UNITED STATES
SECURITIES AND EXCHANGE COMMISSION




Washington,
D.C. 20549




FORM
10-Q




x QUARTERLY REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934




For the
quarterly period ended March 31, 2009




OR




o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934




ERF WIRELESS,
INC.


(Exact
name of registrant as specified in its charter)




Nevada
            
            000-27467
            
            76-0196431(State
      or other jurisdiction
              of
      incorporation)
            
            (Commission
      File Number)
            
            (IRS
      Employer
              Identification
      No.)





2911 SOUTH SHORE BOULEVARD,
SUITE 100, LEAGUE CITY, TEXAS 77573


(Address
of principal executive offices) (Zip Code)




Registrant's
telephone number, including area code:  (281)
538-2101




Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to filing requirements for the
past 90 days. Yes xNo o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


o Yes   o No




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer”, and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):




Large
accelerated filer o Accelerated
filer o




Non-accelerated
filer o Smaller
reporting company x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.) Yes oNo x




Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date. 111,874,034 common shares issued and
outstanding as of May 14, 2009









PART I – FINANCIAL INFORMATION





ITEM
1.  CONSOLIDATED FINANCIAL STATEMENTS


ERF
WIRELESS, INC.


CONSOLIDATED
BALANCE SHEETS


MARCH 31,
2009, AND DECEMBER 31, 2008


($ in
thousands except share data)





March
      31,
            
            
            December
      31,2009
            
            
            2008(unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
            
            $
            656
            
            
            $
            348Accounts
      receivable, net
            
            
            345
            
            
            
            248Accounts
      receivable other
            
            
            62
            
            
            
            52Inventories
            
            
            201
            
            
            
            193Costs
      and profits in excess of billings
            
            
            558
            
            
            
            427Prepaid
      expenses and other current assets
            
            
            461
            
            
            
            494Total
      current assets
            
            
            2,283
            
            
            
            1,762Property
      and equipmentProperty
      and equipment
            
            
            7,973
            
            
            
            7,751Less:
      accumulated depreciation
            
            
            (2,120
            )
            
            
            (1,649
            )Net
      property and equipment
            
            
            5,853
            
            
            
            6,102Goodwill
            
            
            436
            
            
            
            436Intangible
      assets, net
            
            
            912
            
            
            
            1,059Other
      assets
            
            
            252
            
            
            
            264Total
      assets
            
            $
            9,736
            
            
            $
            9,623LIABILITIES
      AND SHAREHOLDERS’ EQUITY (DEFICIT)Current
      liabilities:Notes
      payable and current portion of long-term debt
            
            $
            1,138
            
            
            $
            702Capital
      lease and current portion of long-term capital leases
            
            
            892
            
            
            
            861Accounts
      payable
            
            
            853
            
            
            
            981Accrued
      expenses
            
            
            1,806
            
            
            
            1,269Derivative
      liabilities
            
            
            193
            
            
            
            78Deferred
      liability and revenue
            
            
            491
            
            
            
            237Total
      current liabilities
            
            
            5,373
            
            
            
            4,128Long-term
      debt, net of current portion
            
            
            3,047
            
            
            
            2,844Long-term
      capital leases, net of current portion
            
            
            1,408
            
            
            
            1,581Deferred
      liability and revenue, net of current portion
            
            
            274
            
            
            
            316Total
      liabilities
            
            
            10,102
            
            
            
            8,869CommitmentsShareholders’
      equity (deficit):Preferred
      stock  -  $.001 par valueSeries
      A authorized  25,000,000 sharesIssued
      and outstanding at March 31, 2009 andDecember
      31, 2008, 3,850,059 and 4,085,514, respectively
            
            
            4
            
            
            
            4Common
      stock  -  $.001 par valueAuthorized
      475,000,000 sharesIssued
      and outstanding at March 31, 2009, andDecember
      31, 2008, 110,578,724 and 101,884,119, respectively
            
            
            111
            
            
            
            102Additional
      paid in capital
            
            
            28,735
            
            
            
            27,504Accumulated
      deficit
            
            
            (29,216
            )
            
            
            (26,856
            )Total
      shareholders’ equity (deficit)
            
            
            (366
            )
            
            
            754Total
      liabilities and shareholders' equity (deficit)
            
            $
            9,736
            
            
            $
            9,623See
      accompanying notes to consolidated financial statements.


2




ERF
WIRELESS, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


FOR THE
THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Unaudited)


($ in
thousands except share data and loss per share)





2009
            
            
            2008Sales:Products
            
            $
            138
            
            
            $
            437Services
            
            
            1,166
            
            
            
            1,219Other
            
            
            19
            
            
            
            19Total
      sales
            
            
            1,323
            
            
            
            1,675Costs
      of goods sold:Products
      and integration services
            
            
            368
            
            
            
            360Rent,
      repairs and maintenance
            
            
            96
            
            
            
            91Salary
      and related cost
            
            
            17
            
            
            
            49Depreciation
            
            
            265
            
            
            
            196Other
      cost
            
            
            58
            
            
            
            139Total
      costs of goods sold
            
            
            804
            
            
            
            835Gross
      profit
            
            
            519
            
            
            
            840Operating
      expenses:Selling,
      general and administrative
            
            
            2,238
            
            
            
            2,102Depreciation
      and amortization
            
            
            353
            
            
            
            231Total
      operating expenses
            
            
            2,591
            
            
            
            2,333Loss
      from operations
            
            
            (2,072
            )
            
            
            (1,493
            )Other
      income(expenses):Interest
      expense, net
            
            
            (252
            )
            
            
            (178
            )Derivative
      income (expense)
            
            
            (36
            )
            
            
            130Total
      other income (expense)
            
            
            (288
            )
            
            
            (48
            )Net
      loss
            
            $
            (2,360
            )
            
            $
            (1,541
            )Net
      loss per common share:Basic
            
            $
            (0.02
            )
            
            $
            (0.02
            )Diluted
            
            $
            (0.02
            )
            
            $
            (0.02
            )See
      accompanying notes to consolidated financial statements.






