.
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>
<br>
<p>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, 2001 and 2000, and the results of their
operations and cash flows for each of the three years ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.</p>
<br>
<p>As discussed more fully in Note 15, the Company is not in compliance with continued listing guidelines of AMEX.
The ultimate outcome of this uncertainty is not determinable at this time, but could have a significant impact on the
Company.  </p>
<br>
<p>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 $1.25 million.
These conditions raise substantial doubt about its ability to continue as a going concern.  Management&#8217;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>
<br>
<br>
<p>/s/ POSTLETHWAITE &amp; NETTERVILLE</p>
<br>
<p>Postlethwaite &amp; Netterville</p>
<br>
<p>Baton Rouge, Louisiana</p>
<p>April 12, 2002</p>
<br>
<br>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>BATON ROUGE, LOUISIANA</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>CONSOLIDATED BALANCE SHEETS</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>DECEMBER 31, 2001 AND 2000</p>
</td>
</tr>
</table>
<br>
<p style="text-align: center">ASSETS</p>
<br>
<div align="left">
<table width="624px" cellpadding="6" cellspacing="0">
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>2001</p>
</td>
<td width="19%" align="center" valign="top"><p>2000</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>__________</p>
</td>
<td width="19%" align="center" valign="top"><p>__________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>CURRENT ASSETS</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;Cash and cash equivalents</p>
</td>
<td width="19%" align="right" valign="top"><p>$10</p>
</td>
<td width="19%" align="right" valign="top"><p>$1,088</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;Inventory</p>
</td>
<td width="19%" align="right" valign="top"><p>134,746</p>
</td>
<td width="19%" align="right" valign="top"><p>246,721</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>134,756</p>
</td>
<td width="19%" align="right" valign="top"><p>247,809</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>PROPERTY AND EQUIPMENT</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;Cost</p>
</td>
<td width="19%" align="right" valign="top"><p>203,141</p>
</td>
<td width="19%" align="right" valign="top"><p>138,954</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;Less: accumulated depreciation</p>
</td>
<td width="19%" align="right" valign="top"><p>(125,036)</p>
</td>
<td width="19%" align="right" valign="top"><p>(69,476)</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>78,105</p>
</td>
<td width="19%" align="right" valign="top"><p>69,478</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>INVESTMENTS</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
</td>
<td width="19%" align="right" valign="top"><p>68,029</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>OTHER ASSETS</p>
</td>
<td width="19%" align="right" valign="top"><p>16,667</p>
</td>
<td width="19%" align="right" valign="top"><p>25,000</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>TOTAL ASSETS</p>
</td>
<td width="19%" align="right" valign="top"><p>$229,528</p>
</td>
<td width="19%" align="right" valign="top"><p>$410,316</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>===========</p>
</td>
<td width="19%" align="right" valign="top"><p>===========</p>
</td>
</tr>
</table>
</div>
<br>
<p>The accompanying notes are an integral part of these statements.</p>
<br>
<p style="text-align: center">LIABILITIES AND STOCKHOLDERS&#8217; DEFICIT</p>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>2001</p>
</td>
<td width="19%" align="center" valign="top"><p>2000</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>__________</p>
</td>
<td width="19%" align="center" valign="top"><p>__________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>CURRENT LIABILITIES</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;Disbursements in excess of cash balances</p>
</td>
<td width="19%" align="right" valign="top"><p>$15,539</p>
</td>
<td width="19%" align="right" valign="top"><p>$42,469</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;Accounts payable</p>
</td>
<td width="19%" align="right" valign="top"><p>1,034,619</p>
</td>
<td width="19%" align="right" valign="top"><p>1,472,030</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;Accrued payroll</p>
</td>
<td width="19%" align="right" valign="top"><p>265,978</p>
</td>
<td width="19%" align="right" valign="top"><p>158,262</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;Other current liabilities</p>
</td>
<td width="19%" align="right" valign="top"><p>54,996</p>
</td>
<td width="19%" align="right" valign="top"><p>41,824</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;Property dividends payable</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
</td>
<td width="19%" align="right" valign="top"><p>43,750</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;Notes payable to stockholder</p>
</td>
<td width="19%" align="right" valign="top"><p>18,521</p>
</td>
<td width="19%" align="right" valign="top"><p>6,638</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>1,389,653</p>
</td>
<td width="19%" align="right" valign="top"><p>1,764,973</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>LONG-TERM LIABILITIES</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;Deferred income taxes</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>1,389,653</p>
</td>
<td width="19%" align="right" valign="top"><p>1,764,973</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>REDEEMABLE COMMON STOCK</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>Common stock subject to rescission, 2,138,726 shares outstanding
at December 31, 2001, and 2,767,823 shares outstanding at
December 31, 2000, $.0001 par value per share</p>
</td>
<td width="19%" align="right" valign="top"><p>1,192,700</p>
</td>
<td width="19%" align="right" valign="top"><p>3,897,552</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>Deferred consulting</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
</td>
<td width="19%" align="right" valign="top"><p>(574,000)</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>1,192,700</p>
</td>
<td width="19%" align="right" valign="top"><p>3,323,552</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>STOCKHOLDERS&#8217; DEFICIT</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>Common stock, $.0001 par value; Authorized: 100,000,000 shares;
Issued and outstanding: 23,848,108 in 2001 and 13,920,985 in 2000</p>
</td>
<td width="19%" align="right" valign="top"><p>2,385</p>
</td>
<td width="19%" align="right" valign="top"><p>1,392</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>Additional paid-in capital</p>
</td>
<td width="19%" align="right" valign="top"><p>35,642,817</p>
</td>
<td width="19%" align="right" valign="top"><p>30,286,687</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>Accumulated deficit</p>
</td>
<td width="19%" align="right" valign="top"><p>(37,000,628)</p>
</td>
<td width="19%" align="right" valign="top"><p>(34,502,160)</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>Subscriptions receivable</p>
</td>
<td width="19%" align="right" valign="top"><p>165,750</p>
</td>
<td width="19%" align="right" valign="top"><p>933,514</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>Deferred consulting</p>
</td>
<td width="19%" align="right" valign="top"><p>(1,163,149)</p>
</td>
<td width="19%" align="right" valign="top"><p>(1,397,642)</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>(2,352,825)</p>
</td>
<td width="19%" align="right" valign="top"><p>(4,678,209)</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>TOTAL LIABILITIES AND STOCKHOLDERS&#8217; DEFICIT</p>
</td>
<td width="19%" align="right" valign="top"><p>$229,528</p>
</td>
<td width="19%" align="right" valign="top"><p>$410,316</p>
</td>
</tr>
<tr>
<td width="62%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>===========</p>
</td>
<td width="19%" align="right" valign="top"><p>===========</p>
</td>
</tr>
</table>
<br>
<p>The accompanying notes are an integral part of these statements.</p>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>BATON ROUGE, LOUISIANA</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>CONSOLIDATED STATEMENTS OF OPERATIONS</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>2001</p>
</td>
<td width="17%" align="center" valign="top"><p>2000</p>
</td>
<td width="18%" align="center" valign="top"><p>1999</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="center" valign="top"><p>__________</p>
</td>
<td width="17%" align="center" valign="top"><p>__________</p>
</td>
<td width="18%" align="center" valign="top"><p>__________</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>REVENUES</p>
</td>
<td width="18%" valign="top"><p>&#160;</p>
</td>
<td width="17%" valign="top"><p>&#160;</p>
</td>
<td width="18%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;Revenues</p>
</td>
<td width="18%" align="right" valign="top"><p>$7,446</p>
</td>
<td width="17%" align="right" valign="top"><p>$1,781,082</p>
</td>
<td width="18%" align="right" valign="top"><p>$2,268,511</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;Equipment sales</p>
</td>
<td width="18%" align="right" valign="top"><p>0</p>
</td>
<td width="17%" align="right" valign="top"><p>91,547</p>
</td>
<td width="18%" align="right" valign="top"><p>278,714</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Internet access costs, cost of goods sold</p>
</td>
<td width="18%" align="right" valign="top"><p>(11,999)</p>
</td>
<td width="17%" align="right" valign="top"><p>(2,145,955)</p>
</td>
<td width="18%" align="right" valign="top"><p>(1,152,721)</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Inventory write-down</p>
