UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 50549

                                   Form 10-KSB
(Mark One)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 For the transition period from _______ to_______.


         Commission file number: 000-30722

                      Microwave Transmission Systems, Inc.
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                 (Name of small business issuer in its charter)

                                      Texas
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         (State or other jurisdiction of incorporation or organization)

                                   75-2197372
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                      (I.R.S. Employer Identification No.)

 541 Sterling Drive, Richardson, TX                              75081
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(Address of principal executive offices)                       (Zip Code)

Issuer's telephone number: (972) 669-0591

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports. Yes X No

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by referenced in Part III of this Form
10-KSB or any amendment to this Form 10-KSB [X]

State issuer's revenues for its most recent fiscal year: $19,332,575

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of March
26, 2003: $1,671,868.

State the number shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 11,828,880.






<PAGE>




                                     PART I

         We make forward-looking statements in this document. Our
forward-looking statements are subject to risks and uncertainties. You should
note that many factors, some of which are described in this section or discussed
elsewhere in this document, could affect our company in the future and could
cause our results to differ materially from those expressed in our
forward-looking statements. Forward-looking statements include those regarding
our goals, beliefs, plans or current expectations and other statements regarding
matters that are not historical facts. For example, when we use the words
"believe," "expect," "anticipate" or similar expressions, we are making
forward-looking statements. Factors that could affect our forward-looking
statements include:

         the outcome of our growth strategy;

         future results of operations;

         liquidity and capital expenditures;

         construction and acquisition activities;

         the availability of capital to finance construction of towers that we
         may own;

         regulatory developments and competitive conditions in the
         communications site and wireless carrier industries;

         projected growth of the wireless communications and wireless carrier
         industries;

         the implementation of new wireless technologies and the adoption of
         applications that use wireless technologies; and

         general economic conditions.

         We are not required to release publicly the results of any revisions to
these forward-looking statements we may make to reflect future events or
circumstances.

Item 1. Description of Business.

General

         We are a holding company and the sole shareholder of MTSI, Inc., a
Texas corporation ("MTSI"), CKS Management, Inc., ("CKS"), a Texas corporation,
EPIC Communications, Inc., a Texas corporation ("Epic"), Viper Communications
Systems Inc., a Texas corporation ("Viper") and Site Communications, ("Site"),
which collectively are our only assets and the entities through which we conduct
our operations. All references herein to the Company or to "we," "us" or "our"
with respect to our business operations refer to the combined business
operations of Microwave Transmission Systems, Inc., MTSI, CKS, Epic, Viper and
Site, unless specifically stated otherwise.

         Our principal business is the construction and maintenance of wireless
communications transmitting and receiving facilities for providers of wireless
communication services. In 2002 approximately 44% of our revenues are derived
from operations in Texas, 19% Florida, 11% Kentucky, 8% N. Carolina, 6%
international and the balance, 12%, derived from operations in other regions of
the United States. We have participated in the development of more than 4,000,
antenna sites in the United States. MTSI commenced operations in 1987, and was
principally engaged in the construction of microwave towers. As part of this
original effort, MTSI developed the skill to calibrate the antennae and
instruments used in these towers and thereby assure the tower's robust
operation, a value added skill that is used in implementing the construction and
maintenance work on technologies utilized in later years. In the early 1990's
MTSI began work on a variety of other wireless technologies lead by the sharp
increase in use of cellular telephone systems, an analog technology. These other
technologies included paging technologies as well as Specialized Mobile Radio
and Enhanced Specialized Mobile Radio technologies. In the late 1990's MTSI
began working Personal Communications Systems or PCS technologies, a technology
that utilizes efficiencies of digital technology for the transmission of voice
and data.

         Immediately prior to acquiring MTSI in August 1999, our name was RBSC
Acquisition Corp, we had more than 1000 stockholders, and we had no operations.
RBSC Acquisition Corp., a Texas corporation, was formed by the merger in
December 1997 of RBSC, Inc., a California corporation, into RBSC Acquisition
Corp. In March 1997, RBSC, Inc. had filed a petition in bankruptcy and, as a
result of that proceeding, canceled all of the issued and outstanding stock of
the stockholders who were such on the date of the filing of the petition in
bankruptcy. As part of the bankruptcy proceeding, we issued 500,084 shares of
Common Stock to creditors of RBSC, Inc. and Halter Financial Group, Inc. RBSC,
Inc. was formed in California in 1962 as West Covina Auto Parts, Inc. and in

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<PAGE>

1993 Reddi Brake Supply Company, Inc. merged into West Covina Auto Parts, Inc.
At that time the corporation's name was changed to RBSC, Inc.

         With the acquisition of MTSI in August 1999, we issued 5,750,000 shares
of Common Stock to P. David Spurlin, which constituted 92% of our then issued
and outstanding stock, and thereby obtained operations. In January 2000, we
changed our name to Microwave Transmission Systems, Inc.

         On August 30, 2001, the Company closed the acquisition via merger of
CKS, Viper and Epic, three Texas corporations engaged in the same business as
the Company of constructing and maintaining wireless communications transmitting
and receiving facilities for providers of wireless communication services (the
"Acquired Businesses"). The transactions are structured as mergers of the
Acquired Businesses into three wholly owned subsidiaries of the Company formed
for the purpose of effecting the mergers. The Acquired Businesses will continue
to operate as separate subsidiaries under their same names before the
transactions. Consideration for the mergers consisted of 5,378,796 shares of the
Company's Common Stock and cash in the amount of $2,514,168. Of such
consideration, 2,017,932 shares of common stock were issued, and $894,975 of the
cash was paid to P. David Spurlin, the Chief Executive Officer of the Company
and the controlling shareholder of the Acquired Businesses.

         In continuation of our organic growth business model, in November 2001,
we formed a corporation named Site Communications, Inc. This corporation was
modeled after our successful Viper and Epic corporations which provide the same
type of services. Site is located in Gallatin, Tennessee.

Industry Background

         The number of wireless transmissions that an antenna on a communication
facility can process is limited. Wireless devices such as cellular telephones
using analog technology, PCS telephones using digital technology, and other
devices such as pagers and personal digital assistants or PDA's that use both
analog and digital technology, all use radio frequencies to transmit to
communication facilities, usually antennae located on towers near the user. The
number of frequencies that are available to transmit to a communication facility
and the capacity of that frequency to carry a given number of radio signals are
limited. Heavy usage in a given area congests the frequencies and may result in
a frequency or frequencies being unavailable. To increase capacity, the
geographic area that an antenna serves is decreased through increased
construction of antenna, thereby reducing the number of transmissions to a given
antenna. As the number of users of wireless services increases, whether by
increased number of users utilizing an existing technology or by increased usage
of a new technology such as internet usage by PDA's, more towers and antennae
must be built to reduce congestion.

         Our principal customers are enterprises providing mobile telephone
communication services. These service providers use both analog and digital
technologies. PCS services or digital services are increasingly replacing
cellular services or analog services. While cellular and PCS providers now
dominate our business, the construction and maintenance of microwave facilities
continues to provide a significant portion of our revenues. In addition, new
uses for older wireless technologies such as specialized mobile radio technology
and enhanced specialized mobile radio technologies, technologies that were used
in radio communications such as that used in taxi cabs, are now being used for
voice and data communications. We anticipate that wireless technologies will be
used increasingly for non-voice communications through devices such as PDA's as
well as voice and data communications from fixed locations.

         A device, usually a portable telephone, transmits a radio signal to the
nearest communication tower using analog or digital transmission. The
communications facility contains an antenna or antennae connected by wireline or
short haul microwave to a nearby switching office. The switching office
processes signals for several cellular facilities. For transmission from a
mobile telephone to a telephone that is not a mobile phone, the switching office
connects the telephone signal to a local telephone exchange. For transmission
between two mobile telephones, the switching office locates the receiving
cellular communication facility to which the receiving telephone is connected
and completes the connection by transmitting the signal to that facility. If one
or both of the cellular telephones is moving, such as a car phone, the local
switching station hands the signal off to a different facility as the phone
moves from one area to another.

         We initially constructed microwave and cellular transmission
facilities, and installed electronic lines and components. As microwave
technology evolved and matured, so did the construction and installation
services relating to those technologies. In fact, we often return to previously
built facilities to upgrade the equipment. Recent years have seen the rise of
the use and demand for cellular telephones and PCS. We design, build, and
install towers and rooftop sites that house cellular telephone and PCS antennae.
These facilities are currently designed for use with microwave, cellular
telephone, pager, specialized mobile radio and satellite based radio
technologies.

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Business

         Our revenue is predominantly generated by construction and construction
management services for wireless communications, principally towers built for
microwave, cellular and PCS services. We also perform inspection and maintenance
services on previously built towers, many of which were not originally
constructed by us. We provide the infrastructure necessary for the latest
wireless communications systems by fabricating, building, inspecting and
maintaining wireless and satellite based communication transmitting and
receiving facilities for providers of wireless telecommunication services.

         Much of the process of designing, engineering and constructing a system
of antennae for a wireless system occurs prior to a client contracting with us
for the actual construction of towers and installation of antennae. While we can
provide some or all of these preliminary services, prior to engaging us, a
provider of wireless services has usually analyzed the sites available for
construction of antennae or towers, the Radio Frequency requirements in those
areas, zoning regulations and the availability of co-location opportunities. The
wireless service provider has also secured the right from the property owner to
construct a tower or co-locate on the site as well as obtained local zoning and
permitting.

         We typically contract with the wireless service provided to construct a
tower and antennae on a fixed fee or turnkey basis. Our inspection and
maintenance services, however, are usually contracted for on a time and material
basis.

         Once we are engaged to work on a site development project, we dispatch
a site development team from headquarters to the project site and establish a
temporary field office for the duration of the project. The site development
team is typically composed of our permanent employees and supplemented with
local hires employed only for that particular project. A team leader is assigned
to each phase of the site development project and reports to a project manager
who oversees all team leaders. Upon the completion of a site development
project, the field office is closed and all of our permanent employees are
either relocated to another project or directed to return to headquarters.

