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, 2003

[ ]      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.
                 (Name of small business issuer in its charter)

                                     Texas
         (State or other jurisdiction of incorporation or organization)

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

541 Sterling Drive, Richardson, TX                         75081
       (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: $23,181,866

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
30, 2004: $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.

                      DOCUMENTS INCORPORATED BY REFERENCE

The registrant's proxy statement filed with the commission on November 6,2003,
is hereby incorporated by reference

<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.,
("MTSI"), CKS Management, Inc., ("CKS"), EPIC Communications, Inc. ("EPIC"),
Viper Communications Systems Inc. ("Viper"), Site Communications, ("Site"), MTSI
Westcoast Division Incorporated ("Westcoast"), and MTSI, Northeast, Incorporated
("Northeast"), which collectively are our only assets and the entities through
which we conduct our operations. MTSI, CKS, EPIC, Viper, and Site are Texas
corporations. Westcoast is a California corporation and Northeast is an Ohio
corporation. 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, Site, Westcoast
and Northeast 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. 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 we began working on
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
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.

                                       1
<PAGE>

         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 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 under their same names before the merger.
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.

         Beginning in November 2001 we began to expand our operations into areas
of the United States where we did not have significant prior operations. This
strategy was based upon the successful models of Viper and Epic. The November
2001 operations, conducted through Site, are headquartered in Gallatin,
Tennessee. Westcoast, formed in the summer of 2002 but with operations
commencing in January 2003, is headquartered in Santa Ana California. Northeast,
formed in August 2003 with operations commencing at approximately the same time,
is headquartered in Mechanicstown, Ohio.

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 antennae, 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.

                                       2
<PAGE>

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 provider 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 2003,
our largest customers were Alltel, Cingular, Alcatel, General Dynamics, MCI
Worldcom and SBA representing 13.7%, 13.7%, 9.4%, 7.3%, 6.7% and 6.4% of our
revenues, respectively. No other customer represented more than 10% of our
revenues during this period.

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.

                                       3

<PAGE>

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 opened
an office in Santa Ana, California and another in Mechanicstown, Ohio.

         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.

                                       4
<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, 2004, we had 199 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, 27 in administration
and 156 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 was classified as an operating
lease prior to the purchase of the building by MTSI. Total rent expense
associated with this lease was $14,100 and $56,400 for the years ended December
31, 2003 and 2002, respectively.

         In 2003, MTSI purchased their primary office facility in Richardson,
Texas from P. David Spurlin, our Chief Executive Officer, President, and
majority shareholder. The purchase price, $380,000, was determined pursuant to
an independent appraisal, and the purchase was financed with a mortgage note
obtained from a bank. The note, which is from a bank, is in the amount of
$304,000, is for a term of fifteen years, bears interest at 5.3% per annum, and
is payable in monthly installments. Upon closing, Mr. Spurlin loaned the entire
amount of his proceeds from the sale to the Company. The note payable to Mr.
Spurlin may be prepaid but matures on December 31, 2004 and bears interest,
commencing April 1, 2003 at a rate equal to the prime interest rate published in
the Wall Street Journal plus 2% at the beginning of each calendar quarter.
Interest accrues quarterly and is due at maturity.

         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 $21,450 and $23,400 for the years ending December 31, 2003
and 2002, respectively.

         Viper in Ocala, Florida owns its property. Viper in North Carolina
leased its office facility in Concord, North Carolina. 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 $21,450 and
$36,500 for the years ending December 31, 2003 and 2002, respectively.

         In July 2003 Viper in North Carolina leased a building from Donald D.
Jones, Vice President of Viper . The building is located in Concord, NC. The
lease is for an initial five-year term expiring July 31 2008, with a
month-to-month renewal thereafter. Total rent expense associated with this lease
was $23,500 for the year ending December 31, 2003.

         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.

         In February 2003 we leased a building in Santa Ana, California for a
term of two years. The monthly lease in the first year was $3,750 and for the
second year is $3,900.

         We lease a building from Mike Sutton, one of our directors, in
Mechanicstown, Pennsylvania. Mr. Sutton does not charge rent on the building.

         Total rental expense for all of our operating leases was $123,914 and
$129,663 for the years ended December 31, 2003 and 2002, respectively.

                                       6
<PAGE>

         We believe that the condition of our leased and owned 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


                                       7
<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.
<TABLE>
<CAPTION>

                                           Bid                                 Ask
                                ------------------------             ----------------------
                                    High            Low                High            Low
                                 --------        -------             -------        -------
         2002
<S>                              <C>             <C>                 <C>            <C>
         First Quarter           $   1.85        $  1.10             $  2.20        $  1.20
         Second Quarter          $   3.10        $  0.85                3.60           1.09
         Third Quarter           $   2.10        $  1.05                2.30           1.50
         Fourth Quarter          $   1.25        $  0.60                1.60           1.40

         2003
         First Quarter           $   1.30        $  0.60             $  1.50        $  1.05
         Second Quarter              0.60           0.55                1.05           1.00
         Third Quarter               0.55           0.30                1.00           0.51
         Fourth Quarter              0.51           0.25                1.00           0.55
</TABLE>


         Holders. As of March 15, 2004, 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 are derived from the installation of wireless
transmission and receiving facilities used by cellular and PCS telephones.
Generally, 60% of our revenues are derived from the erection of microwave
towers.