</td>
<td width="18%" align="right" valign="top"><p>(97,526)</p>
</td>
<td width="17%" align="right" valign="top"><p>0</p>
</td>
<td width="18%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>__________</p>
</td>
<td width="17%" align="right" valign="top"><p>__________</p>
</td>
<td width="18%" align="right" valign="top"><p>__________</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Gross profit (loss)</p>
</td>
<td width="18%" align="right" valign="top"><p>(102,079)</p>
<p>_________</p>
</td>
<td width="17%" align="right" valign="top"><p>(273,326)</p>
<p>__________</p>
</td>
<td width="18%" align="right" valign="top"><p>1,394,504</p>
<p>__________</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>OPERATING EXPENSES</p>
</td>
<td width="18%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;Depreciation and amortization</p>
</td>
<td width="18%" align="right" valign="top"><p>70,105</p>
</td>
<td width="17%" align="right" valign="top"><p>7,618,755</p>
</td>
<td width="18%" align="right" valign="top"><p>7,653,924</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;Professional fees</p>
</td>
<td width="18%" align="right" valign="top"><p>1,803,751</p>
</td>
<td width="17%" align="right" valign="top"><p>4,168,610</p>
</td>
<td width="18%" align="right" valign="top"><p>1,945,935</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;Rent</p>
</td>
<td width="18%" align="right" valign="top"><p>28,528</p>
</td>
<td width="17%" align="right" valign="top"><p>216,416</p>
</td>
<td width="18%" align="right" valign="top"><p>132,395</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;Salaries and commissions</p>
</td>
<td width="18%" align="right" valign="top"><p>856,124</p>
</td>
<td width="17%" align="right" valign="top"><p>2,060,528</p>
</td>
<td width="18%" align="right" valign="top"><p>1,603,556</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;Advertising</p>
</td>
<td width="18%" align="right" valign="top"><p>0</p>
</td>
<td width="17%" align="right" valign="top"><p>24,583</p>
</td>
<td width="18%" align="right" valign="top"><p>125,034</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;Other</p>
</td>
<td width="18%" align="right" valign="top"><p>93,602</p>
</td>
<td width="17%" align="right" valign="top"><p>886,691</p>
</td>
<td width="18%" align="right" valign="top"><p>399,914</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>__________</p>
</td>
<td width="17%" align="right" valign="top"><p>__________</p>
</td>
<td width="18%" align="right" valign="top"><p>__________</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>2,852,110</p>
</td>
<td width="17%" align="right" valign="top"><p>14,975,583</p>
</td>
<td width="18%" align="right" valign="top"><p>11,860,758</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>__________</p>
</td>
<td width="17%" align="right" valign="top"><p>__________</p>
</td>
<td width="18%" align="right" valign="top"><p>__________</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>LOSS FROM OPERATIONS</p>
</td>
<td width="18%" align="right" valign="top"><p>(2,954,189)</p>
<p>__________</p>
</td>
<td width="17%" align="right" valign="top"><p>(15,248,909)</p>
<p>__________</p>
</td>
<td width="18%" align="right" valign="top"><p>(10,466,254)</p>
<p>__________</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>OTHER INCOME (EXPENSE)</p>
</td>
<td width="18%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;Other income</p>
<p>&#160;Litigation settlement</p>
</td>
<td width="18%" align="right" valign="top"><p>0</p>
<p>0</p>
</td>
<td width="17%" align="right" valign="top"><p>67,447</p>
<p>0</p>
</td>
<td width="18%" align="right" valign="top"><p>23,875</p>
<p>(957,075)</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;Impairment loss</p>
</td>
<td width="18%" align="right" valign="top"><p>(31,118)</p>
</td>
<td width="17%" align="right" valign="top"><p>(9,239,310)</p>
</td>
<td width="18%" align="right" valign="top"><p>(1,164,561)</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;Interest expense</p>
</td>
<td width="18%" align="right" valign="top"><p>(3,066)</p>
</td>
<td width="17%" align="right" valign="top"><p>(21,418)</p>
</td>
<td width="18%" align="right" valign="top"><p>(19,309)</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>__________</p>
</td>
<td width="17%" align="right" valign="top"><p>__________</p>
</td>
<td width="18%" align="right" valign="top"><p>__________</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>(34,184)</p>
<p>__________</p>
</td>
<td width="17%" align="right" valign="top"><p>(9,193,281)</p>
<p>___________</p>
</td>
<td width="18%" align="right" valign="top"><p>(2,117,070)</p>
<p>__________</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>LOSS BEFORE EXTRAORDINARY ITEMS</p>
</td>
<td width="18%" align="right" valign="top"><p>(2,988,373)</p>
<p>__________</p>
</td>
<td width="17%" align="right" valign="top"><p>(24,442,190)</p>
<p>__________</p>
</td>
<td width="18%" align="right" valign="top"><p>(12,583,324)</p>
<p>__________</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>EXTRAORDINARY ITEMS</p>
</td>
<td width="18%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="17%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Gain on debt forgiveness</p>
</td>
<td width="18%" align="right" valign="top"><p>489,905</p>
</td>
<td width="17%" align="right" valign="top"><p>0</p>
</td>
<td width="18%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Gain on rescission</p>
</td>
<td width="18%" align="right" valign="top"><p>0</p>
</td>
<td width="17%" align="right" valign="top"><p>961,436</p>
</td>
<td width="18%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>__________</p>
</td>
<td width="17%" align="right" valign="top"><p>__________</p>
</td>
<td width="18%" align="right" valign="top"><p>__________</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>489,905</p>
</td>
<td width="17%" align="right" valign="top"><p>961,436</p>
</td>
<td width="18%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>__________</p>
</td>
<td width="17%" align="right" valign="top"><p>__________</p>
</td>
<td width="18%" align="right" valign="top"><p>__________</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>LOSS BEFORE INCOME TAX</p>
</td>
<td width="18%" align="right" valign="top"><p>(2,498,468)</p>
</td>
<td width="17%" align="right" valign="top"><p>(23,480,754)</p>
</td>
<td width="18%" align="right" valign="top"><p>(12,583,324)</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>INCOME TAX BENEFIT</p>
</td>
<td width="18%" align="right" valign="top"><p>0</p>
</td>
<td width="17%" align="right" valign="top"><p>1,595,424</p>
</td>
<td width="18%" align="right" valign="top"><p>1,653,161</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>__________</p>
</td>
<td width="17%" align="right" valign="top"><p>__________</p>
</td>
<td width="18%" align="right" valign="top"><p>__________</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>NET LOSS</p>
</td>
<td width="18%" align="right" valign="top"><p>$(2,498,468)</p>
</td>
<td width="17%" align="right" valign="top"><p>$(21,885,330)</p>
</td>
<td width="18%" align="right" valign="top"><p>$(10,930,163)</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>=========</p>
</td>
<td width="17%" align="right" valign="top"><p>=========</p>
</td>
<td width="18%" align="right" valign="top"><p>========</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Net loss per common share</p>
</td>
<td width="18%" align="right" valign="top"><p>$(0.13)</p>
</td>
<td width="17%" align="right" valign="top"><p>$(1.68)</p>
</td>
<td width="18%" align="right" valign="top"><p>$(0.96)</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>=========</p>
</td>
<td width="17%" align="right" valign="top"><p>=========</p>
</td>
<td width="18%" align="right" valign="top"><p>========</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>Weighted average number of shares outstanding</p>
</td>
<td width="18%" align="right" valign="top"><p>18,616,434</p>
</td>
<td width="17%" align="right" valign="top"><p>13,000,391</p>
</td>
<td width="18%" align="right" valign="top"><p>11,419,641</p>
</td>
</tr>
<tr>
<td width="47%" valign="top"><p>&#160;</p>
</td>
<td width="18%" align="right" valign="top"><p>=========</p>
</td>
<td width="17%" align="right" valign="top"><p>=========</p>
</td>
<td width="18%" align="right" valign="top"><p>========</p>
</td>
</tr>
</table>
<br>
<p>The accompanying notes are an integral part of these statements.</p>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>BATON ROUGE, LOUISIANA</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS&#8217; DEFICIT</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="13%" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>Shares</p>
</td>
<td width="13%" align="center" valign="top"><p>Common Stock</p>
</td>
<td width="13%" align="center" valign="top"><p>Paid-in Capital</p>
</td>
<td width="13%" align="center" valign="top"><p>Accumulated
Deficit</p>
</td>
<td width="13%" align="center" valign="top"><p>Subscriptions
Receivable</p>
</td>
<td width="13%" align="center" valign="top"><p>Deferred
Consulting</p>
</td>
<td width="9%" align="center" valign="top"><p>Total</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="center" valign="top"><p>___________</p>
</td>
<td width="13%" align="center" valign="top"><p>___________</p>
</td>
<td width="13%" align="center" valign="top"><p>___________</p>
</td>
<td width="13%" align="center" valign="top"><p>___________</p>
</td>
<td width="13%" align="center" valign="top"><p>___________</p>
</td>
<td width="13%" align="center" valign="top"><p>___________</p>
</td>
<td width="9%" align="center" valign="top"><p>___________</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Balance,
12/31/98</p>