3





ERF
WIRELESS, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR THE
THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Unaudited)


($ in
thousands)




2009
            
            
            2008Cash
      flows from operating activitiesNet
      loss
            
            $
            (2,360
            )
            
            $
            (1,541
            )Adjustments
      to reconcile net loss to net cashused
      by operating activities:Amortization
      of debt discount
            
            
            39
            
            
            
            9Depreciation
      and amortization
            
            
            618
            
            
            
            427Stock
      issued for services rendered and interest
            
            
            825
            
            
            
            649Derivative
      (income) expense
            
            
            36
            
            
            
            (130
            )Bad
      debt expense
            
            
            -
            
            
            
            63Changes
      in:Accounts
      receivable, net
            
            
            (97
            )
            
            
            (213
            )Accounts
      receivable other
            
            
            (10
            )
            
            
            (30
            )Inventories
            
            
            (8
            )
            
            
            (37
            )Prepaid
      expenses
            
            
            33
            
            
            
            37Costs
      and profits in excess of billings
            
            
            (131
            )
            
            
            (169
            )Accounts
      payable
            
            
            (128
            )
            
            
            141Accrued
      expenses
            
            
            537
            
            
            
            (196
            )Deferred
      liability and revenue
            
            
            212
            
            
            
            (45
            )Total
      adjustment
            
            
            1,926
            
            
            
            506Net
      cash used by operating activities
            
            
            (434
            )
            
            
            (1,035
            )Cash
      flows from investing activitiesPurchase
      of property and equipment
            
            
            (153
            )
            
            
            (63
            )Business
      acquisitions, net of cash acquired
            
            
            -
            
            
            
            (171
            )Change
      in other assets
            
            
            12
            
            
            
            (29
            )Net
      cash used by investing activities
            
            
            (141
            )
            
            
            (263
            )Cash
      flows from financing activitiesNet
      proceeds from line of credit
            
            
            355
            
            
            
            38Proceeds
      from financing agreements
            
            
            150
            
            
            
            25Proceeds
      from subordinated promissory financing
            
            
            550
            
            
            
            -Payment
      of debt obligations
            
            
            (131
            )
            
            
            (70
            )Payment
      on capital lease obligations
            
            
            (210
            )
            
            
            (120
            )Proceeds
      from sale of common stock, net
            
            
            169
            
            
            
            272Net
      cash provided by financing activities
            
            
            883
            
            
            
            145Net
      (decrease) increase in cash
            
            
            308
            
            
            
            (1,153
            )Cash
      and cash equivalents at the beginning of the period
            
            
            348
            
            
            
            2,211Cash
      and cash equivalents at the end of the period
            
            $
            656
            
            
            $
            1,058Supplemental
      disclosure of cash flow information:Net
      cash paid during the year for:Interest
            
            $
            84
            
            
            $
            79Income
      taxes
            
            $
            -
            
            
            $
            -Supplemental
      non-cash investing and financing activities:Conversion
      of debt through issuance of common stock
            
            $
            170
            
            
            $
            125Issuance
      of shares for asset acquisition
            
            $
            -
            
            
            $
            400Property
      acquired under capital lease
            
            $
            68
            
            
            $
            588Note
      payable for acquisition
            
            $
            -
            
            
            $
            150




See
accompanying notes to consolidated financial statements.


4





ERF
WIRELESS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  NOTE
1 - BASIS OF PRESENTATION




NATURE
OF THE COMPANY




ERF
Wireless, Inc. (“Company” or “ERF Wireless”) provides secure, high-capacity
wireless products and services to a broad spectrum of customers in primarily
underserved, rural and suburban parts of the United States.  We
provide our customers with high quality broadband services and basic
communications services to residential, oil and gas, and bank customers in the
areas that otherwise would not be able to receive such
services.   We are also a comprehensive solutions provider to
other enterprise customers, providing them with a wide array of communications
services including high speed broadband, voice over Internet Protocol (VOIP)
telephone and facsimile service, and video security.




Historically,
our revenues have been generated primarily from Internet and construction
services.  Our Internet revenues have resulted from our offering of
broadband and basic communications services to residential and enterprise
customers.  Our construction revenues typically have consisted of
revenues generated from the construction of bank networks and other services
associated with providing wireless products and services to the regional banking
industry.




Our
revenues are principally internet and construction. Our internet revenues are
recorded in our subsidiary, Wireless Bundled Services, Inc. (“WBS”),
construction of bank networks in our subsidiary, Enterprise Network Services,
Inc. (“ENS”) and other construction in our subsidiary, Wireless Messaging
Services, Inc. (“WMS”). Please refer to segment footnote 10 for additional
information regarding the Company’s operating divisions.




BASIS
OF ACCOUNTING




The
accompanying unaudited interim financial statements of the Company have been
prepared in accordance with accounting principles generally accepted in the
United States of America and the rules of the Securities and Exchange Commission
("SEC") and should be read in conjunction with the audited consolidated
financial statements and notes thereto contained in the Company's annual report
for the year ended December 31, 2008 filed with the SEC on Form 10-K. In the
opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim periods presented have been reflected
herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year.




PRINCIPLES
OF CONSOLIDATION




The
consolidated financial statements include the accounts of the Company and its
subsidiaries. All significant inter-company transactions and balances have been
eliminated in the consolidation. The consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America.




INVENTORIES




Inventories
are valued at the lower of cost or market. The cost is determined by using the
average cost method. Inventories consist of the following items as of March 31,
2009 and December 31, 2008, in thousands:




March
      31,
            
            
            December
      31,2009
            
            
            2008Raw
      material
            
            $
            113
            
            
            $
            113Finished
      goods
            
            
            88
            
            
            
            80$
            201
            
            
            $
            193




The
Company has pledged all the inventory of WBS of $64,000 and $56,000 as
collateral against outstanding notes as of March 31, 2009 and December 31, 2008,
respectively.