         As new technologies are developed and implemented, we are engaged to
return to an existing structure to install the newer technology. In particular,
we are seeing the first implementations of third generation wireless
technologies as well as enhancements to microwave transmitting facilities to
accommodate anticipated WiFi technology for the internet. (The WiFi Alliance is
a nonprofit international association formed to certify interoperability of
wireless Local Area Netwrok products on IEEE 802.11 specification. Currently the
Wi-Fi Alliance has 17 member companies from around the world, and 611 products
have received WiFi certification since certification began in March of 2002. The
goal of the WiFi Alliance's members is to enhance the user experience through
product interoperability.) These new technologies may relate to the upgrading of
an existing system that is becoming obsolete or may relate to the implementation
of an additional technology such as microwave or digital technology.

Maintenance and Management

         In addition to the aforementioned construction, maintenance and
inspection services that we provide, we own and manage three wireless
communications tower sites. We maintain and manage our sites through a
combination of in-house personnel and independent contractors. In-house
personnel are responsible for oversight and supervision of all aspects of site
maintenance and management, and are particularly responsible for monitoring
security access, RF emission and interference issues, structural engineering,
tower capacity, tenant relations and supervision of independent contractors. We
hire independent contractors locally to perform routine maintenance functions
such as landscaping, pest control, snow removal, vehicular access and equipment
installation oversight. We engage these independent contractors on either a
fixed fee or time and materials basis.

Customers

         We have performed site development services for many of the largest
wireless service providers over the past several years. The majority of our
contracts have been for PCS broadband, ESMR (Enhanced Specialized Mobile Radio),
cellular and paging customers. We also service PCS narrowband, SMR (Special
Mobile Radio) and MDS (Multiple Address Systems) wireless providers. In 2002,
our largest customers were Alcatel, Cingular Wireless, Alltel Corporation, Leaco
and MCI Worldcom representing 38%, 7%, 6%, 6% and 6% of our revenues,
respectively. In 2001, our largest customers were Cingular Wireless, Alcatel,
Alltel Corporation and MCI Worldcom representing 28%, 23%, 6% and 6% of our
revenues, respectively. No other customer represented more than 10% of our
revenues during these periods. See "Item 6. Management's Discussion and Analysis
Of Financial Condition And Results Of Operations."

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<PAGE>

Business Development

         Our business growth has been based on the growth of the wireless
communication industry. Initially we derived our revenues from the construction
and installation of microwave transmission systems and then cellular systems.
Cellular systems are primarily used in the United States for mobile telephone
communications. PCS technology is supplanting cellular systems because of its
use of digital technology. Microwave transmission systems, however, remain a
significant portion of our business because microwave technology is used in
towers to transmit radio signals to switching offices and remains a choice for
long distance transmission of signals where the cost of running a wireline
exceeds the cost of microwave communications, a use that is independent of
retail wireless communication systems.

         Our growth is dependent upon the continued and increasing use of mobile
and other wireless telecommunication technologies and expanding our services
into new geographical areas. Increased use of wireless mobile technologies
requires a larger number of towers. Improved technologies frequently require the
implementation of these technologies on existing facilities. Additional uses of
wireless technologies such as the wireless internet require the additional
construction of towers where existing capacity is insufficient to handle
increased usage. As the towers are built to implement these wireless
technologies, they will need to be maintained.

         In 2001 we opened an office in Gallatin, Tennessee. In 2003 we
anticipate opening an office in Santa Rosa, California and another near
Pittsburg, Pennsylvania.

         We continually evaluate the prospects of opening additional offices
throughout the United States. Our opening of additional offices will be driven
by the needs of our existing customer base. Where our existing customers are
upgrading major installations or are embarking upon a new market, we will
consider the efficiencies to be gained in opening offices in those locations.

         While we believe that improving technologies, increased usage of
existing technologies and new applications will drive the growth of our
business, we will, when we believe that the construction provides an adequate
return, construct towers that we own and lease space on these to providers of
wireless communication services. We would build the tower to the specifications
provided by the service provider. The service provider would then lease one or
more antenna sites on the tower from us. We anticipate that these towers will be
able to accommodate multiple tenants. By working with one or more "anchor"
tenants, we will seek to develop a comprehensive plan for a particular network
by locating new sites in areas identified by our customers as optimal for their
network expansion requirements. Companies leasing antenna sites are expected to
come from a wide range of industries, including cellular, PCS, enhanced
specialized mobile radio, paging, fixed microwave, radio and television.

         We have in the past negotiated to provide multiple antennae to such
potential clients but have not entered into agreements because the construction
and operation of those projects did not provide an adequate return or, in the
opinion of our management, the return was too speculative. We continue to pursue
opportunities to construct towers that we would own and may, in the appropriate
case, build such sites speculatively. Presently, we own three towers on which we
lease space.

Competition

         Summary. The industry for wireless infrastructure building and
implementation services is highly competitive and fragmented. Most industry
participants are small companies with fewer than fifty employees. Other
participants in the market are wireless equipment manufacturers that provide
services in conjunction with the sale of wireless equipment and non-wireless
engineering and construction companies and non-wireless subcontractors. As
demand for wireless infrastructure building increases, we expect that more
non-traditional competitors will enter the market, thereby increasing
competition.

         Site Development and Tower Construction Competition. We also compete
for development and new tower construction opportunities with wireless service
providers, site developers and other independent tower operating companies and
believe that competition for site development will increase and that additional
competitors may enter the tower market, some of whom may have greater financial
resources than we do. We believe that the majority of our competitors in the
site development business operate within local market areas exclusively, while
some firms appear to offer their services nationally, including American Tower
Corporation, SpectraSite, Accelera Wireless, Wireless Facilities and LCC
International. Our market includes participants from a variety of market
segments offering individual, or combinations of, competing services. The field
of competitors includes site development consultants, construction companies,
tower owners/managers, radio frequency engineering consultants, and
telecommunications equipment vendors (which provide end-to-end site development
services through multiple subcontractors). We believe that providers base their
decisions on site development services on certain criteria, including a
company's experience, track record, local reputation, price and time for
completion of a project, and believe that we compete favorably in these areas.

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<PAGE>


         Maintenance and Management Competition. The following companies are
primarily competitors for our site management activities: AAT, APEX, JJS
Leasing, Inc., Motorola, Signal One, Subcarrier Communications and Tower
Resources Management.

Employees

         As of March 15, 2003, we had 155 employees, none of whom is represented
by a collective bargaining agreement. All of our employees are full-time
employees. Of our total employees, 16 work in management, 23 in administration
and 116 in construction. We consider our employee relations to be good, and we
have never experienced a work stoppage. From time to time, we also employ
independent contractors to support our operation.

         Our future success will depend in part upon our ability to attract,
retain and motivate highly qualified technical and management personnel, for
whom competition is intense. As part of our retention efforts, we seek to
minimize turnover of key employees by emphasizing our industry experience, our
work environment and our competitive compensation packages. Due to the nature of
our business, we experience a "run-up" and "run-down" in employees as contracts
are completed in one area of the country and are commenced in a different area.

Regulatory And Environmental Matters

         Federal Regulations. Both the Federal Communications Commission ("FCC")
and Federal Aviation Administration ("FAA") regulate towers used for wireless
communications transmitters and receivers. These regulations control the siting
and marking of towers and may, depending on the characteristics of particular
towers, require registration of tower facilities. Wireless communications
devices operating on towers are separately regulated and independently licensed
based upon the particular frequency used.

         Pursuant to the requirements of the Communications Act of 1934, the
FCC, in conjunction with the FAA, has developed standards to consider proposals
for new or modified antennae. These standards mandate that the FCC and the FAA
consider the height of proposed antennae, the relationship of the structure to
existing natural or man-made obstructions and the proximity of the structure to
runways and airports. Proposals to construct or to modify existing antennae
above certain heights are reviewed by the FAA to ensure the structure will not
present a hazard to aviation. The FAA may condition its issuance of a no-hazard
determination upon compliance with specified lighting and/or marking
requirements. The FCC will not license the operation of wireless
telecommunications devices on towers unless the tower has been registered with
the FCC or a determination has been made that such registration is not
necessary. The FCC will not register a tower unless the tower has been
registered with the FAA. The FCC may also enforce special lighting and painting
requirements. Owners of wireless transmissions towers may have an obligation to
maintain painting and lighting to conform to FCC standards. Tower owners may
also bear the responsibility of notifying the FAA of any tower lighting outage.
Failure to comply with the applicable requirements may lead to civil penalties.

         The Telecommunications Act of 1996 amended the Communications Act of
1934 by giving state and local zoning authorities jurisdiction over the
construction, modification and placement of towers. The new law preserves local
zoning authority by prohibiting any action that would (1) discriminate between
different providers of personal wireless services or (2) ban altogether the
construction, modification or placement of radio communication towers. Finally,
the 1996 Telecom Act requires the federal government to help licensees for
wireless communications services gain access to preferred sites for their
facilities. This may require that federal agencies and departments work directly
with licensees to make federal property available for tower facilities.

         Owners and operators of antennae may be subject to, and therefore must
comply with, environmental laws. The FCC's decision to license a proposed tower
may be subject to environmental review pursuant to the National Environmental
Policy Act of 1969, which requires federal agencies to evaluate the
environmental impacts of their decisions under certain circumstances. The FCC
has issued regulations implementing the National Environmental Policy Act. These
regulations place responsibility on each applicant to investigate any potential
environmental effects of operations and to disclose any significant effects on
the environment in an environmental assessment prior to constructing a tower. In
the event the FCC determines the proposed tower would have a significant
environmental impact based on the standards the FCC has developed, the FCC would
be required to prepare an environmental impact statement. This process could
significantly delay the registration of a particular tower.