</td>
<td width="13%" align="right" valign="top"><p>8,497,259</p>
</td>
<td width="13%" align="right" valign="top"><p>850</p>
</td>
<td width="13%" align="right" valign="top"><p>2,874,189</p>
</td>
<td width="13%" align="right" valign="top"><p>(1,686,667)</p>
</td>
<td width="13%" align="right" valign="top"><p>(860)</p>
</td>
<td width="13%" align="right" valign="top"><p>(1,102,924)</p>
</td>
<td width="9%" align="right" valign="top"><p>84,588</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Issuance of
common stock
for future
services</p>
</td>
<td width="13%" align="right" valign="top"><p>566,000</p>
</td>
<td width="13%" align="right" valign="top"><p>57</p>
</td>
<td width="13%" align="right" valign="top"><p>2,215,943</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>(2,216,000)</p>
</td>
<td width="9%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Issuance of
common stock
for acquisitions</p>
</td>
<td width="13%" align="right" valign="top"><p>3,030,000</p>
</td>
<td width="13%" align="right" valign="top"><p>303</p>
</td>
<td width="13%" align="right" valign="top"><p>21,586,726</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>21,587,029</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Issuance of
common stock
for cash</p>
</td>
<td width="13%" align="right" valign="top"><p>115,000</p>
</td>
<td width="13%" align="right" valign="top"><p>11</p>
</td>
<td width="13%" align="right" valign="top"><p>394,989</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>395,000</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Exercise of
warrants</p>
</td>
<td width="13%" align="right" valign="top"><p>176,857</p>
</td>
<td width="13%" align="right" valign="top"><p>18</p>
</td>
<td width="13%" align="right" valign="top"><p>337,304</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>337,322</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Issuance of
subscription
agreement</p>
</td>
<td width="13%" align="right" valign="top"><p>50,000</p>
</td>
<td width="13%" align="right" valign="top"><p>5</p>
</td>
<td width="13%" align="right" valign="top"><p>149,995</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>(150,000)</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Proceeds on
subscription
receivable</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>150,000</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>150,000</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Issuance of
stock per
employment
agreement</p>
</td>
<td width="13%" align="right" valign="top"><p>11,000</p>
</td>
<td width="13%" align="right" valign="top"><p>1</p>
</td>
<td width="13%" align="right" valign="top"><p>43,311</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>43,312</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Expenses to be
paid by issuance
of common
stock</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>257,167</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>257,167</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Issuance of
common stock
for settlement</p>
</td>
<td width="13%" align="right" valign="top"><p>340,000</p>
</td>
<td width="13%" align="right" valign="top"><p>34</p>
</td>
<td width="13%" align="right" valign="top"><p>913,716</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>913,750</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Stock warrants</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>145,298</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>145,298</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Amortization of
deferred
consulting</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>1,457,006</p>
</td>
<td width="9%" align="right" valign="top"><p>1,457,006</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Net loss</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>(10,930,163)</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>(10,930,163)</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="9%" align="right" valign="top"><p>___________</p>
</td>
</tr>
</table>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="13%" valign="top"><p>Balance,
12/31/99</p>
</td>
<td width="13%" align="right" valign="top"><p>12,786,116</p>
</td>
<td width="13%" align="right" valign="top"><p>1,279</p>
</td>
<td width="13%" align="right" valign="top"><p>28,918,638</p>
</td>
<td width="13%" align="right" valign="top"><p>(12,616,830)</p>
</td>
<td width="13%" align="right" valign="top"><p>(860)</p>
</td>
<td width="13%" align="right" valign="top"><p>(1,861,918)</p>
</td>
<td width="9%" align="right" valign="top"><p>14,440,309</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Issuance of
common stock
for future
services</p>
</td>
<td width="13%" align="right" valign="top"><p>425,227</p>
</td>
<td width="13%" align="right" valign="top"><p>42</p>
</td>
<td width="13%" align="right" valign="top"><p>958,138</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>(958,180)</p>
</td>
<td width="9%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Issuance of
common stock
for cash</p>
</td>
<td width="13%" align="right" valign="top"><p>400,000</p>
</td>
<td width="13%" align="right" valign="top"><p>40</p>
</td>
<td width="13%" align="right" valign="top"><p>79,960</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>(10,000)</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>70,000</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Issuance of
subscription
agreement</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>(25,000)</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>(25,000)</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Issuance of
stock per
employment
agreement</p>
</td>
<td width="13%" align="right" valign="top"><p>19,642</p>
</td>
<td width="13%" align="right" valign="top"><p>2</p>
</td>
<td width="13%" align="right" valign="top"><p>115,080</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>115,082</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Expenses paid
by issuance of
common stock</p>
</td>
<td width="13%" align="right" valign="top"><p>290,000</p>
</td>
<td width="13%" align="right" valign="top"><p>29</p>
</td>
<td width="13%" align="right" valign="top"><p>214,871</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>214,900</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Conversion of
debt to equity</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>969,374</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>969,374</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Amortization of
deferred
consulting</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>1,422,456</p>
</td>
<td width="9%" align="right" valign="top"><p>1,422,456</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Net loss</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>(21,885,330)</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>(21,885,330)</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="9%" align="right" valign="top"><p>___________</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Balance,
12/31/2000</p>
</td>
<td width="13%" align="right" valign="top"><p>13,920,985</p>
</td>
<td width="13%" align="right" valign="top"><p>1,392</p>
</td>
<td width="13%" align="right" valign="top"><p>30,286,687</p>
</td>
<td width="13%" align="right" valign="top"><p>(34,502,160)</p>
</td>
<td width="13%" align="right" valign="top"><p>933,514</p>
</td>
<td width="13%" align="right" valign="top"><p>(1,397,642)</p>
</td>
<td width="9%" align="right" valign="top"><p>(4,678,209)</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Plus: shares
subject to
rescission</p>
</td>
<td width="13%" align="right" valign="top"><p>2,767,826</p>
<p>__________</p>
</td>
<td width="13%" align="right" valign="top"><p>277</p>
<p>__________</p>
</td>
<td width="13%" align="right" valign="top"><p>3,897,275</p>
<p>__________</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
<p>__________</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
<p>__________</p>
</td>
<td width="13%" align="right" valign="top"><p>(574,000)</p>
<p>__________</p>
</td>
<td width="9%" align="right" valign="top"><p>3,323,552</p>
<p>__________</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Balance,
12/31/2000</p>
</td>
<td width="13%" align="right" valign="top"><p>16,688,811</p>
</td>
<td width="13%" align="right" valign="top"><p>1,669</p>
</td>
<td width="13%" align="right" valign="top"><p>34,183,962</p>
</td>
<td width="13%" align="right" valign="top"><p>(34,502,160)</p>
</td>
<td width="13%" align="right" valign="top"><p>933,514</p>
</td>
<td width="13%" align="right" valign="top"><p>(1,971,642)</p>
</td>
<td width="9%" align="right" valign="top"><p>(1,354,657)</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Issuance of
common stock
for future
services</p>
</td>
<td width="13%" align="right" valign="top"><p>2,005,000</p>
</td>
<td width="13%" align="right" valign="top"><p>201</p>
</td>
<td width="13%" align="right" valign="top"><p>365,049</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>(365,250)</p>
</td>
<td width="9%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Professional fees
paid by issuance
of common
stock</p>
</td>
<td width="13%" align="right" valign="top"><p>1,534,500</p>
</td>
<td width="13%" align="right" valign="top"><p>154</p>
</td>
<td width="13%" align="right" valign="top"><p>526,956</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>527,110</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Compensa-tion
paid/pay-able by
issuance of
common stock</p>
</td>
<td width="13%" align="right" valign="top"><p>819,361</p>
</td>
<td width="13%" align="right" valign="top"><p>82</p>
</td>
<td width="13%" align="right" valign="top"><p>180,865</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>96,000</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>276,947</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Issuance of