BASIC
LOSS PER SHARE




The
Company is required to provide basic and dilutive earnings (loss) per common
share information.




5




ERF
WIRELESS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)




The basic
net loss per common share is computed by dividing the net loss by the weighted
average number of common shares outstanding.




Diluted
net loss per common share is computed by dividing the net loss, adjusted on an
"as if converted" basis, by the weighted average number of common shares
outstanding plus potential dilutive securities. For the periods ended March 31,
2009 and 2008, potential dilutive securities had an anti-dilutive effect and
were not included in the calculation of fully diluted net loss per common
share.




RECENT
ACCOUNTING PRONOUNCEMENTS




In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 162, “Hierarchy of Generally Accepted Accounting Principles” (“SFAS
162”). This statement is intended to improve financial reporting by identifying
a consistent framework, or hierarchy, for selecting accounting principles to be
used in preparing financial statements of nongovernmental entities that are
presented in conformity with GAAP. The effective date of this statement was
November 15, 2008. The adoption of SFAS 162 did not have a material impact
on the Company’s consolidated financial statements.




In April
2008, the FASB issued FASB Staff Position (“FSP”) No. SFAS 142-3, “Determination
of the Useful Life of Intangible Assets” (“FSP SFAS 142-3”). FSP SFAS 142-3
amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset
under SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”).
The intent of FSP SFAS 142-3 is to improve the consistency between the useful
life of a recognized intangible asset under SFAS 142 and the period of expected
cash flows used to measure the fair value of the asset under SFAS No. 141R
(revised 2007), “Business Combinations” (“SFAS 141R”) and other applicable
accounting literature. FSP SFAS 142-3 is effective for financial statements
issued for fiscal years beginning after December 15, 2008 and must be
applied prospectively to intangible assets acquired after the effective date.
The Company has not acquired any intangible assets since adopting FSP SFAS
142-3. As such, there has been no impact to the Company’s financial statements
since the January 1, 2009 adoption date.




In March
2008, the FASB issued SFAS No. 161, “Disclosures About Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No. 133”
(“SFAS 161”), which expands the disclosure requirements in SFAS 133 about an
entity’s derivative instruments and hedging activities. SFAS 161’s disclosure
provisions apply to all entities with derivative instruments subject to SFAS 133
and its related interpretations. The provisions also apply to related hedged
items, bifurcated derivatives, and nonderivative instruments that are designated
and qualify as hedging instruments. Entities with instruments subject to SFAS
161 must provide more robust qualitative disclosures and expanded quantitative
disclosures. Such disclosures, as well as existing SFAS 133 required
disclosures, generally will need to be presented for every annual and interim
reporting period. SFAS 161 is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008. For the
three months ended March 31, 2009, we have included the statement’s
expanded disclosures about derivative instruments and hedging activities within
the Company’s financial statements.




In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141R”), which replaces SFAS 141. SFAS 141R establishes
principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
any non-controlling interest in the acquiree and the goodwill acquired in
connection with a business combination. The Statement also establishes
disclosure requirements that will enable users to evaluate the nature and
financial effect of the business combination. SFAS 141R applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of an entity’s first fiscal year that begins after December 15,
2008. The Company applied the provisions of SFAS 141R in connection with the
acquisition that closed during the first quarter of 2009 (see Note 2 below). The
adoption of SFAS 141R did not have a material impact on the Company’s
consolidated financial statements.




In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”).
SFAS 160 requires that accounting and reporting for minority interests will be
recharacterized as noncontrolling interests and classified as a component of
equity. SFAS 160 also establishes reporting requirements that provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. This Statement is
effective as of the beginning of an entity’s first fiscal year beginning after
December 15, 2008. The adoption of SFAS 160 did not have a material impact
on the Company’s consolidated financial statements.




6




ERF
WIRELESS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  In
February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective
Date of FASB Statement No. 157” (“FSP FAS 157-2”), which delayed the
effective date of SFAS 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on at least an annual basis, until fiscal years beginning
after November 15, 2008. Nonfinancial assets and liabilities that the
Company measures at fair value on a non-recurring basis consist primarily of
property and equipment, goodwill, and intangible assets, which are subject to
fair value adjustments in certain circumstances (for example, when there is
evidence of impairment). The adoption of FSP FAS 157-2 did not have a material
impact on the Company’s consolidated financial statements.




NOTE
2 - ACCOUNTS RECEIVABLE




Accounts
receivable consists of the following (in thousands):




March
      31,
              
              
              December
      31,2009
              
              
              2008Accounts
      receivable
              
              $
              817
              
              
              $
              731Allowance
      for doubtful accounts
              
              
              (472
              )
              
              
              (483
              )Accounts
      receivable, net
              
              $
              345
              
              
              $
              248
  The
Company has pledged all the accounts receivables of WBS of $279,000 and $374,000
as collateral against outstanding notes and capital leases, as of March 31, 2009
and December 31, 2008, respectively.




NOTE 3 - COMMON STOCK, PREFERRED STOCK AND
WARRANTS




The total
number of shares of stock of all classes which the Company shall have the
authority to issue is 500,000,000, of which 25,000,000 are shares of preferred
stock with a par value of $.001 per share ("Preferred Stock"), and 475,000,000
are shares of common stock with a par value of $.001 per share.




COMMON
STOCK




As of
March 31, 2009, there were 110,578,724 shares of common stock issued and
outstanding.