         Environmental Regulation. As an owner of three wireless communications
tower sites, we are subject to certain environmental laws that impose strict,
joint and several liability for the cleanup of on-site or off-site contamination
and related personal or property damages. We are also subject to certain
environmental laws that govern tower placement, including pre-construction
environmental studies. We must also take into consideration certain RF emissions
regulations that impose a variety of procedural and operating requirements. The
potential connection between RF emissions and certain negative health effects,
including some forms of cancer, has been the subject of substantial study by the

                                       5

<PAGE>

scientific community in recent years. To date, the results of these studies have
been inconclusive. We believe that we are in substantial compliance with, and we
have no material liability under all applicable environmental laws. The cost of
compliance with existing or future environmental laws and liability related
thereto may have a material adverse effect on our prospects, financial condition
or results of operations. We had no costs from our compliance with these laws
during the past three years.

         State And Local Regulations. Most states regulate certain aspects of
real estate acquisition and leasing activities. Where required, we conduct the
site acquisition portions of our site development services business through
licensed real estate brokers or agents, who may be our employees or hired as
independent contractors. Local regulations include city and other local
ordinances, zoning restrictions and restrictive covenants imposed by community
developers. These regulations vary greatly, but typically require tower owners
to obtain approval from local officials or community standards organizations
prior to tower construction. Local zoning authorities generally have been
hostile to construction of new transmission towers in their communities because
of the height and visibility of the towers.

Item 2. Description of Properties.

         In 2002, MTSI leased our primary office facility in Richardson, Texas
from P. David Spurlin, our Chief Executive Officer, President, and majority
shareholder. The lease was for an initial three year term that expired 1999,
with a month-to-month renewal thereafter, and has been classified as an
operating lease. Total rent expense associated with this lease was $56,400 for
each of the years ended December 31, 2002 and 2001, respectively.

         Until June 2002, we also leased a house from P. David Spurlin. The
house provided lodging for out-of-town employees and contractors in lieu of
incurring hotel and other travel related charges. The lease began in April 1999
and continued on a month-to-month basis. Total rent expense associated with this
lease was $8,400 for the year ended December 31, 2001 and $3,500 during the
first six months of the 2002 fiscal year. In June 2002, we terminated this
relationship.

         In September 2002 Epic purchased a building in Austin, Texas for
$291,039, of which $232,178 was financed through Comerica Bank.

         Site leases their office located in Gallatin, Tennessee from Volunteer
Leasing Company. The lease is for an initial three-year term expiring August 31,
2004, with a month-to-month renewal thereafter. Total rent expense associated
with this lease was $23,400 and $9,750 for the years ending December 31, 2002
and 2001, respectively.

         Viper in Ocala, Florida owns its property. Viper in North Carolina
leases its office facility in Concord, North Carolina from Bobby H. Elliott and
Sara C. Elliott. The lease was for an initial two-year term expiring May 1, 2002
and became a month to month lease thereafter. Total rent expense associated with
this lease was $36,500 and $26,500 for the years ending December 31, 2002 and
2001, respectively.

         MTSI owns the property and manufacturing facility located in Melissa,
Texas which serves as the operating headquarters for MTSI's Fabricator RSI.

         CKS owns the property and offices at two locations, one is located in
Jacksonville, Texas and the other in Yukon, Oklahoma.

         Total rental expense for all of our operating leases was $129,663 and
$111,363 for the years ended December 31, 2002 and 2001, respectively.

         We believe that the condition of our lease facilities are excellent,
and are sufficient for our use and operation at our present level of operations.
We believe that these facilities will be sufficient for our operations for the
foreseeable future. In the opinion of our management, these properties are
adequately insured, in good condition and suitable for their anticipated future
use.

Item 3.  Legal Proceedings.

         From time to time, we are involved in various legal proceedings
relating to claims arising in the ordinary course of business. We are not
currently a party to any such legal proceedings, the adverse outcome of which,
individually or taken together with all other legal proceedings, is expected to
have a material adverse effect on our prospects, financial condition or result
of operations.

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

         None


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<PAGE>


                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

         Market Information. Our common stock was approved for trading on the
NQB Pink Sheets on March 23, 2000 and the set bid and ask price was $.50.
Following registration of our Common Stock under the Securities Exchange Act of
1934, our stock commenced trading on the Nasdaq OTC Bulletin Board under the
symbol MWVT.OB.

         The following table sets forth the high and low closing prices for the
Company's Common Stock for the periods indicated. Such information was obtained
from Commodity Systems Inc. The quotations represent interdealer quotations
without adjustment for retail markups, markdowns or commissions and may not
represent actual transactions.

                                  High                         Low
                                ---------                   ---------
         2001
         First Quarter          $ 2.000                   $    .516
         Second Quarter         $ 4.000                   $   1.010
         Third Quarter          $ 3.750                   $   1.650
         Fourth Quarter         $ 2.500                   $   1.320

         2002
         First Quarter          $ 2.200                   $   1.150
         Second Quarter         $ 3.550                   $   1.000
         Third Quarter          $ 2.500                   $   1.100
         Fourth Quarter         $ 1.200                   $   1.150

         Holders. As of March 15, 2003, there were a total of 11,828,880 shares
of our common stock outstanding, held by 1,089 shareholders of record.

         Dividends. We have not declared any dividends on our common stock
during the last two fiscal years. Our current lines of credit agreements require
prior written consent for any payment of dividends.

         Issuance of Stock. On August 30, 2001, we issued 5,378,796 shares of
Common Stock in connection with the acquisitions of three business entities.
These shares were issued to six individuals. The issuance of these shares was
exempt from registration under the Securities Act pursuant to Section 4 (2)
thereof as not involving a public offering.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

GENERAL

         Most of our revenues, 60% in fiscal 2002, are derived from the
installation of wireless transmission and receiving facilities used by cellular
and PCS telephones. Generally, 15% of our revenues are derived from maintenance
of those and similar facilities and another 15% are derived from fabricating,
grounding, painting facilities and antenna testing. The remaining 10% of our
revenues are derived from the erection of microwave towers.

         In fiscal 2001 we saw two new trends that affected the results of our
operations. An increased portion of our operations came from the build out of
systems of towers in a single geographical location rather than the construction
of one or a few towers in many locations. Where we can concentrate construction
of several towers in a single location, our employees work more efficiently and
our mobilization expenses are reduced. Secondly, our clients have traditionally
provided materials and equipment used for construction projects. Beginning in
late 2000 and continuing through the second quarter of 2001, we began providing
these materials and equipment for some of our clients with the result that the
sales of construction materials and equipment have comprised a greater
percentage of net revenues, 15.2% for fiscal year 2001 compared to 5.3% for the
same period in 2000. The effect of these purchases and sales increased our
revenues but offset the gains in margins that we would have otherwise achieved
from our personnel's greater efficiency. This trend diminished significantly in
the fourth quarter of 2001, significantly contributing to the decline in
revenues in the fourth quarter of 2001 when compared to the fourth quarter of
2000. After the second quarter of 2001, this activity returned to traditional
levels.

         On a case-by case basis, we continue to evaluate the ownership and
management of towers used in cellular and PCS communications, but will not
engage in this activity unless the financial return is attractive. We will not
dedicate resources to actively seek these opportunities and will require that
any investment not jeopardize operations or strategic expansion plans. As of
March 15, 2003, we owned three towers.

                                       7
<PAGE>

Results of Operations

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

         Our net earnings increased 30% to $1,257,837 in 2001 from $971,193 in
2000. Our income before taxes and minority interest increased to $2,557,477 in
2001 from $2,117,695 in fiscal year 2000, an increase of 21%.

         Our revenues in 2001 increased 25%, to $20,412,562 from $16,369,135 in
2000. Most of this increase reflects more sales of materials and equipment
between the comparable periods and an increase in the number of projects
awarded. In addition, the amount of jobs in progress increased from December 31,
2001 to December 31, 2000 by $132,755, or 21%, reflecting projects which we have
started but not completed. Our gross profit for 2001 increased approximately
21%, to $7,759,228, or 38% of revenues, from $6,391,465, or 39% of revenues.

         Operating expenses increased approximately 18% for the year compared to
the same period in 2000, largely reflecting increased general and administrative
expenses of a larger organization, the cost of being publicly held, particularly
the expenses for legal, accounting, other financial professionals, and financing
and merger expenses incurred in the third quarter for the acquisition of three
entities. We believe we can continue to grow our revenue base without a
corresponding percentage increase in operating expenses, resulting in improved
operating leverage and profit margin. For the twelve months ended December 31,
2001, operating expenses to net sales were 25%, compared to 26% for the
comparable period in 2000.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

         Our net income declined to $403,382 for the year ended December 31,
2002 compared to net income of $1,257,837 for the year ended December 31, 2001,
a decline of 68%. Revenues declined by approximately 5% to $19,332,575 from
$20,412,562.

         The most significant factor causing the decline in net income was the
increase in general and administrative expenses which increased to $6,714,548 in
the later period from $5,016,564, an increase of approximately 34%. As a
percentage of revenues, general and administrative expenses were approximately
34% in fiscal 2002 compared to approximately 25% in fiscal 2001. Although some
of this increase is attributable to credit losses from the bankruptcy of some of
our clients as well as large increases in insurance costs, the largest part of
the increase is the result of opening offices in Gallatin, Tennesee. We believe
that it takes about 18 months for new offices to become profitable. The
Nashville office is now breaking even. In 2003 we anticipate opening new offices
in Santa Rosa, California and near Pittsburg, Pennsylvania.

         In the latter part of the fourth quarter of 2002, we experienced a
marked slow down in business, the principal reason revenues declined in 2002
compared to 2001. This slow down ended in the first quarter of 2003. In 2002 we
also wrote off approximately $215,000 receivable because of the bankruptcy of
Triangle Communication and an additional amount of approximately $195,000, write
offs that did not occur in 2001. While gross margins for the two years are
comparable, 39% in 2002 and 38% in 2001, the slow down in the fourth quarter of
2002 caused the inefficient use of employees and other resources and further
contributed to the decline in net income for fiscal 2002 compared to fiscal
2001.