common stock
for cash</p>
</td>
<td width="13%" align="right" valign="top"><p>2,500,000</p>
</td>
<td width="13%" align="right" valign="top"><p>250</p>
</td>
<td width="13%" align="right" valign="top"><p>340,000</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>340,250</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Stock issuance
costs</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>(19,200)</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>(19,200)</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Exercise of
warrants</p>
</td>
<td width="13%" align="right" valign="top"><p>100,000</p>
</td>
<td width="13%" align="right" valign="top"><p>10</p>
</td>
<td width="13%" align="right" valign="top"><p>14,990</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>(15,000)</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Stock issued for
debt conversion</p>
</td>
<td width="13%" align="right" valign="top"><p>774,162</p>
</td>
<td width="13%" align="right" valign="top"><p>77</p>
</td>
<td width="13%" align="right" valign="top"><p>943,437</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>(943,514)</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Issuance of
subscription
agreement</p>
</td>
<td width="13%" align="right" valign="top"><p>1,545,000</p>
</td>
<td width="13%" align="right" valign="top"><p>154</p>
</td>
<td width="13%" align="right" valign="top"><p>291,846</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>(292,000)</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Subscription
agreement for
stock bonus</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>27,000</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>27,000</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Proceeds on
subscription
receivable</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>359,750</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>359,750</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Issuance of
common stock
for settlement</p>
</td>
<td width="13%" align="right" valign="top"><p>20,000</p>
</td>
<td width="13%" align="right" valign="top"><p>2</p>
</td>
<td width="13%" align="right" valign="top"><p>7,398</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>7,400</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Amortization of
deferred
consulting</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>1,173,743</p>
</td>
<td width="9%" align="right" valign="top"><p>1,173,743</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Net loss</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>(2,498,468)</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="13%" align="right" valign="top"><p>0</p>
</td>
<td width="9%" align="right" valign="top"><p>(2,498,468)</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="9%" align="right" valign="top"><p>___________</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Balance at
December 31,
2001</p>
</td>
<td width="13%" align="right" valign="top"><p>25,986,834</p>
</td>
<td width="13%" align="right" valign="top"><p>$2,599</p>
</td>
<td width="13%" align="right" valign="top"><p>$36,835,303</p>
</td>
<td width="13%" align="right" valign="top"><p>$(37,000,628)</p>
</td>
<td width="13%" align="right" valign="top"><p>$165,750</p>
</td>
<td width="13%" align="right" valign="top"><p>(1,163,149)</p>
</td>
<td width="9%" align="right" valign="top"><p>$(1,160,125)</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>Less: shares
subject to
rescission</p>
</td>
<td width="13%" align="right" valign="top"><p>(2,138,726)</p>
</td>
<td width="13%" align="right" valign="top"><p>(214)</p>
</td>
<td width="13%" align="right" valign="top"><p>(1,192,486)</p>
</td>
<td width="13%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="9%" align="right" valign="top"><p>(1,192,700)</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="13%" align="right" valign="top"><p>___________</p>
</td>
<td width="9%" align="right" valign="top"><p>___________</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="right" valign="top"><p>23,848,108</p>
</td>
<td width="13%" align="right" valign="top"><p>$2,385</p>
</td>
<td width="13%" align="right" valign="top"><p>$35,642,817</p>
</td>
<td width="13%" align="right" valign="top"><p>$(37,000,628)</p>
</td>
<td width="13%" align="right" valign="top"><p>$165,750</p>
</td>
<td width="13%" align="right" valign="top"><p>$(1,163,149)</p>
</td>
<td width="9%" align="right" valign="top"><p>$(2,352,825)</p>
</td>
</tr>
<tr>
<td width="13%" valign="top"><p>&#160;</p>
</td>
<td width="13%" align="right" valign="top"><p>==========</p>
</td>
<td width="13%" align="right" valign="top"><p>==========</p>
</td>
<td width="13%" align="right" valign="top"><p>==========</p>
</td>
<td width="13%" align="right" valign="top"><p>==========</p>
</td>
<td width="13%" align="right" valign="top"><p>==========</p>
</td>
<td width="13%" align="right" valign="top"><p>==========</p>
</td>
<td width="9%" align="right" valign="top"><p>==========</p>
</td>
</tr>
</table>
<br>
<p>The accompanying notes are an integral part of these statements.</p>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>BATON ROUGE, LOUISIANA</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>CONSOLIDATED STATEMENTS OF CASH FLOWS</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999</p>
</td>
</tr>
</table>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>2001</p>
</td>
<td width="19%" align="center" valign="top"><p>2000</p>
</td>
<td width="20%" align="center" valign="top"><p>1999</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>__________</p>
</td>
<td width="19%" align="center" valign="top"><p>__________</p>
</td>
<td width="20%" align="center" valign="top"><p>__________</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>CASH FLOWS FROM OPERATING
ACTIVITIES</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="20%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>___________________________</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="20%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Net loss</p>
</td>
<td width="19%" align="right" valign="top"><p>$(2,498,468)</p>
</td>
<td width="19%" align="right" valign="top"><p>$(21,885,330)</p>
</td>
<td width="20%" align="right" valign="top"><p>$(10,930,163)</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Adjustments to reconcile net loss to net cash
used in operating activities</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Depreciation and amortization</p>
</td>
<td width="19%" align="right" valign="top"><p>70,105</p>
</td>
<td width="19%" align="right" valign="top"><p>7,618,755</p>
</td>
<td width="20%" align="right" valign="top"><p>7,653,924</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Consulting fees paid with stock</p>
</td>
<td width="19%" align="right" valign="top"><p>1,623,903</p>
</td>
<td width="19%" align="right" valign="top"><p>3,000,276</p>
</td>
<td width="20%" align="right" valign="top"><p>1,457,006</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Litigation settlement</p>
</td>
<td width="19%" align="right" valign="top"><p>7,400</p>
</td>
<td width="19%" align="right" valign="top"><p>214,900</p>
</td>
<td width="20%" align="right" valign="top"><p>913,750</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Gain on rescission</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
</td>
<td width="19%" align="right" valign="top"><p>(961,436)</p>
</td>
<td width="20%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Impairment loss and write down of assets</p>
</td>
<td width="19%" align="right" valign="top"><p>128,644</p>
</td>
<td width="19%" align="right" valign="top"><p>10,577,878</p>
</td>
<td width="20%" align="right" valign="top"><p>1,164,561</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Legal fees paid with stock</p>
</td>
<td width="19%" align="right" valign="top"><p>66,000</p>
</td>
<td width="19%" align="right" valign="top"><p>281,498</p>
</td>
<td width="20%" align="right" valign="top"><p>126,500</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Compensation expense paid with stock</p>
</td>
<td width="19%" align="right" valign="top"><p>303,947</p>
</td>
<td width="19%" align="right" valign="top"><p>774,066</p>
</td>
<td width="20%" align="right" valign="top"><p>319,301</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Deferred income taxes</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
</td>
<td width="19%" align="right" valign="top"><p>(1,595,423)</p>
</td>
<td width="20%" align="right" valign="top"><p>(1,653,161)</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Loss on Disposal</p>
<p>Gain on debt forgiveness</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
<p>(489,905)</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
<p>0</p>
</td>
<td width="20%" align="right" valign="top"><p>280</p>
<p>0</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Changes in operating assets and liabilities</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Accounts receivable</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
</td>
<td width="19%" align="right" valign="top"><p>59,098</p>
</td>
<td width="20%" align="right" valign="top"><p>35,537</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Inventory</p>
</td>
<td width="19%" align="right" valign="top"><p>1,398</p>
</td>
<td width="19%" align="right" valign="top"><p>71,000</p>
</td>
<td width="20%" align="right" valign="top"><p>49,518</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Prepaid expenses and other current assets</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
</td>
<td width="19%" align="right" valign="top"><p>5,500</p>
</td>
<td width="20%" align="right" valign="top"><p>7,980</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Accounts payable</p>