During
the three months ended March 31, 2009, the Company issued 3,146,000 shares of
common stock in lieu of cash for services rendered against professional services
and consulting agreements valued at $423,000, settlement expense of $7,000,
salary and compensation of $214,000, other services rendered of $181,000 and
notes payable of $170,000.  The Company valued the 3,146,000 shares at
the closing market price on the date of issuance of such shares, which were
issued in lieu of cash as payment for the following (in thousands):




March
      31, 2009
              
              SupplementalNon-
                Cash
      DisclosureProfessional
      fees
              
              $
              423Settlements
              
              
              7Salary
      and compensation
              
              
              214Other
      services rendered
              
              
              181Total
      for services, interest, liabilities and compensation
              
              $
              825Notes
      payable
              
              $
              170




7




ERF
WIRELESS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  During
the three months ended March 31, 2009, we issued to various accredited investors
an aggregate of 1,151,000 shares of restricted common stock for net
consideration of $169,000. We relied on Section 4(2) of the Securities Act in
effecting this transaction.




PREFERRED
STOCK




The
Company has 3,850,059 shares of Series A Preferred Stock issued and outstanding
as of March 31, 2009. The Series A Preferred Stock is convertible at holder's
option at one preferred share for 18.676347 shares common stock and has a 2:1
liquidation preference. The holder of Series A Preferred Stock is required to
give a 65-day notice of conversion to the Company. With respect to the Series A
Preferred Stock outstanding at March 31, 2009, the Company would be required to
issue 71,905,038 shares of its common stock, subject to certain contractually
imposed conversion restrictions as described herein. During the fourth quarter
2005, all of the Series A Preferred Stock holders entered into a conversion
restriction agreement whereby all Series A Preferred Stock holders, as a group,
are prohibited from converting more than 5% of the total
outstanding  Series A Preferred Stock holdings in any one calendar
quarter. During the first quarter of 2009, we issued 4,398,000 shares of common
stock upon conversion of 235,455 Series A Preferred Stock.




WARRANTS




The
Company had warrants outstanding to third parties to purchase 5,294,180 shares
of common stock as of March 31, 2009.




Warrants
to purchase 389,999 shares of common stock at a purchase price of $3.57 per
share were issued by the Company in September 2005 and November 2005.
Specifically, the Company issued convertible notes for $1,500,000 to accredited
investors and issued warrants to purchase 389,999 shares of common stock at
$3.57 per share, subject to adjustment, expiring September 2010, as additional
consideration.




Warrants
to purchase 4,287,589 shares of Common stock at a purchase price $5.00 per share
were issued by the Company during 2006 thru 2009. As of March 31, 2009, the
Company has attributed $45,000 in warrant expense.




Warrants
to purchase 616,592 shares of common stock at a purchase price of $.45 per share
were issued by the Company in March 2009. The Company issued convertible
subordinated notes for $550,000 to accredited investors and issued warrants to
purchase 616,592 shares of common stock at $.45 per share subject to adjustment
from future equity financing if below their exercise price, expiring three years
from issuance, as additional consideration.




The
following table summarizes warrants that are issued, outstanding and
exercisable.




Options/WarrantsIssued
      & OutstandingMarch
      31,Exercise
      Price
              
              Expiration
      Date
              
              20093.57
              
              Sep-10
              
              
              389,9990.45
              
              Mar-12
              
              
              616,5925.00
              
              May-09
      thru Jan-12
              
              
              4,287,5895,294,180




NOTE
4 - EMPLOYEE STOCK OPTIONS




In April
2008, the Board of directors adopted a Non-Qualified Stock Option Plan whereby
15,000,000 shares were reserved for issuance. There were 95,742 Series A
Preferred Stock convertible to 1,788,111 common stock shares granted to certain
officers and employees under employment agreements. As of March 31, 2009,
210,557 common stock shares remain to be converted from Series A preferred
stock. Also the Company has granted to certain officers and employees 500,000
stock options which are currently exercisable. As of March 31, 2009, under the
2008 Non-Qualified Stock Option Plans, 4,430,811 shares were issued and
exercised by certain employees and consultants for services
rendered.




8




ERF
WIRELESS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Stock
Plan activity was as follows for the three months ended March 31,
2009:




2008PlanShares
      initially reserved
              
              
              15,000,000Remaining
      shares January 01, 2009
              
              
              12,018,541Issued
              
              
              1,449,352Remaining
      shares March 31, 2009
              
              
              10,569,189Outstanding
      March 31, 2009
              
              
              4,430,811




Option
activity was as follows for the three months ended March 31, 2009:




2009Shares
              
              Weighted-Average
      Exercise PriceOutstanding
      at beginning of year
              
              500,000
              
              $
              0.57Granted
              
              -
              
              
              -Assumed
      through acquisitions
              
              -
              
              
              -Exercised
              
              -
              
              
              -Forfeited/cancelled
              
              -
              
              
              -Outstanding
      throughout the period
              
              500,000
              
              $
              0.57Exercisable
      at March 31, 2009
              
              500,000
              
              $
              0.57




The
weighted average fair value of the individual options granted during the three
months ended March 31, 2009, is estimated at $0 on the date of grant.
Information about options outstanding was as follows at March 31,
2009:




Remaining
            
            
            
            
            
            AverageClass
            
            
            Number
            
            
            Average
      Contractual
            
            
            Number
            
            
            ExerciseExercise
      Price
            
            
            Outstanding
            
            
            Life
      in Years
            
            
            Exercisable
            
            
            Price$
            0.10
            
            
            
            225,000
            
            
            
            0.33
            
            
            
            225,000
            
            
            $
            0.10$
            1.38
            
            
            
            150,000
            
            
            
            0.33
            
            
            
            150,000
            
            
            $
            1.38$
            0.43
            
            
            
            125,000
            
            
            
            1.83
            
            
            
            125,000
            
            
            $
            0.43500,000
            
            
            
            0.88
            
            
            
            500,000
            
            
            $
            0.57






9


ERF
WIRELESS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  NOTE
5 - EARNINGS PER SHARE:




The
following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share amount):




For
      the three months ended March 31, 2009Income
              
              
              Shares
              
              
              Per-Share(Numerator)
              
              
              (Denominator)
              
              AmountNet
      loss
              
              $
              (2,360
              )
              
              
              105,980
              
              
              $
              (0.02
              )Basic
      EPS:Loss
      available to common stockholders
              
              
              (2,360
              )
              
              
              105,980
              
              
              
              (0.02
              )Effect
      of dilutive securities
              
              
              -
              
              
              
              -
              
              
              
              -Diluted
      EPS:Loss
      available to common stockholders
              
              $
              (2,360
              )
              
              
              105,980
              
              
              $
              (0.02
              )and
      assumed conversionsFor
      the three months ended March 31, 2008Income
              
              
              Shares
              
              
              Per-Share(Numerator)
              
              
              (Denominator)
              
              AmountNet
      loss
              
              $
              (1,541
              )
              
              
              65,651
              
              
              $
              (0.02
              )Basic
      EPS:Loss
      available to common stockholders
              
              
              (1,541
              )
              
              
              65,651
              
              
              
              (0.02
              )Effect
      of dilutive securities
              
              
              -
              
              
              
              -
              
              
              
              -Diluted
      EPS:Loss
      available to common stockholders
              
              $
              (1,541
              )
              
              
              65,651
              
              
              $
              (0.02
              )and
      assumed conversions




For the
three months ended March 31, 2009, dilutive securities existed. The effect of
the dilutive securities for the year to date ended March 31, 2009, would have
been 127,101,062 shares of common stock comprised of the following: 945,946
shares of common stock assuming all debt instruments were converted; 500,000
shares of common stock assuming all employee stock options were exercised;
5,294,180 shares of common stock assuming all warrants were exercised;
14,381,008 shares of common stock assuming all Series A Preferred Stock (limited
to 20% per year based on  restrictive covenant) were converted and
105,979,928 shares of weighted average shares of common stock
outstanding.  At March 31, 2009 110,578,724 shares of common stock
were issued and outstanding.




NOTE
6 - MAJOR CUSTOMERS




The
Company had gross sales of approximately $1,323,000 and $1,675,000 for the three
months ended March 31, 2009 and 2008, respectively. The Company had one customer
that represented approximately 10% of the gross sales in the three months ended
March 31, 2009, and had two customers that represented 27% and 13% or 40% of
gross sales for the three months ended March 31, 2008.




10




ERF
WIRELESS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  NOTE
7 – NOTES PAYABLE AND LONG-TERM DEBT




Notes
payable, long-term debts and capital leases consist of the following as of March
31, 2009 (in thousands):




Terms
              
              Maturity
      Date
              
              Interest
      Rate
              
              
              Gross
      Balance
              
              
              Debt
      Discount
              
              
              Net
      BalanceBancleasing,
      Inc.
              $10,660
      / Month including interest
              
              October-14
              
              
              11.62
              %
              
              $
              540
              
              
              $
              -
              
              
              $
              540Agility
      Capital Lease
              $91,457
      / Month including interest
              
              Various
              
              
              18.82
              %
              
              
              1,757
              
              
              
              -
              
              
              
              1,757Balboa
      Lease
              $225
      / Month including interest
              
              June-10
              
              
              27.74
              %
              
              
              3
              
              
              
              -
              
              
              
              3Liberty
      Finance
              $517
      / Month including interest
              
              September-09
              
              
              13.97
              %
              
              
              3
              
              
              
              -
              
              
              
              3Chase
      Bank
              $449
      / Month including interest
              
              November-09
              
              
              5.89
              %
              
              
              4
              
              
              
              -
              
              
              
              4Blanco
      National Bank
              $3,913
      / Month including interest
              
              August-10
              
              
              9.50
              %
              
              
              55
              
              
              
              -
              
              
              
              55Premium
      Assignment, Insurance notes
              $2,199
      / Month including interest
              
              September-09
              
              
              8.65
              %
              
              
              9
              
              
              
              -
              
              
              
              9Robert
      McClung, Momentum
              $23,476
      / Quarterly including interest
              
              October-10
              
              
              7.50
              %
              
              
              132
              
              
              
              -
              
              
              
              132George
      Kemper, TSTAR
              $38,254
      / Quarterly including interest
              
              April-10
              
              
              7.50
              %
              
              
              185
              
              
              
              -
              
              
              
              185Shane
      Griffths, Crosswind
              $13,911
      / Quarterly including interest
              
              December-10
              
              
              7.50
              %
              
              
              104
              
              
              
              -
              
              
              
              104Centramedia
              $56,342
      / Quarterly including interest
              
              December-11
              
              
              7.50
              %
              
              
              555
              
              
              
              -
              
              
              
              555Convertible
      Subordinated Financing
              1
      year
              
              Demand
              
              
              10.00
              %
              
              
              550
              
              
              
              120
              
              
              
              430Line
      of credit
              2
      years/ Quarterly interest (See below)
              
              March-11
              
              
              12.00
              %
              
              
              2,539
              
              
              
              -
              
              
              
              2,539E-bond
      investor notes
              3
      years/ Semiannual interest (See below)
              
              Various
              
              
              10.00
              %
              
              
              175
              
              
              
              6
              
              
              
              169Total
      debt
              
              
              
              
              
              
              
              
              $
              6,611
              
              
              $
              126
              
              
              
              6,485Less
      current maturities
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (2,030
              )Add
      back debt discount currentmaturities
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              126Long-term
      debt
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              4,581




INVESTOR NOTES




The following table summarizes
the convertible debt derivative liability activity for the period December 31,
2008, to March 31, 2009:




Description
              
              Investor
      Notes
              
              
              Warrant
      Liabilities
              
              
              Compound
      Derivative
              
              
              TotalFair
      value at 12-31-08
              
              $
              -
              
              
              $
              28,734
              
              
              $
              -
              
              
              $
              28,73401-01-09
      to 03-31-09 change in fair value
              
              
              -
              
              
              
              (4,751
              )
              
              
              -
              
              
              
              (4,751
              )Fair
      value at March 31, 2009
              
              $
              -
              
              
              $
              23,983
              
              
              $
              -
              
              
              $
              23,983


For the
year to date ended March 31, 2009 and 2008, net derivative income was $5,000 and
$114,000, respectively.