         Our customers will either supply the materials for our construction
activity or ask us to provide those. The percentage of our revenues derived from
us supplying those materials has traditionally varied. Because our margins are
lower on material compared to our construction services, the cost of sales can
be affected significantly by the percentage of materials in our revenues in a
given year. That percentage was 15.2% in fiscal 2001, 12.7% in fiscal 2002 and
18.9% in fiscal 2003.

         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, 2004, we owned three towers.

Critical Accounting Policies and Estimates

         Management's discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. We review the accounting policies we
use in reporting our financial results on a regular basis. The preparation of
these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosure of contingent assets and liabilities. On an on-going basis we
evaluate our estimates, including those related to accounts receivable,
inventories, goodwill impairment and contingencies and litigation. Our estimates
are based on historical experience and other assumptions that are believed to be

                                       8

<PAGE>

reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities. In addition
to the items listed above which are affected by estimates, we believe that the
following are among critical accounting policies used in the preparation of our
consolidated financial statements:

Revenue Recognition. The Company uses the completed contract method of revenue
recognition since all of its contracts are of a short-term nature. Under this
method, revenue and related expenses are not recognized until a 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. Amounts billed in advance are recorded as
deferred revenue.

Allowance for Doubtful Accounts. We maintain allowances for doubtful accounts
for estimated losses resulting from the inability of our customers to make
required payments. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.

Goodwill Impairment. As required by SFAS No. 142, Goodwill and Intangible Assets
we are required to test goodwill for impairment annually or at other times if
events have occurred or circumstances exist that indicate the carrying value of
goodwill may no longer be recoverable. The impairment test for goodwill involves
a two-step process: step one consists of a comparison of the fair value of a
reporting unit with its carrying amount, including the goodwill allocated to
each reporting unit. For goodwill impairment testing purposes, the Company has
one reporting unit. If the carrying amount exceeds the fair value, step two
requires the comparison of the implied fair value of the reporting unit goodwill
with the carrying amount of the reporting unit goodwill. Any excess of the
carrying value of the reporting unit goodwill over the implied fair value of the
reporting unit goodwill will be recorded as an impairment loss. Considerable
management judgment is necessary to estimate the fair value, which may be
impacted by future actions taken by us and our competitors and the economic
environment in which we operate.

Results of Operations

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

         While revenues increased almost 20% from $19,332,575 to $23,181,866
between the periods, net income fell almost 36% as a result of increases in our
cost of sales and operating expenses. The increase in revenues was a result of
what management of the Company believes to be a general recovery in the wireless
industry which necessitated increased construction of infrastructure. Cost of
sales increased 30%. Management of the Company believes that the increase in
cost of sales at a greater rate than the increase in sales can be mostly
attributed to the fact the in fiscal 2003 when compared to 2002, the Company
provided a significantly larger amount of materials, which have less than margin
than that on services, used in construction projects causing our gross margins
to decrease to 34% in 2003 from 39% in 2002. Further, we began operations in
California and Ohio in 2003 and California operations experienced the
inefficient use of assets and personnel and rigorous market competition that
suppressed our margins in that market. The California operations provided
$1,075,493 in revenues with cost of sales of $906,492, resulting in gross
margins of approximately 16%, significantly less than the gross margin of 34%
achieved company wide. In 2003, revenues from sales of materials increased by
approximately $1,600,000. Material sales have lower gross margins than our
construction services. Most of the increase in material sales occurred in the
fourth quarter of 2003.

         During the third and fourth quarters of 2003, we experienced a
significant increase in contract work for our services. The amount of costs
incurred in performing services resulted in an increase of $742,465 or 230% in
our jobs in progress accounts over the prior year-end. Since our contracts are
generally short-term, we expect to complete most of the contracts during the 1st
quarter of 2004, which will allow us to recognize the related revenues.

         The Tennessee office, which opened in 2002, was profitable in 2003
after breaking even in 2002. In 2003 we opened new offices in Santa Rosa,
California and in Mechanicstown, Ohio. The California office is struggling with
a depressed construction environment in the areas which lead to a loss for the
year. The Ohio office is showing a break even to small profit from their
operations.

         Our operating expenses, while increasing approximately $490,000 in 2003
compared to 2002, declined as a percentage of revenues. Much of the increase is
attributable to increased contributions to our profit sharing plan program, an
increase in administrative expenses from our California operations as well as
significant increases in workers compensation insurance costs in most of the
states in which we conduct business except Texas.

Liquidity and Capital Resources

                                       9

<PAGE>

         Our operations are primarily funded by internally generated funds from
the collection of our accounts receivables and by borrowings from our line of
credit.