</td>
<td width="19%" align="right" valign="top"><p>(41,481)</p>
</td>
<td width="19%" align="right" valign="top"><p>1,108,365</p>
</td>
<td width="20%" align="right" valign="top"><p>(36,857)</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Accrued payroll</p>
</td>
<td width="19%" align="right" valign="top"><p>107,716</p>
</td>
<td width="19%" align="right" valign="top"><p>40,105</p>
</td>
<td width="20%" align="right" valign="top"><p>118,157</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Other current liabilities</p>
</td>
<td width="19%" align="right" valign="top"><p>13,172</p>
</td>
<td width="19%" align="right" valign="top"><p>(174,826)</p>
</td>
<td width="20%" align="right" valign="top"><p>215,929</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Other assets and liabilities</p>
<p>&#160;Deferred revenue</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
<p>0</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
<p>(87,538)</p>
</td>
<td width="20%" align="right" valign="top"><p>(11,555)</p>
<p>23,196</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="20%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Net cash used in operating activities</p>
</td>
<td width="19%" align="right" valign="top"><p>(707,569)</p>
</td>
<td width="19%" align="right" valign="top"><p>(953,112)</p>
</td>
<td width="20%" align="right" valign="top"><p>(546,097)</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="20%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>CASH FLOWS FROM INVESTING
ACTIVITIES</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>_____________________________</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Proceeds on disposal of fixed assets</p>
</td>
<td width="19%" align="right" valign="top"><p>$0</p>
</td>
<td width="19%" align="right" valign="top"><p>$40,050</p>
</td>
<td width="20%" align="right" valign="top"><p>$15,090</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Cash acquired in acquisitions</p>
<p>Capital expenditures</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
<p>(12,681)</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
<p>(125,200)</p>
</td>
<td width="20%" align="right" valign="top"><p>186,318</p>
<p>(614,193)</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="20%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Net cash used in investing activities</p>
</td>
<td width="19%" align="right" valign="top"><p>(12,681)</p>
</td>
<td width="19%" align="right" valign="top"><p>(85,150)</p>
</td>
<td width="20%" align="right" valign="top"><p>(412,785)</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="20%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>CASH FLOWS FROM FINANCING
ACTIVITIES</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>____________________________</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>&#160;</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Payments on notes payable</p>
</td>
<td width="19%" align="right" valign="top"><p>$0</p>
</td>
<td width="19%" align="right" valign="top"><p>$(5,910)</p>
</td>
<td width="20%" align="right" valign="top"><p>$(65,369)</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Disbursements in excess of cash balances</p>
</td>
<td width="19%" align="right" valign="top"><p>15,539</p>
</td>
<td width="19%" align="right" valign="top"><p>42,469</p>
</td>
<td width="20%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Payments on notes payable - stockholder</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
</td>
<td width="19%" align="right" valign="top"><p>(11,093)</p>
</td>
<td width="20%" align="right" valign="top"><p>(25,000)</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Payments on subscriptions receivable</p>
</td>
<td width="19%" align="right" valign="top"><p>359,750</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
</td>
<td width="20%" align="right" valign="top"><p>150,000</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Proceeds from note payable - stockholder</p>
</td>
<td width="19%" align="right" valign="top"><p>11,883</p>
</td>
<td width="19%" align="right" valign="top"><p>568,571</p>
</td>
<td width="20%" align="right" valign="top"><p>235,010</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Issuance of common stock for cash</p>
<p>Warrants exercised</p>
</td>
<td width="19%" align="right" valign="top"><p>340,000</p>
<p>0</p>
</td>
<td width="19%" align="right" valign="top"><p>370,000</p>
<p>0</p>
</td>
<td width="20%" align="right" valign="top"><p>395,000</p>
<p>337,322</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Fee for stock issuances</p>
</td>
<td width="19%" align="right" valign="top"><p>(8,000)</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
</td>
<td width="20%" align="right" valign="top"><p>0</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="20%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Net cash provided by financing activities</p>
</td>
<td width="19%" align="right" valign="top"><p>719,172</p>
</td>
<td width="19%" align="right" valign="top"><p>964,037</p>
</td>
<td width="20%" align="right" valign="top"><p>1,026,963</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="19%" align="right" valign="top"><p>_____________</p>
</td>
<td width="20%" align="right" valign="top"><p>_____________</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Net increase (decrease) in cash and cash
equivalents</p>
</td>
<td width="19%" align="right" valign="top"><p>(1,078)</p>
</td>
<td width="19%" align="right" valign="top"><p>(74,225)</p>
</td>
<td width="20%" align="right" valign="top"><p>68,081</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Cash and cash equivalents, Beginning of
period</p>
</td>
<td width="19%" align="right" valign="top"><p>1,088</p>
</td>
<td width="19%" align="right" valign="top"><p>75,313</p>
</td>
<td width="20%" align="right" valign="top"><p>7,232</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Cash and cash equivalents, End of period</p>
</td>
<td width="19%" align="right" valign="top"><p>$10</p>
</td>
<td width="19%" align="right" valign="top"><p>$1,088</p>
</td>
<td width="20%" align="right" valign="top"><p>$75,313</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>===========</p>
</td>
<td width="19%" align="right" valign="top"><p>===========</p>
</td>
<td width="20%" align="right" valign="top"><p>===========</p>
</td>
</tr>
</table>
<br>
<p>The accompanying notes are an integral part of these statements.</p>
<br>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="100%" align="center" valign="top"><p>USURF AMERICA, INC. AND SUBSIDIARIES</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>BATON ROUGE, LOUISIANA</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="100%" align="center" valign="top"><p>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>
</td>
</tr>
</table>
<br>
<br>
<p>1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</p>
<br>
<p>Basis of Presentation</p>
<br>
<p>USURF America, Inc. (the &#8220;Company&#8221;), formerly Internet Media Corporation, was incorporated as Media
Entertainment, Inc. in the State of Nevada on November 1, 1996.  The Company currently provides wireless Internet
access services to a small number of customers in Del Rio, Texas, and Santa Fe, New Mexico.</p>
<br>
<p>Principles of Consolidation</p>
<br>
<p>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>
<br>
<p>Use of Estimates</p>
<br>
<p>The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America 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>
<br>
<p>Cash Equivalents</p>
<br>
<p>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>
<br>
<p>Inventory</p>
<br>
<p>Inventories are stated at the lower of cost or market, and represents modems purchased from suppliers.  During
2001, the Company determined that certain items of its inventory had become impaired and recorded a write-down
of its inventory in the approximate amount of $98,000.</p>
<br>
<p>Property and Equipment</p>
<br>
<p>Property and equipment are stated at cost and are depreciated principally by the straight-line method over the
estimated useful lives (5 years) of the assets.</p>
<br>
<p>Revenue Recognition</p>
<br>
<p>Until September 2000, the Company maintained license agreements with affiliate ISP&#8217;s to provide internet access to
affiliates&#8217; 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.  The Company has contracted with a reseller in Del Rio, Texas,
with respect to the marketing of its wireless Internet access service.  This reseller is paid, from the gross receipts of
the Company, a monthly per-customer commission.</p>
<br>
<p>Costs of Access Revenues</p>
<br>
<p>For 2000, 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&#8217;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>
<br>
<p>Income Taxes</p>
<br>
<p>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 adjusted for the change during the period in deferred tax assets and liabilities.</p>
<br>
<p>Financial Instruments and Concentration of Credit Risk</p>
<br>
<p>Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of
cash.  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>
<br>
<p>Fair Values of Financial Instruments</p>
<br>
<p>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&#8217;s rescission shares is not significant (see
Note 20).</p>
<br>
<p>Loss Per Common Share</p>
<br>
<p>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 anti-dilutive.</p>
<br>
<p>Goodwill and Other Intangible Assets</p>
<br>
<p>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.  See Note 13.</p>
<br>
<p>During 1999, the Company acquired two private companies and certain assets of two other private companies.  In
these acquisitions, the Company issued a total of 306,000 shares with an assigned approximate value of $1,195,000.