The
following assumptions were used in the fair value determination of warrants
liabilities at March 31, 2009:




Assumptions
            
            Warrants
              03/31/2009Dividend
      yield
            
            
            0.00
            %Risk-free
      rate for term
            
            
            0.81
            %Volatility
            
            
            140.00
            %Maturity
      date
            
            1.43
      years




A
Black-Scholes methodology was used to value the warrants.




LINE
OF CREDIT




During
2008, the Company increased its unsecured revolving credit facility with certain
private investors from $3 million to $6.5 million maturing March 31, 2011. The
terms of the unsecured revolving credit facility allow the Company to draw upon
the facility as financing requirements dictate and provide for quarterly
interest payments at a 12% rate per annum. At March 31, 2009, the line of credit
of totaled $2,539,000.




11
 
  ERF
WIRELESS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  E-SERIES
BOND INVESTOR NOTE




The
Company issued to certain accredited investors a principal amount of $1,200,000
of E-series bonds (the "Bonds") between May 2006 and March 2009, of which
$1,025,000 has been converted to common stock leaving a principal amount of
$175,000 of Bonds outstanding as of March 31, 2009. The Bonds are due and
payable upon maturity, a three-year period from the issuance date. Interest on
the Bonds is payable at the rate of 10% per annum, and is payable semiannually.
The Bondholder may require the Company to convert the Bond (including any unpaid
interest) into shares of common stock at any time only during the first year. If
the Bonds are converted under this option, the Company will issue shares
representing 100% of the Bond principal and unpaid interest calculated through
maturity. The value of the common stock issued under this option will be the
lesser of $1.50 or the 20-day trailing average per share closing price of common
stock preceding the notice of conversion. If the Bond is converted the Company
will issue a warrant to purchase one additional share of common stock at a price
of $5.00 for every share of common stock that has been received from the
conversion of the Bond principal.




At the
Company's discretion at any time after the first year, the Bonds, including the
interest payments calculated through the date of conversion may be repaid in
cash or in shares of our common Stock, which shares will be valued at the
average last sales price of our common stock over the 60-trading-day period
preceding any prepayment date. If the Company elects to issue shares of our
common stock as repayment of the Bond, we will issue shares representing a value
equal to 125% of the Bond principal. If the Company elects to issue shares of
our common stock as payment of interest, we will issue shares representing a
value equal to 100% of the interest due.




The Bonds
were determined to include various embedded derivative liabilities. The
derivative liabilities are the conversion feature and the redemption option
(compound embedded derivative liability). At the date of issuance the Bond,
compound embedded derivative liabilities were measured at fair value using
either quoted market prices of financial instruments with similar
characteristics or other valuation techniques. These derivative liabilities will
be marked-to-market each quarter with the change in fair value recorded in the
income statement. The Company uses the effective interest method to record
interest expense and related debt accretion which was $35,703 for the three
months ended March 31, 2009, and the estimated debt accretion for 2009 is
$6,090.




The
following table summarizes the convertible debt activity for the period May 31,
2006, to March 31, 2009:


Description
              
              E-Series
      Bonds
              
              
              Compound
      Derivative
                Liability
              
              
              TotalFair
      value at 12-31-08
              
              $
              164,668
              
              
              $
              48,872
              
              
              $
              332,079Fair
      value issuance at inception
              
              
              118,539
              
              
              
              -
              
              
              
              118,53901-01-09
      to 03-31-09 change in fair value
              
              
              35,704
              
              
              
              (1,007
              )
              
              
              34,697Conversions
      during 2009
              
              
              (150,000
              )
              
              
              -
              
              
              
              (150,000
              )Fair
      value at March 31, 2009
              
              $
              168,911
              
              
              $
              47,865
              
              
              $
              216,776


For the
year to date ended March 31, 2009 and 2008, net derivative income was $1,007 and
$39,397, respectively.





CONVERTIBLE
SUBORDINATED FINANCING





During
March 2009, the Company entered into an agreement with an investment banking
firm to raise up to $3,000,000 in convertible subordinated promissory notes.
 These notes are unsecured, bear interest at 10% and are due upon the
earlier of one year or completion of second private placement.  The
note holder has the option of exchanging their notes for an equivalent amount of
the subsequent funding transaction or being repaid the principal and interest at
this second funding date. In connection with the issuance of the convertible
subordinated promissory notes the investors will be issued common stock purchase
warrants to purchase up to 616,592 shares of common stock that are exercisable
at $.45 per share subject to adjustment from future equity financing if below
their exercise price, and expire three years from issuance.




12




ERF
WIRELESS, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Based on
the guidance in SFAS 133 and EITF 07-05, the Company concluded the warrants are
required to be accounted for as derivatives as of the issue date due to the
reset feature on the exercise price.  At the date of issuance the
convertible subordinated financing, warrant derivative liabilities were measured
at fair value using either quoted market prices of financial instruments with
similar characteristics or other valuation techniques. The Company records the
fair value of these derivatives on its balance sheet at fair value with changes
in the values of these derivatives reflected in the consolidated statements of
operations as “Gain (loss) on derivative liabilities.”  These derivative
instruments are not designated as hedging instruments under SFAS 133 and are
disclosed on the balance sheet under Derivative Liabilities.