         Interest expense also increased in fiscal 2002 when compared to 2001.
The increase in interest expense, which was $218,735 in 2002 compared to
$112,632 in 2001, arose because of the borrowing we incurred in the second half
of 2001 to acquire three operations.

LIQUIDITY AND CAPITAL RESOURCES

         Our principal source of liquidity is from operations. Our cash flow
from operations was approximately $900,000, that is, profits plus depreciation
plus collection of receivables less payments of deferred taxes, current taxes,
accounts payable and accrued liabilites, the most significant operational cash
flow items, together with less significant operational items resulted in
generating about $900,000 in cash. We expended approximately $1,200,000 on the
purchase of plant, property and equipment, which with the $900,000 cash
generated from operations resulted in the net decrease in cash of approximately
of $310,000. The expenditures on plant, property and equipment reflect cash for
down payment on the purchase of property by Epic, the purchase of production
equipment and vehicles, essentially activities consolidating our acquisitions,
expending amounts necessary to expand our business, and the usual scheduled
replacement of equipment and vehicles. Debt payments were essentially offset by
additional borrowings, borrowings incurred principally for the vehicles and the
property acqusition of Epic.

         We maintain a line of credit to manage fluctuations in cash flows. At
December 31, 2002, the total borrowing capacity under our line of credit was
$2,550,000. At December 31, 2002, the Company had borrowed $1,765,019 under the
line of credit. We believe that cash flows provided by operations and

                                       8

<PAGE>

availability of the line of credit, supplemented by our cash position, will be
adequate to meet and sustain moderate growth. Management believes that any
growth that cannot be met through internal operations and existing credit
facilities can be met through increasing the line of credit and additional
borrowings for equipment. However, there is no assurance that financing would be
available when and if needed, or that it would be available on suitable terms.

         We do not anticipate becoming significantly involved in a build to suit
program whereby we would construct wireless communications facilities for our
own account. Consequently, we do not presently anticipate incurring the large
capital expenditures such a program would entail.

         We are reviewing the possibility of acquiring other wireless
enterprises and such acquisitions may entail additional capital resources.

Item 7. Financial Statements.

         The response to this item is submitted on a separate section on this
Form 10-KSB.

Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.

         On January 17, 2002, the registrant filed a current report on Form 8-K,
Item 4 regarding the appointment of Grant Thornton LLP as its independent
auditors to replace the firm of King Griffin & Adamson P.C. who was dismissed
contemporaneously therewith. King Griffin & Adamson had submitted a letter to
the Securities & Exchange Commission to the effect that it has no disagreements
with management of the Company related to matters that are material to the
Company's 2000 financial statements.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons' Compliance
With Section 16(a) of the Exchange Act.

         The following table sets forth certain information regarding the
Company's directors and executive officers as of March 15, 2003.

Name                     Age   Position

Preston D. Spurlin       43    Chief Executive Officer, President, Director
Susan King               58    Vice President of Finance, Director
David Story              41    Vice President of Operations, Director
Michael D. Sutton        47    Vice President of Field Services, Director
Carl Moore               48    Director
S. Kerry Tassopoulos     45    Director
Lou Strenger             53    Director
Dan Lassiter             54    Director

         P. David Spurlin is the founder of MTSI, Inc. and has served as its
Chief Executive Officer, President and director since its inception in 1987.

         Susan King is the Company's Vice President of Finance, a position she
assumed upon joining the Company in May 1988. Ms. King has more than 35 years
experience in accounting and accounting management and became a director of the
Company in December 2000.

         David Story is a Vice President of Operations for the Company, a
position he assumed upon joining the Company in 1995. Mr. Story became a
director of the Company in December 2000.

         Michael D. Sutton is Vice President of Field Services for the Company,
a position he assumed upon joining the Company in 1987. Mr. Sutton became a
director of the Company in December 2000.

         Carl Moore was a Vice President of Fort Worth Tower prior to its sale
to an investment group in 1997. In 1999 Mr. Moore became president of Fort Worth
Tower after its repurchase. Fort Worth Tower manufactures material used in the
wireless communications industry.

         S. Kerry Tassopoulos is Director of Global Legal Resources for Mary
Kay, Inc., a personal care, cosmetic and vitamin products company. Prior to Mary
Kay, Mr. Tassopoulos served as Director of Government Affairs and Assistant
General Counsel for Excel Communications, a provider of long distance
telecommunications. Mr. Tassopoulos became a director of the Company in December
2000.

         Lou Strenger has been a business and management consultant since 1983
as a principal of ELESCO Financial Services and of Media97. He has consulted or
participated in joint ventures primarily in financial services and media. He has

                                       9

<PAGE>

been a health organization administrator and a hospital authority internal
auditor. Mr. Strenger became a director of the Company in February 2001.

         Dan Lassiter is a self-employeed Certified Public Accountant, a
position he has held for more than five years. Mr. Lassiter became a director of
the Company in August 2002.

         Committees Of The Board Of Directors. Our Board of Directors has two
committees, an audit committee, which has two members, Lou Strenger and Dan
Lassiter. The duties of the Audit Committee are to recommend to the entire Board
of Directors the selection of independent certified public accountants to
perform an audit of the financial statements of the Company, to review the
activities and report of the independent certified public accountants, and to
report the results of such review to the entire Board of Directors. The Audit
Committee also monitors the internal controls of the Company.

         In 2002, we established a compensation committee comprised of two
members, Carl Moore and Kerry Tassopoulos.

Item 10. Executive Compensation.

         The information set forth below concerns the cash and non-cash
compensation to the named executive officers of the Company for each of the past
three fiscal years ended December 31, 2002, 2001, and 2000. No executive officer
of the Company has an employment agreement with the Company and all executive
officers serve at the discretion of the Board of Directors.
<TABLE>
<CAPTION>

Summary Compensation Table

     Name and                       Fiscal           Annual Compensation                       All Other
         Principal Position          Year         Salary           Bonus                     Compensation

<S>                                 <C>           <C>            <C>                            <C>
P. David Spurlin                    2002          $  115,013     $   4,860                      $    6,619
Chief Executive Officer             2001             115,013         4,952                          17,995
                                    2000             114,123         2,054                          17,426

David Story                         2002             111,914        15,663                           7,245
Vice-President                      2001             102,537         9,094                          16,745
                                    2000             101,743         5,369                          16,067

Mike Sutton                         2002              68,450        10,640                           3,955
Vice President                      2001              95,200         2,656                          14,678
                                    2000              78,037         3,785                          10,679

Susan King                          2002              91,930        16,060                           5,399
Vice-President/Secretary            2001              81,701        11,830                          14,030
                                    2000              87,148         3,060                          13,531
</TABLE>


(1)      Included in Other Compensation is premium paid on term life insurance
         policies on behalf of P. David Spurlin and employer contribution under
         the Profit Sharing Plan described below.
(2)      Included in Other Compensation are employer's contributions under
         MTSI's Profit Sharing Plan.
(3)      Included in Annual Compensation are director's fees of $4,000.

         Employee Benefit Plan. We offer a profit-sharing plan, the Microwave
Transmission Systems, Inc. Profit Sharing Plan (the "Plan"), which covers all of
our employees who have attained age 18 or older and have at least six months of
service with us as of the semi-annual Plan entrance dates. We make non-matching
contributions at the discretion of the Plan's trustees. Employees' profit
sharing accounts are fully vested after seven years. In accordance with the Plan
provisions, we cover all costs associated with the administration of the Plan.
Employer discretionary contributions for the years ended December 31, 2002 and
2001 were $176,189 and $572,446, respectively.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

         At March 15, 2003, we had issued and outstanding 11,828,880 shares of
common stock. The table below sets forth, as of March 15, 2003, certain
information with respect to the beneficial ownership of our capital stock by (1)
each person who we know to be beneficial owner of more than 5% of any class or

                                       10

<PAGE>

series of our capital stock; (2) each of the directors and executive officers
individually and (3) all directors and executive officers as a group.
<TABLE>
<CAPTION>


Name and Address of                          Number of                            Percent
   Beneficial Owner                        Shares Owned                            Owned

<S>                                         <C>                                      <C>
P. David Spurlin(1)                         7,791,340                                66%

Susan King(1)                                  17,550                                 1%

David Story(1)                                 13,200                                 1%

Michael Sutton(1)                               5,000                                 0%

James A. Conant, Jr.(1)                       920,494                                 8%

Donald D. Jones(1)                            924,520                                 8%

Dwayne Griffin(1)                             674,997                                 6%

Carl Moore                                      2,000                                 0%
4104 Flower Garden
Arlington, TX 76016

S. Kerry Tassopoulos                                -                                 0%
8750 N. Central Expwy, #2000
Dallas, TX 75231

Lou Strenger                                      250                                 0%
P.O Box 515922
Dallas, TX 75251

Dan Lassiter                                        -                                 0%

All executive directors
and officers as a group
(Eight people)                              7,829,340                                66%
</TABLE>


(1) The address of the indicated individual is 541 Sterling Drive, Richardson,
TX 75081

Item 12. Certain Relationships and Related Transactions.

         The Company maintains a line of credit for $2,550,000 with a bank, and
borrowings under that line of credit are guaranteed by P. David Spurlin.

         We lease our office facility from P. David Spurlin. The facility is
leased on a month-to-month basis, and has been classified as an operating lease.
Total rent expense associated with this lease was $56,400 for each of the years
ended December 31, 2002 and 2001.

         Until June 2002 we leased a house from P. David Spurlin, an arrangement
that began in April 1999. The house provided lodging for out-of-town employees
and contractors in lieu of the Company incurring hotel and other travel related
charges. Total rent expense associated with this lease was $8,400 and $3,500 for
each of the years ended December 31, 2001 and 2000, respectively.

         On August 30, 2001, we acquired three companies, each of which P. David
Spurlin was a stockholder. In connection with these acquisitions, we issued
2,017,932 shares of Common Stock to P. David Spurlin and paid him $894,975.