During 2000, the Company acquired two private companies.  In these acquisitions, the Company issued a total of
131,063 shares with an assigned approximate value of $762,000.  All of these acquisitions were accounted for as
purchase business combinations.  None of these acquired companies 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&#8217; being immaterial to
the financial statements taken as a whole.</p>
<br>
<p>Goodwill and other intangible assets, primarily acquired customer bases, were stated on the basis of cost and were
amortized, principally on a straight-line basis, over the estimated future periods to be benefitted (generally 3 years).
Goodwill and other intangible assets were reviewed for impairment to ensure they were appropriately valued.  A
change in the operations of a subsidiary in 2000 indicated the existence of an impairment issue.</p>
<br>
<p>Due to the demise of the dial-up Internet access business of the CyberHighway subsidiary, associated goodwill and
other intangibles were impaired at December 31, 2000, and were expensed in the amounts of $4,425,037 and
$4,814,272 (net of deferred taxes of $2,531,497), respectively.</p>
<br>
<p>Advertising</p>
<br>
<p>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>
<br>
<p>Investments</p>
<br>
<p>Effective December 31, 1996, the Company acquired all of the outstanding common stock of Winter Entertainment,
Inc., a Delaware corporation (WEI), and Missouri Cable TV Corp., a Louisiana corporation (MCTV).  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 the Company 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 Desert Rain was accounted for as a purchase whereby cost is allocated to
the assets acquired.</p>
<br>
<p>Investments include minority interests held in three non-public companies.  All of these investments were impaired
at December 31, 2001, and were written-down in the total amount of $24,279.  This impairment was caused by the
uncertainty of the value of these non-public companies.  The Company has ceased efforts to develop its wireless
cable and low power television businesses and the values of all of the assets associated with them have been
written-down.</p>
<br>
<p>Stock for Services</p>
<br>
<p>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 are
amortized over the respective lives of the agreements.</p>
<br>
<p>2. NET 1, INC. ACQUISITION</p>
<br>
<p>In August 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 U.S. generally accepted
accounting principles to record Net 1 as a wholly owned subsidiary from the date of acquisition.</p>
<br>
<p>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>
<br>
<p>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>
<br>
<p>In October 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 rescission of the
transaction was approximately $960,000.</p>
<br>
<p>3. PROPERTY AND EQUIPMENT</p>
<br>
<p>Classifications of property and equipment and accumulated depreciation were as follows at December 31, 2001 and
2000:</p>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>2001</p>
</td>
<td width="19%" align="center" valign="top"><p>2000</p>
</td>
<td width="20%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>_____________</p>
</td>
<td width="19%" align="center" valign="top"><p>_____________</p>
</td>
<td width="20%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Furniture, fixtures and equipment</p>
</td>
<td width="19%" align="right" valign="top"><p>203,141</p>
</td>
<td width="19%" align="right" valign="top"><p>138,954</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>____________</p>
</td>
<td width="19%" align="right" valign="top"><p>____________</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Accumulated depreciation</p>
</td>
<td width="19%" align="right" valign="top"><p>(125,036)</p>
</td>
<td width="19%" align="right" valign="top"><p>(69,476)</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>____________</p>
</td>
<td width="19%" align="right" valign="top"><p>____________</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Property and equipment, net</p>
</td>
<td width="19%" align="right" valign="top"><p>$78,105</p>
</td>
<td width="19%" align="right" valign="top"><p>$69,478</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>===========</p>
</td>
<td width="19%" align="right" valign="top"><p>===========</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<br>
<p>4. INTANGIBLES</p>
<br>
<p>Classification of intangibles and accumulated amortization at December 31st were as follows:</p>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>2001</p>
</td>
<td width="19%" align="center" valign="top"><p>2000</p>
</td>
<td width="20%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>_____________</p>
</td>
<td width="19%" align="center" valign="top"><p>_____________</p>
</td>
<td width="20%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Website</p>
</td>
<td width="19%" align="right" valign="top"><p>25,000</p>
</td>
<td width="19%" align="right" valign="top"><p>25,000</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Accumulated amortization</p>
</td>
<td width="19%" align="right" valign="top"><p>(8,333)</p>
</td>
<td width="19%" align="right" valign="top"><p>0</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>____________</p>
</td>
<td width="19%" align="right" valign="top"><p>____________</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>$16,667</p>
</td>
<td width="19%" align="right" valign="top"><p>$25,000</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>===========</p>
</td>
<td width="19%" align="right" valign="top"><p>===========</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<br>
<p>5. WIRELESS CABLE ASSETS</p>
<br>
<p>Property and equipment includes wireless cable station equipment.  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 are able to be used in the wireless
Internet market.</p>
<br>
<p>6. LICENSES AND RIGHTS TO LEASES OF LICENSES</p>
<br>
<p>The Company owns licenses or rights to leases of licenses in the following wireless cable and community television
markets:</p>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="31%" align="center" valign="top"><p>Wireless Cable Market</p>
</td>
<td width="31%" align="center" valign="top"><p>Expiration Date</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="31%" align="center" valign="top"><p>____________________</p>
</td>
<td width="31%" align="center" valign="top"><p>____________________</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="31%" valign="top"><p>Poplar Bluff, Missouri</p>
</td>
<td width="31%" align="center" valign="top"><p>October 16, 2006</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="31%" valign="top"><p>Lebanon, Missouri</p>
</td>
<td width="31%" align="center" valign="top"><p>October 16, 2006</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="31%" valign="top"><p>Port Angeles, Washington</p>
</td>
<td width="31%" align="center" valign="top"><p>December 21, 2003</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="31%" valign="top"><p>Astoria, Oregon</p>
</td>
<td width="31%" align="center" valign="top"><p>December 21, 2003</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="31%" valign="top"><p>Sand Point, Idaho</p>
</td>
<td width="31%" align="center" valign="top"><p>August 09, 2006</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="31%" valign="top"><p>The Dalles, Oregon</p>
</td>
<td width="31%" align="center" valign="top"><p>August 09, 2006</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="19%" valign="top"><p>&#160;</p>
</td>
<td width="31%" valign="top"><p>Fallon, Nevada</p>
</td>
<td width="31%" align="center" valign="top"><p>August 09, 2006</p>
</td>
<td width="19%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<br>
<p>Application for renewal of licenses must be filed within a certain period prior to expiration.</p>
<br>
<p>7. NOTE PAYABLE TO STOCKHOLDER</p>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>2001</p>
</td>
<td width="19%" align="center" valign="top"><p>2000</p>
</td>
<td width="20%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>____________</p>
</td>
<td width="19%" align="center" valign="top"><p>____________</p>
</td>
<td width="20%" align="center" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Note payable to stockholder, interest accrues
at 8%, due on demand and unsecured</p>
</td>
<td width="19%" align="center" valign="top"><p>$18,521</p>
</td>
<td width="19%" align="center" valign="top"><p>$ 6,638</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>===========</p>
</td>
<td width="19%" align="center" valign="top"><p>===========</p>
</td>
<td width="20%" align="right" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<br>
<p>8. LOAN CONVERSION - STOCKHOLDER</p>
<br>
<p>As of August 21, 2000, the Company owed its president a total of $967,703 ($916,045 in principal, $51,658 in
interest), the result of cash loans made to the Company by this officer during the previous approximately two years.