The
Company uses the effective interest method to record interest expense and
related debt accretion which was $3,703 for the three months ended March 31,
2009, and the estimated debt accretion for 2009 and 2010 are $91,417 and
$29,196, respectively.




The
following table summarizes the convertible debt activity for the
period December 31, 2008, to March 31, 2009:




Description
              
              Bridge
      Note
              
              
              Warrant
      Liabilities
              
              
              TotalFair
      value issuance at inception
              
              $
              425,684
              
              
              $
              124,316
              
              
              $
              550,00003-18-09
      to 03-31-09 change in fair value
              
              
              3,703
              
              
              
              (3,634
              )
              
              
              69Conversions
      from inception to date
              
              
              -
              
              
              
              -
              
              
              
              -Fair
      value at March 31, 2009
              
              $
              429,387
              
              
              $
              120,682
              
              
              $
              550,069




CAPITAL
LEASES




Agility Lease Fund, LLCIncluded in property and equipment at March 31, 2009, is $1,736,000
capitalized equipment, net of amortization. The equipment and one of the
Company's bank accounts are the primary collateral securing the financing with a
guarantee of repayment by ERF Wireless, Inc.




Banc Leasing Inc.,Included in
property and equipment at March 31, 2009, is $610,900 capitalized equipment, net
of amortization. The equipment is the primary collateral securing the
financing.




The
following is a schedule by years of future minimum lease payments under capital
leases together with the present value of the net minimum lease payments as of
March 31, 2009 (in thousands):




Year
      Ending  December 31,2009
              
              $
              9202010
              
              
              1,0452011
              
              
              5212012
              
              
              1412013
              
              
              128Thereafter
              
              
              139Total
      minimum lease payments
              
              
              2,894Less
      amount representing interest
              
              
              (594
              )Present
      value of net minimum lease payments
              
              
              2,300Current
      maturities of capital lease obligations
              
              
              (892
              )Long-term
      portion of capital lease obligations
              
              $
              1,408






13




ERF
WIRELESS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  NOTE
8 – UNCOMPLETED CONTRACTS




Costs,
estimated earnings and billings on uncompleted contracts for the three months
ended March 31, 2009 are summarized as follows (in thousands):




March
      31,2009Costs
      incurred on uncompleted contracts
              
              $
              3,129Estimated
      profit
              
              
              640Gross
      revenue
              
              
              3,769Less:
      billings to date
              
              
              3,211Costs
      and profit in excess of billings
              
              $
              558
  Such
amounts are included in the accompanying balance sheets at March 31, 2009 are
summarized as follows (in thousands):




March
      31,2009Cost
      and estimated earnings in excess of billings on uncompleted
      contracts
              
              $
              558Billings
      in excess of costs and estimated earnings on uncompleted
      contracts
              
              
              -$
              558
  NOTE 9 -
COMMITMENTS




LEASES
AND LICENSE AGREEMENTS




For the
three months ended March 31, 2009 and 2008, rental expenses of approximately
$185,000 and $145,000, respectively, were incurred. The Company accounts for
rent expense under leases that provide for escalating rentals over the related
lease term on a straight-line method. The Company occupies office and tower
facilities under several non-cancelable operating lease agreements expiring at
various dates through September 2018, and requiring payment of property taxes,
insurance, maintenance and utilities.




Future
minimum lease payments under non-cancelable operating leases at March 31, 2009,
were as follows:




Period
      Ending
                December
      31,
              
              Amount
      ($000)2009
              
              $
              4652010
              
              
              5832011
              
              
              3982012
              
              
              522013
              
              
              12Thereafter
              
              
              31Total
              
              $
              1,541
  NOTE
10 - INDUSTRY SEGMENTS




This
summary reflects the Company's current segments, as described
below.




Wireless
Bundled Services Division (WBS)




WBS
provides wireless broadband products and services to commercial and individual
customers throughout the wireless industry. The company is in the early stages
of building and acquiring a seamless wireless broadband network throughout North
America to serve private entities, cities, municipalities and the general
public. All sales from external customers are located within the United
States.




14




ERF
WIRELESS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Wireless
Messaging Services Division (WMS)




WMS
principally provides wireless broadband system design and implementation,
manufactures paging equipment, repair and maintain paging infrastructure
equipment and supplies high-power infrastructure equipment to the wireless
messaging industry and owns and operates a wide-area messaging service. All
sales from external customers are located within the United States as well as
certain international locations.




Enterprise
Network Services (ENS)




ENS
provides product and service to operate an enterprise-class encrypted wireless
banking network business. ENS provides the CryptoVue System consisting of
software, site-based hardware devices and servers to perform network encryption;
contracts for the construction, operation, monitoring and maintenance of fixed
wireless networks for banking customers; trade names, equipment and software,
including the software architecture and design.




Oil
and Gas Division (O&G)




O&G
provides wireless connectivity to rural oil and gas locations primarily via
Mobile Broadband Trailers (MBT’s). O&G provides wireless broadband products
and services focusing primarily on commercial customers in the oil and gas
sector. The Company provides high speed bandwidth to rural North America to
serve the Oil and Gas sector. All sales from external customers are located
within the United States. The O&G division is a division of
WBS.