         We paid Dan Lassiter $6,800 and $4,200 in 2001 and 2002, respectively,
for tax accounting advice.

Item 13. Exhibits and Reports on Form 8-K.

(a)      Reports filed on Form 8-K

         Form 8-K dated January 17, 2002, Item 4 relating to the appointment of
         new auditors.

         Forms 8-K dated August 30, 2001, and as amended November 13, 2001, Item
         2 relating to the acquisition via merger of CKS Management, Inc., Viper
         Communication Systems, Inc. and Epic Communications, Inc.

         Form 8-K dated May 17, 2001, Item 5 relating to a press release
         announcing the execution of letters of intent to acquire CKS
         Management, Inc., Viper Communication Systems, Inc. and Epic
         Communications, Inc.

                                       11
<PAGE>

(b)      Exhibits

2.2.1    Agreement and Plan of Merger dated August 19,2001 regarding CKS
         Management, Inc.

2.2.2    Agreement and Plan of Merger dated August 19,2001 regarding Viper
         Communication Systems, Inc.

2.2.3    Agreement and Plan to Merger dated August 19, 2001 regarding Epic
         Communications, Inc.

3.1      Articles of Incorporation of Microwave Transmission Systems, Inc. (with
         amendments).*

3.2      Restated Bylaws of Microwave Transmission Systems, Inc.*

6.1      Stock Exchange Agreement by and among Microwave Transmission Systems,
         Inc., the Sole Shareholder of Microwave Transmission Systems, Inc., RBS
         Acquisition Corp., and Halter Financial Group, Inc. dated August 6,
         1999.*

6.2      Consulting Agreement by and between Microwave Transmission Systems,
         Inc. and Halter Financial Group, Inc. dated July 29, 1999.*

6.3      Commercial Lease Agreement dated January 17, 1996 by and between
         Microwave Transmission Systems, Inc. (now MTSI, Inc.) and P. David
         Spurlin.*

6.4      Lease Agreement dated April 1, 1999 by and between Microwave
         Transmission Systems, Inc. (now MTSI, Inc.) and P. David Spurlin.*

*Previously filed.

Item 14. Controls and Procedures.

         The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
Securities Exchange Act reports is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms, and that such information is accumulated and communicated to
the Company's management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.

         During the 90-day period prior to the date of this report, an
evaluation was performed under the supervision and with the participation of the
Company's management, including the Chief Executive Officer and the Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based upon that evaluation, the
Chief Executive Officer and the Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect these controls, and no corrective actions taken with
regard to significant deficiencies or material weaknesses in such controls,
subsequent to the date of our most recent evaluation of internal controls.



                                       12
<PAGE>






                      MICROWAVE TRANSMISSION SYSTEMS, INC.
                                AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                           Page
Report of Independent Certified Public Accountants...........................2

Consolidated Balance Sheets at December 31, 2002 and 2001....................3

Consolidated Statements of Income for the years ended
     December 31, 2002 and 2001..............................................5

Consolidated Statement of Shareholders'
     Equity for the years ended December 31, 2002 and 2001...................6

Consolidated Statements of Cash Flows for the years
     ended December 31, 2002 and 2001........................................7

Notes to Consolidated Financial Statements...................................9


                                       1
<PAGE>









               Report of Independent Certified Public Accountants



To the Board of Directors and Shareholders of
Microwave Transmission Systems, Inc.

We have audited the accompanying consolidated balance sheets of Microwave
Transmission Systems, Inc. and Subsidiaries as of December 31, 2002 and 2001,
and the related consolidated statements of income, shareholders' equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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 audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Microwave
Transmission Systems, Inc. and Subsidiaries as of December 31, 2002 and 2001,
and the results of their consolidated operations and their consolidated cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.


Grant Thornton LLP

Dallas, Texas
April 4, 2003



                                       2
<PAGE>



              Microwave Transmission Systems, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                  December 31,



<TABLE>
<CAPTION>

                  ASSETS                                                                2002              2001
                                                                                    -------------    --------------

CURRENT ASSETS
<S>                                                                                 <C>              <C>
   Cash and cash equivalents                                                        $      94,262    $      404,388
   Marketable securities                                                                    1,502            20,702
   Accounts receivable - trade, net of allowance for doubtful accounts
       of $48,110 and $33,844 in 2002 and 2001, respectively                            2,910,098         4,376,465
   Unbilled receivables                                                                   177,104           201,353
   Jobs in progress                                                                       322,574           565,952
   Inventory                                                                              620,939           349,222
   Prepaid and other current assets                                                       265,503           154,709
   Refundable income taxes                                                                 33,900               -
                                                                                      -----------       -----------

                  Total current assets                                                  4,425,882         6,072,791

PROPERTY AND EQUIPMENT                                                                  5,554,399         4,535,553
   Less accumulated depreciation and amortization                                      (1,761,313)       (1,043,805)
                                                                                      -----------       -----------

                  Net property and equipment                                            3,793,086         3,491,748

OTHER ASSETS
   Goodwill                                                                             5,082,183         5,082,183
   Notes receivable                                                                            -                166
   Deferred income taxes                                                                   13,740                -
   Other assets                                                                            57,990            26,771
                                                                                      -----------       -----------

                  Total other assets                                                    5,153,913         5,109,120
                                                                                      -----------       -----------

                  Total assets                                                      $  13,372,881    $   14,673,659
                                                                                      ===========        ==========
</TABLE>




              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                        3
<PAGE>



              Microwave Transmission Systems, Inc. and Subsidiaries

                     CONSOLIDATED BALANCE SHEETS - CONTINUED

                           December 31, 2002 and 2001

<TABLE>
<CAPTION>



        LIABILITIES AND SHAREHOLDERS' EQUITY                                              2002             2001
                                                                                    -------------    --------------

CURRENT LIABILITIES
<S>                                                                                 <C>              <C>
   Line of credit                                                                   $   1,765,019    $      300,000
   Current portion of long-term debt                                                      533,010           483,166
   Accounts payable                                                                       333,426           766,090
   Accrued liabilities                                                                    456,170           915,572
   Deferred revenue                                                                        25,446                 -
   Income taxes payable                                                                   208,402           752,780
   Deferred income taxes                                                                  475,173           732,438
                                                                                      -----------       -----------

                  Total current liabilities                                             3,796,646         3,950,046

LONG-TERM LIABILITIES
   Line of credit                                                                               -         1,610,624
   Long-term debt, less current portion                                                 1,512,487         1,431,992
                                                                                      -----------       -----------

                  Total long-term liabilities                                           1,512,487         3,042,616

COMMITMENT AND CONTINGENCIES                                                                    -                 -

SHAREHOLDERS' EQUITY
   Preferred stock, $0.001 par value; 10,000,000 shares authorized;
     none issued or outstanding                                                                 -                 -
   Common stock $0.001 par value; 40,000,000 shares authorized;
     11,828,880 shares issued andoutstanding                                               11,829            11,829
   Additional paid-in capital                                                           4,773,525         4,773,525
   Accumulated other comprehensive income (loss)                                          (19,200)            1,430
   Retained earnings                                                                    3,297,594         2,894,213
                                                                                      -----------       -----------

                  Total shareholders' equity                                            8,063,748         7,680,997
                                                                                      -----------       -----------

                  Total liabilities and shareholders' equity                        $  13,372,881    $    4,673,659
                                                                                      ===========      ============
</TABLE>





              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                        4
<PAGE>


              Microwave Transmission Systems, Inc. and Subsidiaries

                        CONSOLIDATED STATEMENTS OF INCOME

                        For the years ended December 31,

<TABLE>
<CAPTION>

                                                                                          2002             2001
                                                                                    -------------    --------------

<S>                                                                                 <C>              <C>
Net sales                                                                           $  19,332,575    $   20,412,562
Cost of sales                                                                          11,745,783        12,653,334
                                                                                       ----------        ----------

                  Gross profit                                                          7,586,792         7,759,228

General and administrative expenses                                                     6,714,548         5,016,564
                                                                                       ----------        ----------

                  Operating income                                                        872,244         2,742,664

Merger costs                                                                                   -             72,555
Interest expense, net                                                                     218,735           112,632
                                                                                      -----------       -----------

                  Income before income taxes and minority interest                        653,509         2,557,477

Provision for income taxes                                                                250,128           955,555
                                                                                      -----------       -----------

                  Income before minority interest                                         403,381         1,601,922

Minority interest                                                                              -           (344,085)
                                                                                      -----------       -----------

                  NET INCOME                                                        $     403,381    $    1,257,837
                                                                                      ===========       ===========

Net income per common share - basic and diluted                                     $        0.03    $         0.13
                                                                                      ===========       ===========

Weighted average number of common shares outstanding
   Basic                                                                               11,828,880         9,555,542

   Diluted                                                                             11,862,355         9,560,352
</TABLE>



              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       5
<PAGE>


              Microwave Transmission Systems, Inc. and Subsidiaries

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                 For the years ended December 31, 2002 and 2001

<TABLE>
<CAPTION>


                                                                            Accumulated
                                                            Additional         other
                                      Common stock            paid-in      comprehensive          Retained
                               ------------------------
                                  Shares       Amount         capital      income (loss)           earnings            Total
                               -----------     --------    ------------  ------------------      --------------      ---------------

<S>                             <C>            <C>         <C>             <C>                   <C>                  <C>
Balances at January 1, 2001      8,358,016     $  8,358    $    72,960     $  (1,366)            $2,531,351           $2,611,303

Unrealized gain on
marketable securities                   -             -             -          2,796                     -                 2,796

Net income                              -             -             -             -               1,257,837            1,257,837
                                                                                                                       ---------

Comprehensive income                                                                                                   1,260,633

Cash payments for the
interests of P.David
Spurlin in businesses
acquired                                -             -             -             -                (894,975)            (894,975)

Acquisition of minority
interests in
subsidiaries                     3,360,864        3,361      4,903,501            -                      -             4,906,862

Subsidiaries' capital
changes                                 -            -        (285,326)           -                      -              (285,326)

Issuance of common
stock to employees
for compensation                    10,000           10          7,490            -                      -                 7,500

Purchase of land                   100,000          100         74,900            -                      -                75,000
                               -----------       ------     ----------       --------            ----------            ---------

Balances at December 31,
2001                            11,828,880       11,829      4,773,525         1,430              2,894,213            7,680,997

Unrealized loss on
marketable securities                   -            -              -        (20,630)                    -               (20,630)

Net income                              -            -              -             -                 403,381              403,381
                                                                                                                       ---------

Comprehensive income                                                                                                     382,751
                               -----------       ------     ----------       --------            ----------              -------

Balances at December 31,
2002                            11,828,880     $ 11,829    $ 4,773,525     $ (19,200)            $3,297,594           $8,063,748
                                ==========       ======      =========       ========             =========            =========
</TABLE>


              The accompanying notes are an integral part of this
                       consolidated financial statement.