Operating Cash Flows

         Our operations for the year ended December 31, 2003 used $218,636 in
cash, a decrease of $1,118,554 from the year ended December 31, 2002 which
provided $899,918 in cash. This consumption of cash was caused by accelerating
business activity during the last half of 2003 which resulted in an increase of
$1,736,442 in accounts receivable and $407,069 in unbilled receivables. We also
incurred an increase of $742,565 in costs for jobs in progress that were not
completed.

         Accounts payable increased $705,072 from the purchase of materials and
services required as a result of our increased operations. Accrued liabilities
increased $353,230 primarily from our year-end profit sharing plan contribution.
Deferred revenues increased $730,022 from advance billings on contracts that
were not complete.

Investing and Financing Cash Flows

         We used $1,027,909 in investing activities for the purchase of property
and equipment, including our corporate headquarters, which we purchased from the
Company's President, P. David Spurlin for $380,000 and an additional $647,909 in
property and equipment, principally vehicles. We financed all of these
transactions through borrowings on our line of credit, automobile financing and
a mortgage loan in the amount of $380,000 for the corporate headquarters. We
increased our line of credit borrowings by $296,340 to sustain our increased
business activity, in addition to borrowing $380,000 from our company's
President. We financed property and equipment purchases with additional bank
borrowings of $759,127 and made payments on our long-term bank debt of $573,167.

Line of Credit

         We maintain a line of credit to manage fluctuations in cash flows. At
December 31, 2003 the total borrowing capacity under our line of credit was
$2,550,000, and the Company had $2,061,359 and $1,765,019 outstanding under the
line of credit as of and December 31, 2003 and 2002, respectively. We believe
that cash flows provided by operations and availability of the line of credit
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.

Contractual Obligations

As of December 31, 2003, the Company's contractual obligations, including
payments due by period, are as follows:
<TABLE>
<CAPTION>
                                     Fiscal
                                     ------

                        2004         2006         2006         2007        2008      Thereafter      Total
                        ----         ----         ----         ----        ----      ----------      -----
<S>                    <C>         <C>          <C>          <C>          <C>         <C>        <C>
Long-term debt         $693,654    $596,216     $357,492     $ 91,710     $ 90,532    $776,254   $2,605,858
Operating leases        116,250      57,900       54,000       54,000       30,500           -      312,650
                       --------    --------     --------     --------     --------    --------   ----------
Total                  $809,904    $654,116     $411,492     $145,710     $121,032    $776,254   $2,918,508
                       ========    ========     ========     ========     ========    ========   ==========
</TABLE>

Refer to Notes E and G to the consolidated financial statements for additional
information regarding long-term debt and operating leases.

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.

         Not Applicable

Item 8A. 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

                                       10

<PAGE>

Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. As of December 31, 2003, 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.

                                    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, 2004.

Name                         Age   Position

Preston D. Spurlin           44    Chief Executive Officer, President, Director
Susan King                   59    Vice President of Finance, Director
David Story(1)               42    Vice President of Operations, Director
Michael D. Sutton            48    Vice President of Field Services, Director
Carl Moore(2)                49    Director
S. Kerry Tassopoulos(2)      46    Director
Lou Strenger(2)              54    Director
Dan Lassiter                 55    Director

(1) On May 28,2004, Mr. Story resigned as a director and officer of the Company.
(2) At the end of March 2004, Messrs Strenger, Tassopoulos and Moore resigned as
directors of the Company.

         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. From 1997 to 1999 Mr. Moore was a consultant
to the wireless communications industry. Mr. Moore became a director of the
Company in December 2000.

         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
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-employed 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, as of March 15, 2004, had two members,
Lou Strenger and Dan Lassiter. Mr. Strenger resigned as a director at the end of
March 2004. 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

                                       11

<PAGE>

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. Messrs Moore and Tassopoulos resigned
as directors at the end of March 2004.

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, 2003, 2002, and 2001. 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(1)         Bonus                  Compensation(2)(3)

<S>                                 <C>           <C>            <C>                            <C>
P. David Spurlin                    2003          $  119,013     $   3,074                      $   12,209
Chief Executive Officer             2002             115,013         4,860                           6,619
                                    2001             115,013         4,952                          17,995

David Story                         2003             133,231         2,816                          13,605
Vice-President                      2002             129,231        15,663                           7,245
                                    2001             102,537         9,094                          16,745

Mike Sutton                         2003              82,335        16,967                           9,930
Vice President                      2002              68,450        10,640                           3,955
                                    2001              95,200         2,656                          14,678

Susan King                          2003             101,077        11,920                          11,300
Vice-President/Secretary            2002              91,930        16,060                           5,399
                                    2001              81,701        11,830                          14,030
</TABLE>


(1)      Included in Annual Compensation are director's fees of $4,000.

(2)      Included in Other Compensation is premium paid on term life insurance
         policies on behalf of P. David Spurlin.
(3)      Included in Other Compensation are employer's contributions under
         MTSI's Profit Sharing Plan described below.

         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, 2003 and
2002 were $559,361 and $176,189, respectively.

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

         At March 15, 2004, we had issued and outstanding 11,828,880 shares of
common stock. The table below sets forth, as of March 15, 2004, 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
series of our capital stock; (2) each of the directors and executive officers
individually and (3) all directors and executive officers as a group.