On August 21, 2000, the Company entered into a letter of agreement with this officer, whereby this officer agreed to
convert all sums owed to him into shares of Company common stock.</p>
<br>
<p>Pursuant to the letter agreement, this officer 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 was reflected as stock subscription, as of December 31, 2000, in the accompanying financial statements.</p>
<br>
<p>9. INCOME TAXES</p>
<br>
<p>The significant components of deferred tax assets and liabilities were as follows at December 31st:</p>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>2001</p>
</td>
<td width="19%" align="center" valign="top"><p>2000</p>
</td>
<td width="20%" align="center" valign="top"><p>1999</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="center" valign="top"><p>____________</p>
</td>
<td width="19%" align="center" valign="top"><p>____________</p>
</td>
<td width="20%" align="center" valign="top"><p>____________</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>Deferred tax liabilities</p>
<p>&#160;Amortization of intangibles</p>
<br>
<p>Deferred tax assets</p>
</td>
<td width="19%" align="right" valign="top"><br>
<p>$0</p>
</td>
<td width="19%" align="right" valign="top"><br>
<p>$0</p>
</td>
<td width="20%" align="right" valign="top"><br>
<p>$3,883,210</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Net operating loss carryforwards</p>
</td>
<td width="19%" align="right" valign="top"><p>$4,589,067</p>
</td>
<td width="19%" align="right" valign="top"><p>$3,739,588</p>
</td>
<td width="20%" align="right" valign="top"><p>$2,313,159</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;Less - valuation allowance</p>
</td>
<td width="19%" align="right" valign="top"><p>(4,589,067)</p>
</td>
<td width="19%" align="right" valign="top"><p>(3,739,588)</p>
</td>
<td width="20%" align="right" valign="top"><p>(2,313,159)</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>____________</p>
</td>
<td width="19%" align="right" valign="top"><p>____________</p>
</td>
<td width="20%" align="right" valign="top"><p>____________</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>$0</p>
</td>
<td width="19%" align="right" valign="top"><p>$0</p>
</td>
<td width="20%" align="right" valign="top"><p>$3,883,210</p>
</td>
</tr>
<tr>
<td width="42%" valign="top"><p>&#160;</p>
</td>
<td width="19%" align="right" valign="top"><p>===========</p>
</td>
<td width="19%" align="right" valign="top"><p>===========</p>
</td>
<td width="20%" align="right" valign="top"><p>===========</p>
</td>
</tr>
</table>
<br>
<p>The net change in the valuation allowance for the periods ended December 31, 2001, 2000 and 1999, was $849,479,
$1,426,429 and $1,739,692, respectively.</p>
<br>
<p>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.</p>
<br>
<p>The Company has a net operating loss carry forward available to offset future income for income tax reporting
purposes, which will begin to expire in 2011.</p>
<br>
<p>10. SOURCES OF SUPPLIES</p>
<br>
<p>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>
<br>
<p>During 2000, the Company purchased all of its network radios from one supplier.  Currently, the Company is able to
purchase modem components from numerous suppliers and assembles its modems in its Baton Rouge, Louisiana,
facility.</p>
<br>
<p>11. STOCK COMPENSATION</p>
<br>
<p>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>
<br>
<p>In October 2001, 700,000 shares were issued to an officer as a bonus for his services as an officer.  Compensation
expense of approximately $133,000 was recorded based on the fair value of the common stock on the date of issue.</p>
<br>
<p>In December 2001, 200,000 shares were awarded to an officer as a bonus for his services as an officer.
Compensation expense of approximately $18,000 was recorded based on the fair value of the common stock on the
date of issue.  These shares were authorized in 2001 and were issued in 2002.</p>
<br>
<p>12. WARRANTS</p>
<br>
<p>During 2001, the Company issued warrants to purchase 4,124,250 shares of common stock at various share prices.
Warrants outstanding at December 31, 2001, consist of the following:</p>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>Number of Warrants</p>
</td>
<td width="27%" align="center" valign="top"><p>Exercise Price</p>
</td>
<td width="26%" align="center" valign="top"><p>Expiration Date</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>________________</p>
</td>
<td width="27%" align="center" valign="top"><p>________________</p>
</td>
<td width="26%" align="center" valign="top"><p>________________</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>56,667</p>
</td>
<td width="27%" align="center" valign="top"><p>$1.25</p>
</td>
<td width="26%" align="center" valign="top"><p>May 2003</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>56,667</p>
</td>
<td width="27%" align="center" valign="top"><p>$1.50</p>
</td>
<td width="26%" align="center" valign="top"><p>May 2003</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>12,143</p>
</td>
<td width="27%" align="center" valign="top"><p>$1.25</p>
</td>
<td width="26%" align="center" valign="top"><p>May 2004</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>60,000</p>
</td>
<td width="27%" align="center" valign="top"><p>$7.00</p>
</td>
<td width="26%" align="center" valign="top"><p>May 2002</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>35,000</p>
</td>
<td width="27%" align="center" valign="top"><p>$7.00</p>
</td>
<td width="26%" align="center" valign="top"><p>May 2002</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>60,000*</p>
</td>
<td width="27%" align="center" valign="top"><p>$3.50</p>
</td>
<td width="26%" align="center" valign="top"><p>December 2004</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>50,000</p>
</td>
<td width="27%" align="center" valign="top"><p>$6.00</p>
</td>
<td width="26%" align="center" valign="top"><p>September 2002</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>65,000</p>
</td>
<td width="27%" align="center" valign="top"><p>$7.50</p>
</td>
<td width="26%" align="center" valign="top"><p>March 2002</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>380,000</p>
</td>
<td width="27%" align="center" valign="top"><p>$.20</p>
</td>
<td width="26%" align="center" valign="top"><p>December 2003</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>840,000</p>
</td>
<td width="27%" align="center" valign="top"><p>$.15</p>
</td>
<td width="26%" align="center" valign="top"><p>February 2004</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>336,000</p>
</td>
<td width="27%" align="center" valign="top"><p>$.15</p>
</td>
<td width="26%" align="center" valign="top"><p>February 2004</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>500,000</p>
</td>
<td width="27%" align="center" valign="top"><p>$.25</p>
</td>
<td width="26%" align="center" valign="top"><p>March 2004</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>200,000</p>
</td>
<td width="27%" align="center" valign="top"><p>$.25</p>
</td>
<td width="26%" align="center" valign="top"><p>March 2004</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>268,750</p>
</td>
<td width="27%" align="center" valign="top"><p>$.25</p>
</td>
<td width="26%" align="center" valign="top"><p>May 2006</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>268,750</p>
</td>
<td width="27%" align="center" valign="top"><p>$.35</p>
</td>
<td width="26%" align="center" valign="top"><p>May 2006</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>268,750</p>
</td>
<td width="27%" align="center" valign="top"><p>$.45</p>
</td>
<td width="26%" align="center" valign="top"><p>May 2006</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>287,000</p>
</td>
<td width="27%" align="center" valign="top"><p>$.20</p>
</td>
<td width="26%" align="center" valign="top"><p>June 2004</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>577,500</p>
</td>
<td width="27%" align="center" valign="top"><p>$.20</p>
</td>
<td width="26%" align="center" valign="top"><p>December 2004</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>577,500</p>
</td>
<td width="27%" align="center" valign="top"><p>$.30</p>
</td>
<td width="26%" align="center" valign="top"><p>December 2004</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>____________</p>
</td>
<td width="27%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="26%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>Total</p>
</td>
<td width="24%" align="center" valign="top"><p>4,899,727</p>
</td>
<td width="27%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="26%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="12%" valign="top"><p>&#160;</p>
</td>
<td width="24%" align="center" valign="top"><p>===========</p>
</td>
<td width="27%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="26%" align="center" valign="top"><p>&#160;</p>
</td>
<td width="11%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<br>
<p>*  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>
<br>
<p>13. SIGNIFICANT BUSINESS COMBINATION</p>
<br>
<p>On January 29, 1999, the Company acquired all of the capital stock of CyberHighway, Inc. (CyberHighway), an
Idaho corporation.</p>
<br>
<p>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&#8217;s common stock for five days prior and subsequent to the
acquisition date.</p>
<br>