                                        6
<PAGE>


              Microwave Transmission Systems, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                        For the years ended December 31,

<TABLE>
<CAPTION>



                                                                                          2002             2001
                                                                                    -------------    --------------

Cash flows from operating activities
<S>                                                                                 <C>              <C>
   Net income                                                                       $     403,381    $    1,257,837
     Adjustments to reconcile net income to net cash provided by
       operating activities:
         Minority interest                                                                    -             344,085
         Depreciation and amortization                                                    886,468           602,016
         Loss (gain) on disposal or sale of property and equipment                        (11,973)           20,044
         Common stock issued as compensation                                                   -              7,500
         Deferred income taxes                                                           (271,005)          160,828
         Provision for doubtful accounts                                                   14,266            (2,648)
         Other                                                                            (13,538)           46,644
     Changes in operating assets and liabilities:
       Accounts receivable - trade                                                      1,452,101          (872,426)
       Unbilled receivables                                                                24,249           118,449
       Jobs in progress                                                                   243,378          (251,204)
       Inventory                                                                         (271,717)         (343,285)
       Prepaid and other current assets                                                  (110,794)           23,899
       Income tax receivable                                                              (33,900)               -
       Accounts payable                                                                  (432,664)          524,909
       Accrued liabilities                                                               (459,402)          193,596
       Deferred revenue                                                                    25,446                -
       Income taxes payable                                                              (544,378)         (135,734)
                                                                                      -----------       -----------

                  Cash flows provided by operating activities:                            899,918         1,694,510

Cash flows from investing activities
   Purchase of minority interest                                                               -         (1,619,193)
   Purchases of property and equipment                                                 (1,216,347)       (1,742,814)
   Proceeds from sales of property and equipment                                           21,403            45,094
   Issuance of notes receivable                                                                -             (7,558)
   Payments received on notes receivable                                                      166           271,453
   Proceeds from sales of marketable securities                                                -              1,634
                                                                                      -----------       -----------

                  Cash flows used in investing activities                              (1,194,778)       (3,051,384)
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                        7

<PAGE>



              Microwave Transmission Systems, Inc. and Subsidiaries

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                        For the years ended December 31,


<TABLE>
<CAPTION>


                                                                                          2002             2001
                                                                                    -------------    --------------

Cash flows from financing activities
<S>                                                                                 <C>              <C>
   Proceeds from line of credit, net                                                $     154,395    $    1,542,432
   Payments on line of credit                                                            (300,000)         (200,000)
   Proceeds from long-term debt, net                                                      130,339         1,162,943
   Purchase of interest of controlling shareholder in
     acquired businesses                                                                       -           (894,975)
                                                                                      -----------    --------------

                  Cash flows provided by (used in) financing activities                   (15,266)        1,610,400

Net increase (decrease) in cash and cash equivalents                                     (310,126)          253,526

Cash and cash equivalents, beginning of year                                              404,388           150,862
                                                                                      -----------       -----------

Cash and cash equivalents, end of year                                              $      94,262    $      404,388
                                                                                      ===========       ===========

Supplemental disclosures for cash flow information: Cash paid during the year
   for:
     Interest                                                                       $     214,488    $      100,911
                                                                                      ===========       ===========

     Income taxes                                                                   $     561,176    $      587,400
                                                                                      ===========       ===========

Noncash investing and financing activities:
   Common stock issued:
     Purchase of minority interests                                                 $          -     $    4,906,862
     Purchase of property                                                                      -             75,000

Purchase of property financed by debt                                                     232,178           360,000
</TABLE>




              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                        8
<PAGE>



              Microwave Transmission Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001




1.   NATURE OF OPERATIONS

     Microwave Transmission Systems, Inc. (the "Company" or "MTSI") is a Texas
     corporation formed on August 7, 1987. The Company's principal business is
     the construction and maintenance of wireless communications transmitting
     and receiving facilities for providers of wireless communication services.
     MTSI operates primarily in the United States and is based in Richardson,
     Texas.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation

     The accompanying consolidated financial statements include the accounts of
     Microwave Transmission Systems, Inc. and its wholly-owned subsidiaries,
     MTSI Inc., CKS Management Inc., Epic Communications Inc., Site
     Communications Inc. and Viper Communication Systems Inc. All significant
     intercompany transactions and balances have been eliminated in
     consolidation.

     Cash and Cash Equivalents

     For purposes of the statement of cash flows, the Company considers all
     highly liquid investments purchased with an original maturity of three
     months or less to be cash equivalents.

     Marketable Securities

     Marketable equity securities are classified as available for sale and are
     carried at market value. Unrealized holding gains and losses are reported
     as a separate component of shareholders' equity until realized. Realized
     gains and losses on the sales of investments are based upon the specific
     identification method and are included in the statement of income.

     Accounts Receivable

     The Company extends unsecured credit in the normal course of business to
     virtually all of its customers. Management has provided an allowance for
     doubtful accounts which reflects its opinion of amounts which may
     ultimately become uncollectible. In the event of non-performance of
     accounts receivable, the maximum exposure to the Company is the recorded
     amount shown on the balance sheet.

     Fair Value of Financial Instruments

     The carrying values of cash, cash equivalents, marketable securities and
     debt approximate fair value.

                                       9
<PAGE>


              Microwave Transmission Systems, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2002 and 2001




2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Inventory

     Inventory, which consists primarily of materials used in the construction
     and maintenance of wireless transmitting facilities, are valued using the
     lower of cost or market on a specific identification basis.

     Property and Equipment

     Property and equipment are carried at cost. Expenditures for maintenance
     and repairs are charged directly against income. Major renewals and
     betterments are capitalized.

     Depreciation of property and equipment is calculated on the straight-line
     method over the estimated useful life of the asset, with useful lives
     ranging from 3 to 40 years. Leasehold improvements are amortized by the
     straight-line method over the shorter of the lease term or estimated useful
     life of the asset.

     Income Taxes

     The Company provides for income taxes under the asset and liability method.
     This method requires that deferred tax assets and liabilities be recognized
     for the future tax consequences attributable to differences between the
     financial statement carrying amounts of existing assets and liabilities and
     their respective tax bases. Deferred tax assets and liabilities are
     measured using enacted tax rates expected to apply to taxable income in the
     years in which those temporary differences are expected to be recovered or
     settled. The effect on deferred tax assets and liabilities of a change in
     tax rates is recognized in income in the period that includes the enactment
     date.

     Goodwill

     Goodwill, all of which relates to acquisitions made in August 2001, is not
     being amortized pursuant to the requirements of Statement of Financial
     Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
     Assets." Beginning January 1, 2002, SFAS No. 142 requires goodwill be
     tested for impairment annually and whenever there is an impairment
     indicator. Impairment will be recognized if the fair value of goodwill is
     less than the carrying amount.

     Minority Interest in Consolidated Subsidiaries

     Minority interest in results of operations of the consolidated subsidiaries
     for the year ended December 31, 2001 represents the minority shareholders'
     share of the income of various subsidiaries.


                                       10
<PAGE>


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Revenue Recognition

     The Company uses the completed contract method of revenue recognition since
     all of its current contracts are of a short-term nature. Under this method,
     revenue and related expenses are not recognized until a project, or a
     significant phase of the project, is completed. Costs incurred, which
     primarily consist of labor and materials, on uncompleted projects are
     capitalized as jobs in progress. Provisions for estimated losses on
     uncompleted contracts are made in the period in which such losses are
     determined. Amounts not yet billed for completed contracts are recorded as
     unbilled receivables.

     Accumulated Other Comprehensive Income

     Accumulated other comprehensive income (loss) consists of unrealized gains
     or losses on available-for-sale securities.

     Income Per Common Share

     Basic income per share is computed by dividing income available to common
     shareholders by the weighted-average number of common shares outstanding
     during the year. Diluted earnings per common share is computed by dividing
     income available to common shareholders by the weighted-average number of
     common shares outstanding plus the number of additional shares that would
     have been outstanding if potentially dilutive securities had been
     converted. A reconciliation of the denominators of the basic and diluted
     net income per share computations for 2002 and 2001 follows:
<TABLE>
<CAPTION>


                                                                                        2002              2001
                                                                                    -------------    --------------
<S>                                                                                    <C>                <C>
       Weighted average number of common shares
           outstanding                                                                 11,828,880         9,555,542
       Effect of dilutive options                                                          33,475             4,810
                                                                                    -------------    --------------

       Weighted average number of common shares
           outstanding, assuming dilution                                              11,862,355         9,560,352
                                                                                    =============    ==============
</TABLE>


     Use of Estimates

     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 the disclosure of contingent assets
     and liabilities as of the date of the financial statements, as well as the
     reported amounts of revenues and expenses during the reporting period.
     Actual results could differ from those estimates.


                                       11
<PAGE>



2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Reclassifications

     Certain 2001 amounts have been reclassified to conform with 2002
     presentation.