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

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%

                                       12
<PAGE>

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%
670 West Campbell Road
Suite 150
Richardson, TX 75080

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

(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.

         Until March 27, 2003, we leased our headquarters from P. David Spurlin,
our Chief Executive Officer, President and Majority shareholder. On that date,
MTSI purchased their primary office facility in Richardson, Texas from him. The
purchase price, $380,000, was determined pursuant to an independent appraisal,
and the purchase was financed with a mortgage note obtained from a bank. The
note, which is from a bank, is in the amount of $304,000, is for a term of
fifteen years, bears interest at 5.3% per annum, and is payable in monthly
installments. Upon closing, Mr. Spurlin loaned the entire amount of his proceeds
from the sale to the Company. The note payable to Mr. Spurlin may be prepaid but
matures on December 31, 2004 and bears interest, commencing April 1, 2003 at a
rate equal to the prime interest rate published in the Wall Street Journal plus
2% at the beginning of each calendar quarter. Interest accrues quarterly and is
due at maturity. In June, September and December 2003 we paid Mr. Spurlin a
total of $11,250 in interest, and we paid an aggregate of $22,700 on the
principal in 2003. . The note is payable December 31, 2004.

         Prior to purchasing the facility, we leased it on a month-to-month
basis, and was 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 monthly rent was $4,700 in 2003.

         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 zero for 2002.

         We lease a building from Mike Sutton, one of our directors, in
Mechanicstown, Pennsylvania. Mr. Sutton does not charge rent on the facility.

         We paid Dan Lassiter $10,300 and $4,200 in 2002 and 2003, respectively,
for tax accounting advice.


                                       13
<PAGE>


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

(a)      Reports filed on Form 8-K

         None

(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. Principal Accountant Fees and Services.

      The information  required by this item is set forth in the Proxy
Statement under the heading  Independent  Public  Accountants,
which information is incorporated herein by reference.



                                       14
<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, 2003 and 2002.....................3

Consolidated Statements of Income for the years ended
     December 31, 2003 and 2002...............................................5

Consolidated Statement of Shareholders'
     Equity for the years ended December 31, 2003 and 2002....................6

Consolidated Statements of Cash Flows for the years
     ended December 31, 2003 and 2002.........................................7

Notes to Consolidated Financial Statements....................................8


                                       1
<PAGE>









             Report of Independent public Public Accountanting Firm



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, 2003 and 2002,
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 the standards of the Public Company
Accounting Oversight Board (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, 2003 and 2002,
and the consolidated results of their 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
March 12, 2004



                                       2
<PAGE>



              Microwave Transmission Systems, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                  December 31,



<TABLE>
<CAPTION>

                  ASSETS                                                                2003              2002
                                                                                    -------------    --------------
CURRENT ASSETS
<S>                                                                                 <C>              <C>
   Cash and cash equivalents                                                        $           -    $       94,262
   Marketable securities                                                                    1,502             1,502
   Accounts receivable - trade, net of allowance for doubtful accounts of
        $46,490 and $48,110 in 2003 and 2002, respectively                              4,648,160         2,910,098
   Unbilled receivables                                                                   584,173           177,104
   Jobs in progress                                                                     1,065,139           322,574
   Inventories                                                                            678,125           620,939
   Prepaid expenses and other current assets                                              399,226           265,503
   Refundable income taxes                                                                  2,567            33,900
                                                                                     ------------      ------------
                  Total current assets                                                  7,378,892         4,425,882

PROPERTY AND EQUIPMENT                                                                  6,582,308         5,554,399
   Less accumulated depreciation and amortization                                      (2,534,173)       (1,761,313)
                                                                                     ------------      ------------
                  Net property and equipment                                            4,048,135         3,793,086

OTHER ASSETS
   Goodwill                                                                             5,082,183         5,082,183
   Deferred income taxes                                                                    3,509            13,740
   Other assets                                                                            32,552            57,990
                                                                                     ------------      ------------
                  Total other assets                                                    5,118,244         5,153,913
                                                                                     ------------      ------------
                  Total assets                                                      $  16,545,271    $   13,372,881
                                                                                     ============      ============
</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,


<TABLE>
<CAPTION>

        LIABILITIES AND SHAREHOLDERS' EQUITY                                              2003             2002
                                                                                    -------------    --------------
CURRENT LIABILITIES
<S>                                                                                 <C>              <C>
   Line of credit                                                                   $   2,061,359    $    1,765,019
   Overdraft                                                                              295,569
   Current portion of long-term debt                                                      693,654           533,010
   Accounts payable                                                                     1,038,498           333,426
   Accrued liabilities                                                                    809,400           456,170
   Deferred revenue                                                                       755,468            25,446
   Income taxes payable                                                                   454,011           208,402
   Deferred income taxes                                                                  182,386           475,173
                                                                                     ------------      ------------
                  Total current liabilities                                             6,290,345         3,796,646