<p>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>
<br>
<p>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>
<br>
<table width="100%" cellpadding="6" cellspacing="0">
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="35%" valign="top"><p>Net assets acquired</p>
</td>
<td width="35%" align="center" valign="top"><p>$372,472</p>
</td>
<td width="15%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="35%" valign="top"><p>Acquired customer base</p>
</td>
<td width="35%" align="center" valign="top"><p>15,566,787</p>
</td>
<td width="15%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="35%" valign="top"><p>Other assets</p>
</td>
<td width="35%" align="center" valign="top"><p>5,260,690</p>
</td>
<td width="15%" valign="top"><p>&#160;</p>
</td>
</tr>
<tr>
<td width="15%" valign="top"><p>&#160;</p>
</td>
<td width="35%" valign="top"><p>Deferred tax liability</p>
</td>
<td width="35%" align="center" valign="top"><p>(5,260,690)</p>
</td>
<td width="15%" valign="top"><p>&#160;</p>
</td>
</tr>
</table>
<br>
<p>14.  SETTLEMENT AGREEMENT</p>
<br>
<p>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>
<br>
<p>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&#8217; fees paid by the plaintiffs.</p>
<br>
<p>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>
<br>
<p>15. CONTINGENCIES</p>
<br>
<p>Involuntary Bankruptcy</p>
<br>
<p>On September 29, 2000, three creditors of CyberHighway filed an involuntary petition in the Idaho Federal
Bankruptcy Court, styled In Re:CyberHighway, Inc..  In December 2000, CyberHighway and the petitioning
creditors filed a joint motion to dismiss this proceeding.  However, some of CyberHighway&#8217;s creditors objected to
the joint motion to dismiss and the motion failed.  (See Note 16).</p>
<br>
<p>Subsequent to the involuntary bankruptcy, CyberHighway lost all of its customers.  Due to this loss of customer
base, the Company's intangible assets relating to those customers became worthless.  The write-off of the intangible
assets reflected in the Company's December 31, 2000, statement of operations was $4,814,272 (net of deferred
taxes).  Due to this change in operating environment, the Company's revenues 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 was impaired.  The write-down of goodwill reflected in the
Company's December 31, 2000, statement of operations was $4,425,037.</p>
<br>
<p>Potential Delisting from the American Stock Exchange</p>
<br>
<p>The Company is not in compliance with the continued listing guidelines of AMEX.  The Company was in contact
with AMEX during 2001 and has not received any additional communication in 2002.  Should the common stock be
delisted from AMEX, it is likely to have a detrimental effect on the Company's ability to raise additional capital,
which is critical to the Company to continue as a going concern (see Note 18).  In addition, if the common stock is
delisted from AMEX, the Company would be in default under a financing agreement (see Note 19) and would be
unable to obtain future funding under that agreement.<br>
</p>
<p>16. DEBT FORGIVENESS</p>
<br>
<p>At December 31, 2000, $1,400,997 and $42,469 of CyberHighway&#8217;s accounts payable and disbursements in excess
of bank accounts, respectively, were reflected on the Company&#8217;s balance sheet.  At December 31, 2001, the
Company&#8217;s balance sheet included $953,561 in &#8220;permitted claims&#8221; against CyberHighway, the total claims
submitted by creditors of CyberHighway during 2001, including the statutory notification period.  This notification
period began on December 6, 2001, and ended on March 6, 2002.  A substantial amount of the claims were
submitted by December 31, 2001; therefore, a reduction in the liabilities at that date was deemed appropriate. The
$489,905 reduction in CyberHighway&#8217;s liabilities is reflected in the Company&#8217;s consolidated statements of
operations as an extraordinary item.</p>
<br>
<p>17. SEGMENT DISCLOSURE</p>
<br>
<p>The Company adopted SFAS No. 131 &#8220;Disclosures about Segments of an Enterprise and Related Information,&#8221;
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>
<br>
<p>18. GOING CONCERN</p>
<br>
<p>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 $1.25 million at December 31, 2001.  The Company&#8217;s president loaned the Company
approximately $12,000 during fiscal 2001. The appropriateness of using the going concern basis is dependent upon
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>
<br>
<p>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.  (See Note 19).</p>
<br>
<p>19. FINANCING TRANSACTION</p>
<br>
<p>On May 9, 2001, the Company signed an amended and restated common stock purchase agreement with an
unrelated company to sell up to 6,000,000 shares of common stock for up to $10,000,000.  The purchase price of
the shares under this purchase agreement varies, based on market prices of the Company's common stock.  The
purchase 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 common stock.  The registration statement filed with respect to
this financing transaction became effective on June 29, 2001.  The commencement date of the purchase agreement
was July 10, 2001. $340,000 in proceeds under the purchase agreement was received by the Company during 2001.
At December 31, 2001, the Company had advanced 1,321,200 shares in consideration of the buyer&#8217;s advance of
$80,176, in expectation that a settlement would take place in the near future, which settlement occurred in April
2002.  The purchase agreement remains in effect.</p>
<br>
<p>20. POTENTIAL RESCISSION CLAIMS</p>
<br>
<p>From January 2000 through June 2001, a total of 4,906,549 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 $5,090,252.  For a period of one year from issuance, the issuees of these
shares have or had, as the case may be, a potential claim for rescission of their respective issuance transactions.</p>
<br>
<p>At December 31, 2000, 2,767,823 of these shares have been reflected under the redeemable stock caption on the
accompanying balance sheet with an assigned value of $3,897,552.</p>
<br>
<p>At December 31, 2001, 2,138,726 of these shares have been reflected under the redeemable stock caption on the
accompanying balance sheet with an assigned value of $1,192,700.</p>
<br>
<p>The diminishing number of shares subject to potential rescission claims was caused either by the expiration of the
respective statute of limitations periods or by the transfer of the subject shares by the original issuees.</p>
<br>
<p>The Company believes that it is unlikely that any of the remaining potential rescission claims will be asserted
against the Company.</p>
<br>
<p>21. SUBSEQUENT EVENTS</p>
<br>
<p>The following events occurred subsequent to December 31, 2001:</p>
<br>
<p>In January 2002, the Company issued 120,000 shares of its common stock under a one-year consulting agreement
with the third party with which the Company entered into the amended and restated common stock purchase
agreement described in Note 19.</p>
<br>
<p>In March 2002, the Company adopted a 2002 Stock Ownership Plan for employees and consultants, reserving
3,000,000 shares of its common stock for issuance thereunder.</p>
<br>
<p>In March 2002, the Company entered into a consulting and marketing license agreement with a third party, under
which agreement the Company granted the consultant options, under its 2002 Stock Ownership Plan, to purchase up
to $600,000 of its common stock, up to $50,000 per month for ten years, the per share exercise price being based on
future market prices, with a 38.75% discount to the market price on the date of exercise.  In March and April 2002,
the consultant exercised options to purchase $98,000 of Company common stock.  2,000,000 shares of common
stock were issued pursuant to this option exercise.</p>
<br>
<p>Significant Equity Purchase</p>
<br>
<p>In April 2002, the Company entered into a securities purchase agreement with a third party, whereby the Company
is to issue 3,125,000 units of its securities, each unit consisting of one share of common stock, one common stock
purchase warrant to purchase one share at an exercise price of $.15 per share and one common stock purchase
warrant to purchase one share at an exercise price of $.30 per share, for cash in the amount of $250,000 payable in
two equal increments at the initial closing and 60 days thereafter.  Also pursuant to this agreement, the Company
hired a new president and chief executive officer, who became a director of the Company, and, as a signing bonus,
issued him 3,000,000 shares of common stock; the current president became Chairman of the Board, reduced the
term of his remaining term of employment from approximately four years to six months, waived the payment of all
accrued and unpaid salary and waived the repayment of all loans made by him to the Company, in consideration of
2,000,000 shares of common stock being issued to him; two of the Company&#8217;s vice presidents reduced the terms of
their remaining terms of employment from approximately four years to six months and one year to six months,
respectively, and waived the payment of all accrued and unpaid salary, in consideration of 2,000,000 shares of
common stock being issued to each of them; and the other vice president of the Company terminated his
employment with the Company.</p>
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