     Stock-based Compensation

     The Company accounts for this plan under the recognition and measurement
     principles of APB Opinion No. 25, "Accounting for Stock Issued to
     Employees, and Related Interpretations". No stock-based compensation cost
     is reflected in net earnings, as all options granted under those plans had
     an exercise price equal to the market value of the underlying common stock
     on the date of grant. The following table illustrates the effect on net
     income and income per share if the Company had applied the fair value
     recognition provisions of FASB Statement 123, "Accounting for Stock-Based
     Compensation", to stock-based compensation.
<TABLE>
<CAPTION>

                                                                           2002                  2001
                                                                       -------------    ----------------

         Net income:
<S>                                                                    <C>              <C>
              As reported                                              $     403,381    $        1,257,837
              Deduct:  Total stock-based compensation under
                  fair value based method                                    110,468               122,877
                                                                        ------------      ----------------

              Pro forma                                                $     292,913    $        1,134,960
                                                                        ============      ================

         Net income per share:
              As reported
                  Basic                                                $        0.03    $             0.13
                  Diluted                                              $        0.03    $             0.13
              Pro forma:
                  Basic                                                $        0.02    $             0.12
                  Diluted                                              $        0.02    $             0.12
</TABLE>


     The fair value of each option grant was estimated on the grant date using
     the Black-Scholes option pricing model with the following weighted average
     assumptions: expected volatility of 217%; risk-free interest rate of 4.19%;
     no dividend yield and expected life of 5 years.

     New Accounting Pronouncements

     In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS
     No. 144 "Accounting for Impairment or Disposal of Long-Lived Assets." SFAS
     No. 144 addresses financial accounting and reporting for the impairment or
     disposal of long-lived assets. This statement is effective for fiscal years
     beginning after December 15, 2001. The Company does not believe that the
     implementation of this standard will have a material effect on its
     financial position, or results of operations.


                                       12
<PAGE>


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     In December 2002, the FASB issued Statement 148, "Accounting for
     Stock-Based Compensation - Transition and Disclosure", an amendment of FASB
     Statement 123, to provide alternative transition methods for a voluntary
     change to the fair value based method of accounting for stock-based
     employee compensation. In addition, SFAS 148 amends the disclosure
     requirements of SFAS 123 to require prominent disclosures in annual
     financial statements about the method of accounting for stock-based
     employee compensation and the pro forma effect on reported results of
     applying the fair value based method for entities that use the intrinsic
     value method of accounting. This statement is effective for financial
     statements for fiscal years ending after December 15, 2002 and is effective
     for financial reports containing condensed financial statements for interim
     periods beginning after December 15, 2002, with earlier application
     permitted. The Company does not plan to change to the fair value based
     method of accounting for stock-based employee compensation at this time and
     has included the disclosure requirements of SFAS 148 in these financial
     statements.

     Advertising

     The cost of advertising is expensed as incurred. Total advertising expense
     was $157,376 and $159,059 in 2002 and 2001, respectively.


3.   ACQUISITIONS

     On August 30, 2001, the Company closed the acquisitions via merger of CKS
     Management, Inc. (CKS), Viper Communication Systems, Inc. (Viper), and Epic
     Communications Inc., (Epic), three Texas corporations engaged in the same
     business as the Company of constructing and maintaining wireless
     communications transmitting and receiving facilities for providers of
     wireless communication services (the "Acquired Businesses"). The
     transactions were structured as mergers of the Acquired Businesses into
     three wholly-owned subsidiaries of the Company formed for the purpose of
     effecting the mergers. The Acquired Businesses will continue to operate as
     separate subsidiaries. Consideration for the mergers consisted of 5,378,796
     shares of the Company's common stock, valued at $7,853,043, and cash in the
     amount of $2,514,168. Such cash was obtained from the proceeds of a bank
     loan. Of such consideration, 2,017,932 shares of common stock were issued,
     and $894,975 of the cash was paid, to P. David Spurlin, the Chief Executive
     Officer and the controlling shareholder of the Company.

     All of the Acquired Businesses were under the control of P. David Spurlin.
     Therefore, the portion of Acquired Businesses that was acquired from P.
     David Spurlin has been recorded at historical cost. The cash consideration
     paid for P. David Spurlin's interest has been reflected as a dividend in
     the consolidated financial statements. Financial statements for periods
     prior to the mergers have been restated to combine the Company and the
     Acquired Businesses in a manner similar to a pooling of interests.


                                       13
<PAGE>


3.   ACQUISITIONS - Continued

     The separate sales and net income of the Company and the Acquired
     Businesses for periods prior to the merger are as follows:

                                                              Eight months
                                                                 ended
                                                              August 30,
                                                                 2001
                                                            ------------------
                                                               (Unaudited)
       Sales:
           Company                                          $        7,894,386
       `
           Intercompany transactions                                (1,981,744)
                                                              ----------------

           Combined                                         $       12,908,700
                                                              ================

       Net income:
           Company                                          $          293,027
           Acquired businesses                                         700,949
           Minority interest                                          (344,085)
                                                              ----------------

           Combined                                         $          649,891
                                                              ================

     The portion of the Acquired Businesses purchased from non-controlling
     interests was accounted for by the purchase method of accounting. For
     periods prior to August 30, 2001, the acquisition date, the non-controlling
     interests have been reflected as Minority Interests in the Company's
     financial statements. The purchase of the non-controlling interests
     resulted in goodwill in the amount of $5,082,183. The Company has no tax
     basis in the goodwill.

     The amounts and components of the purchase price along with the allocation
     of the purchase price to the interests acquired from non-controlling
     shareholders of the Acquired Businesses are as follows:
<TABLE>
<CAPTION>

                                                          CKS              Epic            Viper             Total
                                                         -----            ------          -------           -------
       Consideration
<S>                                                 <C>               <C>              <C>               <C>
         Cash                                       $  600,000        $  170,758       $  848,435        $1,619,193
         Stock                                       1,244,694           985,500        2,676,668         4,906,862
                                                     ---------          --------        ---------         ---------

              Total consideration                    1,844,694         1,156,258        3,525,103         6,526,055

       Fair value of non-controlling
         interests                                     601,687           177,212          664,973         1,443,872
                                                      --------          --------         --------         ---------

       Goodwill recorded in purchase
         of non-controlling interests               $1,243,007        $  979,046       $2,860,130        $5,082,183
                                                     =========          ========        =========         =========
</TABLE>


                                       14
<PAGE>


4.   PROPERTY AND EQUIPMENT

     Property and equipment consists of the following at December 31, 2002 and
     2001.
<TABLE>
<CAPTION>


                                                                              2002             2001
                                                                         -------------    --------------
<S>                                                                     <C>               <C>
         Land                                                           $     594,078     $      460,069
         Buildings and improvements                                           859,888            610,130
         Leasehold improvements                                               146,915            146,765
         Furniture and fixtures                                               216,800            182,671
         Towers                                                               136,652             68,699
         Production equipment                                               1,030,562            918,880
         Vehicles and trailers                                              2,569,504          2,148,339
                                                                          -----------      -------------
                                                                            5,554,399          4,535,553
         Less accumulated depreciation
           and amortization                                                (1,761,313)        (1,043,805)
                                                                          -----------      -------------

                                                                        $   3,793,086     $    3,491,748
                                                                          ===========      =============
</TABLE>



5.   LINE OF CREDIT

     At December 31, 2002, the Company had $1,765,019 outstanding under a
     revolving credit agreement with a bank. Under the terms of the revolving
     credit agreement, the Company may borrow up to $2,550,000 or a percentage
     of the borrowing base (as defined). Interest is payable monthly at the
     bank's prime rate plus 0.5% (5.25% at December 31, 2002). The revolving
     credit agreement is collateralized by substantially all of the Company's
     tangible assets and guaranteed by the Company's majority shareholder, P.
     David Spurlin. The credit agreement contains certain cash flow and tangible
     net worth covenants.



                                       15
<PAGE>


6.   LONG-TERM DEBT
     Long-term debt at December 31, 2002 and 2001 consists of the following:
<TABLE>
<CAPTION>


                                                                                        2001              2000
                                                                                    -------------    --------------

         Term loan agreement with a bank maturing in August 2006. Interest is
           payable at the bank's prime rate (4.75% at December 31, 2002). The
           note is payable in monthly principal and interest payments of $18,333
           through maturity, is collateralized by substantially all tangible
           assets of the Company and is guaranteed by the Company's majority
<S>                                                                                 <C>                 <C>
           shareholder.                                                             $     827,111       $ 1,050,329

         Installment note agreement with a bank. The note matures in June 2007
           and has a fixed interest rate of 7.98%. The note is payable in
           monthly interest only payments of $2,394 through June 2002, principal
           and interest payments of $3,288 through June 2007 and a balloon
           payment of $294,346 in June 2007. The note is collateralized by real
           property and is guaranteed by the Company's majority shareholder.              354,788           360,000

         Installment note agreement with a bank maturing in September 2017.
           Interest is payable at the bank's prime rate (4.75% at December 31,
           2002). The note is payable in monthly principal and interest payments
           of $1,805 through maturity. The note is collateralized by real
           property and is guaranteed by the Company's majority shareholder.              229,432                -

         Note payable agreements with various financial institutions for
           vehicles. The notes are payable in equal monthly principal and
           interest payments and maturing at various dates through July 2005.
           The notes have fixed interest rates up to 5.25% and are
           collateralized by vehicles.                                                    634,166           504,829
                                                                                      -----------        ----------
                                                                                        2,045,497         1,915,158
         Less current portion                                                            (533,010)         (483,166)
                                                                                      -----------        ----------

                                                                                    $   1,512,487       $ 1,431,992
                                                                                      ===========        ==========
</TABLE>



                                       16
<PAGE>


6.   LONG-TERM DEBT - Continued

     At December 31, 2001, scheduled maturities of long-term debt are as
follows:
<TABLE>
<CAPTION>