LONG-TERM DEBT, LESS CURRENT PORTION                                                    1,912,214         1,512,487

COMMITMENTS 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 and outstanding
                                                                                           11,829            11,829
   Additional paid-in capital                                                           4,773,525         4,773,525
   Accumulated other comprehensive loss                                                      -              (19,200)
   Retained earnings                                                                    3,557,358         3,297,594
                                                                                     ------------     -------------
                  Total shareholders' equity                                            8,342,712         8,063,748
                                                                                     ------------     -------------
                  Total liabilities and shareholders' equity                        $  16,545,271    $   13,372,881
                                                                                     ============     =============
</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>
                                                                                        2003             2002
                                                                                 ---------------   ----------------
<S>                                                                              <C>               <C>
Net sales                                                                        $    23,181,866   $     19,332,575
Cost of sales                                                                         15,292,664         11,745,783
                                                                                  --------------    ---------------
                  Gross profit                                                         7,889,202          7,586,792

Operating expenses                                                                     7,193,102          6,714,548
                                                                                  --------------    ---------------
                  Operating income                                                       696,100            872,244

Interest expense                                                                         256,065            218,735
                                                                                  --------------    ---------------
                  Income before income taxes                                             440,035            653,509

Provision for income tax
  Current                                                                                462,827            521,133
  Deferred income tax                                                                   (282,556)          (271,005)
                                                                                  --------------    ---------------
                                                                                         180,271            250,128

                  NET INCOME                                                     $       259,764   $        403,381
                                                                                  ==============    ===============
Net earnings per common share-basic and diluted                                  $       0.02      $        0.03
                                                                                  ==============    ===============
Weighted average number of common shares outstanding
Basic                                                                                 11,828,880         11,828,880
                                                                                  ==============    ===============
Diluted                                                                               11,829,364         11,862,355
                                                                                  ==============    ===============
</TABLE>



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

                                        5
<PAGE>




              Microwave Transmission Systems, Inc. and Subsidiaries

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                 For the years ended December 31, 2003 and 2002

<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, 2002     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
                                ----------     -------     ----------      ------------     ----------    ----------
Realized loss on
marketable securities                 -           -              -            19,200              -           19,200

Net income                            -           -              -              -              259,764       259,764
                                                                                            ----------    ----------
Comprehensive income                  -           -              -              -                 -          278,964
                                ----------     -------     ----------      -------------    ----------    ----------

Balances at December 31, 2003   11,828,880     $11,829     $4,773,525      $    -           $3,557,358    $8,342,712
                                ==========     =======     ==========      =============    ==========    ==========
</TABLE>




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

                                        6


<PAGE>


              Microwave Transmission Systems, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                        For the years ended December 31,

<TABLE>
<CAPTION>
                                                                                            2003             2002
                                                                                    -------------    --------------
Cash flows from operating activities
<S>                                                                                 <C>              <C>
   Net income                                                                       $     259,764    $      403,381
     Adjustments to reconcile net income to net cash provided by
      (used in) operating activities:
         Depreciation and amortization                                                    790,247           886,468
         Gain on disposal or sale of property and equipment                               (17,387)          (11,973)
         Deferred income taxes                                                           (282,556)         (271,005)
         Provision for doubtful accounts                                                  160,486            14,266
         Realized loss on marketable securities                                            19,200              -
     Changes in operating assets and liabilities:
         Accounts receivable - trade                                                   (1,898,548)        1,452,101
         Unbilled receivables                                                            (407,069)           24,249
         Jobs in progress                                                                (742,565)          243,378
         Inventory                                                                        (57,186)         (271,717)
         Prepaid and other current assets                                                (133,723)         (110,794)
         Other assets                                                                      25,438           (13,538)
         Cash overdraft                                                                   295,569              -
         Refundable income taxes                                                           31,333           (33,900)
         Accounts payable                                                                 705,072          (432,664)
         Accrued liabilities                                                              353,230          (459,402)
         Deferred revenue                                                                 730,022            25,446
         Income taxes payable                                                             245,609          (544,378)
                                                                                    -------------    --------------
                  Cash flows provided by operating activities                              76,936           899,918

Cash flows from investing activities
     Purchases of property and equipment                                               (1,027,909)       (1,216,347)
     Proceeds from sale of property and equipment                                            -               21,403
     Payments received on notes receivable                                                   -                  166
                                                                                    -------------    --------------
                  Cash flows used in investing activities                              (1,027,909)       (1,194,778)

Cash flows from financing activities
     Proceeds from line of credit                                                         296,340           154,395
     Payments on line of credit                                                              -             (300,000)
     Borrowings of long-term debt, net                                                    759,127           130,339
     Repayment of long-term debt                                                         (578,756)             -
     Proceeds from note payable to shareholder                                            380,000              -
                                                                                    -------------    --------------
                  Cash flows provided by (used in) financing activities                   856,711           (15,266)
                                                                                    -------------    --------------
Net decrease in cash and cash equivalents                                                 (94,262)         (310,126)

Cash and cash equivalents, beginning of period                                             94,262           404,388
                                                                                    -------------    --------------
Cash and cash equivalents, end of period                                            $        -       $       94,262
                                                                                    -------------    --------------
Supplemental disclosures of cash flow information:
     Cash paid for interest                                                         $     255,770    $      214,488
                                                                                    =============    ==============
     Cash paid for income taxes                                                     $     267,876    $      561,176
                                                                                    =============    ==============
</TABLE>


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

                                        7
<PAGE>


              Microwave Transmission Systems, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2003 and 2002



NOTE A - 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.


NOTE B - 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. Viper Communication Systems Inc., MTSI Westcoast
     Division Incorporated and MTSI Northeast, 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's accounts receivable are primarily due from telecommunications
     providers. Credit is extended based on evaluation of each customer's
     financial condition and, generally collateral is not required. Accounts
     receivable are generally due within 30 days and are stated net of an
     allowance for doubtful accounts. Accounts outstanding longer than
     contractual payment terms are considered past due. The Company records an
     allowance on a specific identification basis by considering a number of
     factors, including the length of time trade accounts are past due, the
     Company's previous loss history, the credit-worthiness of individual
     customers, economic conditions affecting the telecommunications industry
     and economic conditions in general. The Company writes-off accounts
     receivable when they become uncollectible and payments subsequently
     received on such receivables are credited against write-offs in the period
     the payment is received.


                                       8
<PAGE>


              Microwave Transmission Systems, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2003 and 2002

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Changes in the Company's allowance for doubtful accounts for the years
     ended December 31, 2003 and 2002 are as follows:

                                                  Year ended December 31,
                                                     2003           2002
                                                  ----------    ----------
        Beginning balance                         $   48,110    $   33,844
        Bad debt expense                             160,486        14,266
        Uncollectible accounts written off          (162,106)         -
                                                  ----------    ----------
                                                  $   46,490    $   48,110
                                                  ==========    ==========
     Fair Value of Financial Instruments

     The carrying values of cash, cash equivalents, and short-term debt
     approximate fair value due to the short-term maturities of these
     instruments. The carrying value of the company's long-term debt
     approximates fair value because actual interest rates were consistent with
     rates estimated to be available for obligations with similar terms and
     conditions.

     Inventories

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

     Property and Equipment

     Property and equipment are carried at cost. Expenditures for maintenance
     and repairs are expensed. 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.


                                       9
<PAGE>



NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Revenue Recognition

     The Company uses the completed contract method of revenue recognition since
     all of its contracts are of a short-term nature. Under this method, revenue
     and related expenses are not recognized until a 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. Amounts billed in advance are recorded as deferred
     revenue.

     Accumulated Other Comprehensive Income

     Accumulated other comprehensive income (loss) consists of unrealized gains
     or losses on marketable 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 2003 and 2002 follows:
<TABLE>
<CAPTION>
                                                                         2003             2002
                                                                      ----------        -----------
       <S>                                                            <C>                <C>
       Weighted average number of common shares
           outstanding                                                11,828,880         11,828,880
       Effect of dilutive options                                            484             33,475
                                                                      ----------         ----------
       Weighted average number of common shares
           outstanding, assuming dilution                             11,829,364         11,862,355
                                                                      ==========         ==========
</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.


                                       10
<PAGE>


              Microwave Transmission Systems, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2003 and 2002


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     Stock-based Compensation

     The Company accounts for its stock option grants to employees under the
     recognition and measurement principles of APB Opinion No. 25, and related
     interpretations. No stock-based compensation cost is reflected in net
     earnings, as all options granted 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.
<TABLE>
<CAPTION>


                                                                              Year ended December 31,
                                                                       ------------------------------------
                                                                           2003                  2002
                                                                       -------------    -------------------
         Net income:
<S>                                                                    <C>              <C>
              As reported                                              $     278,964    $          403,381
              Deduct:  Total stock-based compensation under
                  fair value based method, net of taxes                       82,843               110,468
                                                                       -------------    ------------------
              Pro forma                                                $     176,921    $          292,913
                                                                       =============    ==================
         Net income per share:
              As reported
                  Basic                                                $    0.02        $         0.03
                  Diluted                                              $    0.02        $         0.03
              Pro forma:
                  Basic                                                $    0.01        $         0.02
                  Diluted                                              $    0.01        $         0.02
</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. The Company did not issue
     any stock options in 2003 or 2002.

     New Accounting Pronouncements

     In January 2003, the FASB issued FASB Interpretations ("FIN") No. 46
     "Consolidation of Variable Interest Entities, an interpretation of ARB 51."
     FIN No. 46 provides guidance on the identification of entities for which
     control is achieved through means other than through voting rights called
     "variable interest entities" of "VIEs" and how to determine when and which
     business enterprise should consolidate the VIE (the primary beneficiary").
     This new model for consolidation applies to an entity in which either: (1)
     the equity investors (if any) do not have a controlling financial interest
     or (2) the equity investment at risk is insufficient to finance that
     entity's activities without receiving additional subordinated financial
     support form other parties.