<S>           <C>                                                                   <C>
              2003                                                                  $     533,010
              2004                                                                        510,774
              2005                                                                        324,366
              2006                                                                        189,739
              2007                                                                         21,180
              Thereafter                                                                  466,428
                                                                                      -----------

                                                                                    $   2,045,497
</TABLE>



7.   INCOME TAXES

     Deferred tax assets (liabilities) are comprised of the following at
December 31, 2001:
<TABLE>
<CAPTION>


                                                                                        2002              2001
                                                                                    -------------    --------------

       Deferred tax assets
<S>                                                                                 <C>              <C>
           Accounts payable and accrued liabilities                                 $      52,147    $       77,269
           Property and equipment                                                          13,740               -
           Other                                                                               -             20,215
                                                                                      -----------       -----------

              Total deferred tax assets                                                    65,887            97,484

       Deferred tax liabilities
           Accounts receivable                                                           (511,676)         (783,433)
           Jobs in progress                                                               (14,117)          (27,025)
           Other                                                                           (1,527)          (19,464)
                                                                                      -----------       -----------

              Total deferred tax liabilities                                             (527,320)         (829,922)
                                                                                         --------          --------

       Net deferred tax liability                                                   $    (461,433)   $     (732,438)
                                                                                      ===========       ===========
</TABLE>



                                       17
<PAGE>


7.   INCOME TAXES - Continued

     Deferred tax assets and liabilities included in the balance sheets are as
        follows at December 31, 2002 and 2001:
<TABLE>
<CAPTION>

                                                                                        2002              2001
                                                                                    -------------    --------------

<S>                                                                                 <C>              <C>
       Net current deferred tax liability                                           $    (475,173)   $     (732,438)
       Net long-term asset                                                                 13,740               -
                                                                                      -----------       -----------

       Net deferred tax liability                                                   $    (461,433)   $     (732,438)
                                                                                      ============      ===========
</TABLE>



     The components of income tax expense for the years ended December 31, 2002
        and 2001 are as follows:
<TABLE>
<CAPTION>


                                                                                        2002              2001
                                                                                    -------------    --------------

       Federal:
<S>                                                                                 <C>              <C>
           Current                                                                  $     472,241    $      729,820
           Deferred                                                                      (271,005)          160,828
                                                                                      -----------       -----------
                                                                                          201,236           890,648

       State                                                                               48,892            64,907
                                                                                      -----------       -----------

       Total                                                                        $     250,128    $      955,555
</TABLE>


     The effective income tax rate for the years
     ended December 31, 2002 and 2001 varied from the statutory rate due to the
     following:
<TABLE>
<CAPTION>


                                                                                             2002              2001
                                                                                             ----              ----

<S>                                                                                          <C>              <C>
       Income tax expense at statutory rate                                                  34.0%            34.0%
       State taxes, net of federal benefit                                                    4.9              1.7
       Nondeductible expenses                                                                 2.4              0.3
       Revisions to prior year estimates                                                     (3.0)             1.4
                                                                                             ----             ----

                                                                                             38.3%            37.4%
                                                                                             ====             ====
</TABLE>



8.   LEASES

     The Company leases one of its office facilities from the president and
     majority shareholder of the Company. The facility is leased on a
     month-to-month basis, and has been classified as an operating lease. Total
     rent expense associated with this lease was $56,400 for the years ended
     December 31, 2002 and 2001.

                                       18
<PAGE>


8.   LEASES - Continued

     The Company also leased a house from the president and majority
     shareholder. The house provides lodging for out-of-town employees and
     contractors in lieu of the Company incurring hotel and other travel related
     charges. The lease began in April 1999 and continued on a month-to-month
     basis through May 2002. Total rent expense associated with this lease was
     $3,500 and $8,400 for the years ended December 31, 2002 and 2001,
     respectively.

     The Company leases other office facilities under noncancellable leases
     expiring through August 2004. The future minimum lease payments are as
     follows:

              Years ending
              December 31,

                  2002                           $184,200
                  2003                            184,200
                  2004                            101,400
                                                  -------

                                                 $469,800

     Total rent expense was approximately $129,663 and $111,363 in 2002 and
     2001, respectively.


9.   EMPLOYEE PROFIT SHARING PLAN

     The Company offers a profit sharing plan, Microwave Transmission Systems,
     Inc. Profit Sharing Plan ("Plan"), which covers all employees of the
     Company who have attained age 18 and six months of service with the Company
     as of the semi-annual Plan entrance dates. The Company makes non-matching
     contributions at the discretion of the Plan's trustees. Employees' profit
     sharing accounts are fully vested after seven years. In accordance with the
     Plan provisions, the Company covers all costs associated with the
     administration of the Plan. Employer discretionary contributions for the
     years ended December 31, 2002 and 2001 were $176,189 and $572,446,
     respectively.


10.  RELATED PARTY TRANSACTIONS

     As described in Note 3, the Company completed in 2001, the acquisition of
     three companies in which the majority shareholder of MTSI had a controlling
     interest.

     As discussed in Note 8, the Company leases real estate from the president
     and majority shareholder of the Company.



                                       19
<PAGE>


11.  BUSINESS AND CREDIT CONCENTRATIONS

     During the year ended December 31, 2002, sales to two customers comprised
     36% and 11%, respectively, of total revenue. During the year ended December
     31, 2001, sales to two customers comprised 28% and 23%, respectively, of
     total revenue.

     At December 31, 2002, one customer accounted for 38% of accounts
     receivable. At December 31, 2001, one customer accounted for 37% of
     accounts receivable.


12.  STOCK OPTIONS

     The Company has a stock option plan which provides that options for 800,000
     shares of the Company common stock may be granted to officers, directors
     and key employees of the Company at the market value on the date of grant.
     The options expire 10 years from the date of grant and vest 25% immediately
     and the balance over a three-year period. During 2001, options for 515,000
     shares at $1.32 per share were granted. The weighted average fair value per
     share at date of grant was $1.30.

     Information about stock options outstanding at December 31, 2002 is
     summarized as follows:


                                        Weighted
                                         Average
                                        Remaining
                         Number         Contractual             Number
     Exercise Price      Outstanding      Life                  Exercisable
     --------------      -----------    -----------             -----------
     $1.32               515,000         8.9 years              257,500



                                       20
<PAGE>




                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized



Date:    April 29, 2003             /s/ P. David Spurlin
                                    --------------------
                                    P. David Spurlin








Date:          April 29, 2003               /s/ P. David Spurlin
                                            ----------------------------
                                            P. David Spurlin


Date:           April 29, 2003              /s/ D. Susan King
                                            ----------------------------
                                            D. Susan King


Date:          April 29, 2003               /s/ David Story
                                            ----------------------------
                                            David Story


Date:          April 29, 2003               /s/ Mike Sutton
                                            ----------------------------
                                            Mike Sutton


Date:          April 29, 2003
                                            ----------------------------
                                            Carl Moore


Date:          April 29, 2003
                                            ----------------------------
                                            S. Kerry Tassopoulos


Date           April 29, 2003
                                            ----------------------------
                                            Lou Strenger


Date           April 29, 2003               /s/ Dan Lassiter
                                            ----------------------------
                                            Dan Lassiter


                                       21
<PAGE>



                                  CERTIFICATION

I, P. David Spurlin, certify that:

1.   I have reviewed this annual report on Form 10-KSB of Microwave Transmission
     Systems, Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a) designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this annual report is
         being prepared;

     (b) evaluated the effectiveness of the registrant's disclosure controls and
         procedures as of a date within 90 days prior to the filing date of this
         annual report (the "Evaluation Date"); and

     (c) presented in this annual report our conclusions about the effectiveness
         of the disclosure controls and procedures based on our evaluation as of
         the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     (a) all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

     (b) any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

     Date:  April 29, 2003

     /s/  P. David Spurlin
     ----------------------------
     P. David Spurlin,  President


                                       22
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                                  CERTIFICATION




I, D. Susan King, certify that:

1.   I have reviewed this annual report on Form 10-KSB of Microwave Transmission
     Systems, Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a) designed such disclosure controls and procedures to ensure that
         material information relating to the registrant, including its
         consolidated subsidiaries, is made known to us by others within those
         entities, particularly during the period in which this annual report is
         being prepared;

     (b) evaluated the effectiveness of the registrant's disclosure controls and
         procedures as of a date within 90 days prior to the filing date of this
         annual report (the "Evaluation Date"); and

     (c) presented in this annual report our conclusions about the effectiveness
         of the disclosure controls and procedures based on our evaluation as of
         the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     (a) all significant deficiencies in the design or operation of internal
         controls which could adversely affect the registrant's ability to
         record, process, summarize and report financial data and have
         identified for the registrant's auditors any material weaknesses in
         internal controls; and

     (b) any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

     Date:  April 29, 2003

     /s/  D. Susan King
     ----------------------
     D. Susan King,  Vice President


                                       23
<PAGE>


                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER

           Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the filing with the Securities and Exchange Commission of the
Annual Report of Microwave Transmission Systems, Inc. (the "Company"), on Form
10-KSB, as amended, for the period ending December 31, 2002 (the "Report"), I,
P. David Spurlin, Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to the best of my knowledge:

         (1) The Report fully complies with the requirements of Section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

         (2) The information contained in the Report fairly presents, in all
         material respects, the financial condition and results of operations of
         the Company.

/s/ P. David Spurlin
---------------------------
P. David Spurlin, President

April 29, 2003


                                       24
<PAGE>


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER

           Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the filing with the Securities and Exchange Commission of the
Annual Report of Microwave Transmission Systems, Inc. (the "Company"), on Form
10-KSB, as amended, for the period ending December 31, 2002 (the "Report"), I,
D. Susan King, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to the best of my knowledge:

         (1) The Report fully complies with the requirements of Section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

         (2) The information contained in the Report fairly presents, in all
         material respects, the financial condition and results of operations of
         the Company.

/s/ D. Susan King
------------------------------------
D. Susan King, Chief Financial Officer

April 29, 2003




                                       25
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