     In addition FIN No. 46 requires that both the primary beneficiary and all
     other enterprises with a significant variable interest in a VIE make
     additional disclosures. The adoption FIN No. 46 during the first quarter of
     2003 did not have a material impact on our results of operations, financial
     condition or cash flows.

                                       11
<PAGE>


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     In February 2003, the FASB issued Emerging Issues Task Force 00-21 ("EITF
     00-21"), Revenue Arrangements with Multiple Deliverables." EITF 00-21
     requires revenue arrangements with multiple deliverable to be divided into
     separate units of accounting. If the deliverables in the arrangement meet
     certain criteria, arrangement consideration should be allocated among the
     separate units based on their relative fair values. Applicable revenue
     recognition criteria should be considered separately for each unit. The
     guidance in EITF 00-21 is effective for revenue arrangements entered into
     in fiscal period beginning after June 15, 2003. The adoption of EITF 00-21
     during the third quarter of 2003 did not have a material impact on our
     results of operations, financial condition or cash flows.

     In December 2003, the SEC issued Staff Accounting Bulletin ("SAB") No. 104,
     "Revenue Recognition", which supersedes SAB No. 101 related to
     multiple-element arrangements. The adoption of SAB No. 104 during the
     fourth quarter of 2003 did not have a material impact on our results of
     operations, financial condition or cash flows.

NOTE C - PROPERTY AND EQUIPMENT

     Property and equipment consists of the following at December 31, 2003 and
     2002.
<TABLE>
<CAPTION>

                                                          Estimated
                                                        useful lives         2003              2002
                                                        ------------    -------------     --------------
<S>                                                       <C>           <C>               <C>
         Land                                             -             $     739,361     $      594,078
         Buildings and improvements                       40 years          1,099,636            859,888
         Leasehold improvements                            5 years            146,915            146,915
         Furniture and fixtures                            5 years            223,484            216,800
         Towers                                           10 years             85,977            136,652
         Production equipment                              3 years          1,270,047          1,030,562
         Vehicles and trailers                             3 years           3016,888          2,569,504
                                                                        -------------     --------------
                                                                            6,582,308          5,554,399
         Less accumulated depreciation
           and amortization                                                (2,534,173)        (1,761,313)
                                                                        -------------      -------------
                                                                        $   4,048,135      $   3,793,086
                                                                        =============      =============
</TABLE>

NOTE D - LINE OF CREDIT

     At December 31, 2003, the Company had $2,061,359 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 limited to 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, 2003). 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. The loan is renewed annually and
     does not have a maturity date.


                                       12
<PAGE>


NOTE E - LONG-TERM DEBT

     Long-term debt at December 31, 2003 and 2002 consists of the following:
<TABLE>
<CAPTION>

                                                                                        2003              2002
                                                                                      ------------     -----------
         Term loan agreement with a bank maturing in August 2006. Interest is
            payable at the bank's prime rate (4.00% at December 31, 2003). 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
<S>                                                                                   <C>             <C>
            majority shareholder.                                                     $   606,138     $   827,111

         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 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.                                                         343,628         354,788

         Installment note agreement with a bank maturing in September 2017.
            Interest is payable at the bank's prime rate (4.00% at December 31,
            2003). 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.                                                                  216,880         229,432

         Installment note with a bank maturing in March 2018 and bears interest
            at 5.3% per annum, and is payable in monthly principal and interest
            payments of $2,451 through maturity. The note is collateralized by
            real property and is guaranteed by the Company's majority
            shareholder                                                                   294,000            -

         Note payable agreement with P. David Spurlin, our Chief Executive
            Officer, President and majority shareholder. This note may be
            prepaid but matures on December 31, 2004 at a rate equal to the
            prime interest rate plus 2% at the beginning of each calendar
            quarter (6% at December 31, 2003). Interest accrues quarterly and is
            payable at maturity.                                                          374,414            -

         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.                                                   770,809         634,166
                                                                                       ----------     -----------
                                                                                        2,605,858       2,045,497
         Less current portion                                                            (693,654)       (533,010)
                                                                                       ----------     -----------
                                                                                      $ 1,912,214    $  1,512,487
                                                                                       ==========     ============
</TABLE>

                                       13
<PAGE>



NOTE E - LONG-TERM DEBT - Continued

     At December 31, 2003, scheduled maturities of long-term debt are as
follows:

              2004                                         $     693,654
              2005                                               596,216
              2006                                               357,492
              2007                                                91,710
              2008                                                90,532
              Thereafter                                         776,254
                                                           -------------
                                                           $   2,605,858
                                                           =============
NOTE F - INCOME TAXES

     Deferred tax assets (liabilities) are comprised of the following at
        December 31, 2003:
<TABLE>
<CAPTION>

                                                                       2003             2002
                                                                  --------------    -------------
       Deferred tax assets
<S>                                                               <C>               <C>
           Accounts payable and accrued liabilities               $       22,486    $      52,147
           Property and equipment                                          3,509           13,740
                                                                  --------------    -------------
              Total deferred tax assets                                   25,995           65,887

       Deferred tax liabilities
           Accounts receivable                                          (204,872)        (511,676)
           Jobs in Progress                                                    -          (14,117)
           Other                                                               -           (1,527)
                                                                  --------------    -------------
              Total deferred tax liabilities                            (204,872)        (527,320)
                                                                  --------------    -------------
       Net deferred tax liability                                 $     (178,877)   $    (461,433)
                                                                  ==============    =============
</TABLE>
<TABLE>
<CAPTION>

     Deferred tax assets and liabilities included in the
       balance sheets are as follows at December 31, 2003 and 2002:
                                                                       2003              2002
                                                                  --------------    -------------
<S>                                                               <C>               <C>
       Net current deferred tax liability                         $     (182,386)   $    (475,173)
       Net long-term asset                                                 3,509           13,740
                                                                  --------------    -------------
       Net deferred tax liability                                 $     (178,877)   $    (461,433)
                                                                  ==============    =============
</TABLE>



                                       14
<PAGE>


NOTE F - INCOME TAXES - Continued

     The components of income tax expense for the years ended December 31, 2003
     and 2002 are as follows:

                                                      2003             2002
                                                --------------    -------------
       Federal:
           Current                              $      420,996    $     472,241
           Deferred                                   (282,556)        (271,005)
                                                --------------    -------------
                                                       138,440          201,236

       State                                            41,831           48,892
                                                --------------    -------------
       Total                                    $      180,271    $     250,128
                                                ==============    =============

     The effective income tax rate for the years ended December 31, 2003 and
     2002 varied from the statutory rate due to the following:

                                                     2003             2002
                                                    ------            -----
       Income tax expense at statutory rate          34.0%            34.0%
       State taxes, net of federal benefit            2.9              4.9
       Nondeductible expenses                         1.9              2.4
       Revisions to prior year estimates               -              (3.0)
       Other                                          0.5               -
                                                    ------            -----
                                                     39.3%            38.3%
                                                    ======            ======
NOTE G - 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, 2003 and 2002.

     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 for the year ended December 31, 2002.

     The Company leases other office facilities under noncancellable leases
     expiring through August 2008. The future minimum lease payments are as
     follows:

              Years ending
              December 31,

                  2004          116,250
                  2005           57,900
                  2006           54,000
                  2007           54,000
                  2008           30,500
                                -------
                             $  312,650

     Total rent expense was approximately $123,914 and $129,663 in 2003 and
     2002, respectively.

                                       15

NOTE H - 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, 2003 and 2002 were $559,361 and $176,189,
     respectively.

NOTE I - RELATED PARTY TRANSACTIONS

     As discussed in Note 7, the Company leases real estate from the president
     and majority shareholder of the Company.

NOTE J - BUSINESS AND CREDIT CONCENTRATIONS

     During the year ended December 31, 2003, sales to six customers comprised
     13.7%, 13.7%, 9.4%, 7.3%, 6.7% and 6.4%, respectively, of total revenue.
     During the year ended December 31, 2002, sales to two customers comprised
     36% and 11%, respectively, of total revenue.

     At December 31, 2003, four customers accounted for 38% of accounts
     receivable. At December 31, 2002, one customer accounted for 38% of
     accounts receivable.

NOTE K - 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.

     Additional information regarding stock option activity follows:
<TABLE>
<CAPTION>

                                                                   Weighted
                                                                    Average
                                                 Number of         Price per     Exercise Price
                                                  Shares             Share          per Share
                                                -----------        ---------     --------------
<S>                                                 <C>              <C>              <C>
     Outstanding at January 1, 2002                 515,000          $1.32            $1.32

     Granted                                           -               -                 -
     Canceled/Forfeited                                -               -                 -
                                                    -------
     Outstanding at January 1, 2003                 515,000          $1.32            $1.32

     Granted                                           -               -                 -
     Canceled/Forfeited                              85,000          $1.32            $1.32
                                                    -------
     Outstanding at January 1, 2004                 430,000          $1.32            $1.32
                                                    =======
     Exercisable at December 31, 2002               257,500
                                                    =======
     Exercisable at December 31, 2003               327,500
                                                    =======
</TABLE>

     At December 31, 2003, the weighted average remaining contractual life of
     all options was 7.9 years.



                                       16
<PAGE>


                                   SIGNATURES

     In  accordance  with 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

Microwave Transmission Systems, Inc.

Date:    June 2, 2004               /s/ P. David Spurlin
                                    --------------------------
                                    P. David Spurlin, President

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


In accordance  with the Exchange Act, this report has been signed below by the
following  persons on behalf of the  registrant and in
the capacities and on the dates indicated.



Date:          June 2, 2004                     /s/ P. David Spurlin
                                                --------------------------
                                                P. David Spurlin,Director


Date:           June 2, 2004                     /s/ D. Susan King
                                               --------------------------
                                                D. Susan King, Director


Date           June 2, 2004                     /s/ Mike Sutton
                                               --------------------------
                                                Mike Sutton, Director


Date           June 2, 2004                    /s/ Dan Lassiter
                                               --------------------------
                                                Dan Lassiter, Director



                                       17
<PAGE>