For the
three months ended March 31, 2009 (in thousands)




WMS
            
            
            WBS
            
            
            O&G
            
            
            ENS
            
            
            TotalRevenue
            
            $
            60
            
            
            $
            1,096
            
            
            $
            10
            
            
            $
            157
            
            
            $
            1,323Segment
      (loss) income
            
            
            (15
            )
            
            
            (675
            )
            
            
            (14
            )
            
            
            (213
            )
            
            
            (917
            )Segment
      assets
            
            
            61
            
            
            
            6,459
            
            
            
            266
            
            
            
            2,133
            
            
            
            8,919Capital
      expenditures
            
            
            -
            
            
            
            117
            
            
            
            -
            
            
            
            49
            
            
            
            166Depreciation
      and amortization
            
            
            4
            
            
            
            586
            
            
            
            4
            
            
            
            4
            
            
            
            598





Three
      Months EndedReconciliation
      of Segment Loss from
              Operations
      to Net Loss
            
            March
      31, 2009Total
      segment loss from operations
            
            $
            (917
            )Total
      corporate overhead including other, net
            
            
            (1,443
            )Net
      loss
            
            $
            (2,360
            )





Reconciliation
      of Segment Assets to
              Total
      Assets
            
            March
      31, 2009Total
      segment assets
            
            $
            8,919Total
      corporate assets
            
            
            817Consolidated  assets
            
            $
            9,736




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




15




ERF
WIRELESS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)


For the
quarter ended March 31, 2009, one customer accounts for $131,000 of Enterprise
Network Services Division revenues. At March 31, 2008, one customer accounts for
$224,000 of Enterprise Network Services Division revenues and one customer
accounts for $453,000 of Wireless Messaging Services Division
revenues.





NOTE
11 - SUBSEQUENT EVENTS




During
the second fiscal quarter   2009,  the Company issued
855,752 shares of common stock for services rendered and in exchange of
liabilities, 409,769 shares of common stock in equity financing and 29,789
shares of common stock upon conversion of preferred stock.












16





ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS




This
Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) should be read in conjunction with the other sections of
this quarterly report on Form 10-Q, including the financial
statements.




OUR
MARKETS AND BUSINESS STRATEGY




Historically,
our revenues have been generated primarily from Internet and construction
services.  Our Internet revenues result from our offering of broadband and
basic communications services to residential and enterprise customers.  Our
construction revenues result from the construction of bank networks and other
services associated with providing wireless products and services to the
regional banking industry.  During the first quarter of 2009, approximately
88% of our revenues were generated from internet services and 12% of our
revenues were generated from construction services. We expect that our internet
services will experience the most growth during fiscal 2009, as we expect to
devote significant capital resources to developing the oil and gas market
utilizing wireless services.





During
the first quarter of fiscal 2009, the Company made significant progress with its
strategic business plan as evidenced by the completion and announcement of
numerous agreements. These include:





·
            The
      integration of the Centramedia asset acquisition, providing the Company
      access to a large geographic area in the Panhandle area of
      Texas;


·
            The
      entry into two exclusive reseller agreements with Schlumberger to market
      our wireless services and products to the oil and gas industry in the
      United States, Canada and the Gulf of
Mexico.


·
            The
      decision of management to primarily focus capital and personnel resources
      to deploying wireless services to the oil and gas
  industry;


·
            The
      completion of a BranchNet encrypted enterprise-class wireless banking
      network for West Texas State Bank. This high-capacity wireless network
      connects the West Texas State Bank Operations Center located in Odessa,
      Texas, with all five of its branch locations in Monahans, Kermit, Midland
      and Odessa, Texas. The network is comprised of FCC-licensed frequencies
      creating a 165Mbps backbone, delivering speeds in excess of 40Mbps to each
      bank location; and


·
            The
      hiring of Mike Jones as our chief technology
  officer.





The
Company's revenue is generated primarily from the sale of wireless
communications products and services, including providing reliable
enterprise-class wireless broadband services. The Company recognizes revenue
when persuasive evidence of an arrangement exists, delivery has occurred, the
sales price is fixed or determinable, and collectibility is
probable.





The
Company records revenues from its fixed-price, long-term contracts using the
percentage-of-completion method. Revenues are recorded based on construction
costs incurred to date as a percentage of estimated total cost at completion.
The percentage-of-completion, determined by using total costs incurred to date
as a percentage of estimated total costs at completion, reflects the actual
physical completion of the project. This method of revenue recognition is used
because management considers total cost to be the best available measure of
progress on the contracts.





The
Company recognizes product sales generally at the time the product is shipped.
Concurrent with the recognition of revenue, the Company provides for the
estimated cost of product warranties and reduces revenue for estimated product
returns. Sales incentives are generally classified as a reduction of revenue and
are recognized at the later of when revenue is recognized or when the incentive
is offered. Shipping and handling costs are included in cost of goods
sold.





Service
revenue is principally derived from wireless broadband services, including
internet, voice, and data and monitoring service. Subscriber fees are recorded
as revenues in the period during which the service is provided.




17




RESULTS
OF OPERATIONS




THREE MONTHS ENDED MARCH 31,
2009, COMPARED TO THREE MONTHS ENDED MARCH 31, 2008




The
following table sets forth summarized consolidated financial information for the
three months ended March 31, 2009 and 2008:




Three
      Months Ended March 31,($
      in thousands)
              
              2009
              
              
              2008
              
              
              $
      Change
              
              
              %
      ChangeTotal
      sales
              
              $
              1,323
              
              
              $
              1,675
              
              
              $
              (352
              )
              
              
              -21
              %Cost
      of goods sold
              
              
              804
              
              
              
              835
              
              
              
              (31
              )
              
              
              -4
              %Gross
      profit
              
              
              519
              
              
              
              840
              
              
              
              (321
              )
              
              
              -38
              %Gross
      margin %
              
              
              39
              %
              
              
              50
              %Operating
      expenses
              
              
              2,591
              
              
              
              2,333
              
              
              
              258
              
              
              
              11
              %Loss
      from operations
              
              
              (2,072
              )
              
              
              (1,493
              )
              
              
              (579
              )
              
              
              39
              %Other
      income/(expense)
              
              
              (288
              )
              
              
              (48
              )
              
              
              (240
              )
              
              
              500
              %Net
      loss
              
              
              (2,360
              )
              
              
              (1,541
              )
              
              
              (819
              )
              
              
              53
              %




For the
three months ended March 31, 2009, the Company's business operations reflected
an increase in sales for Wireless Bundled Services and Enterprise Network
Services with an offset of decreased sales for Wireless Messaging Services. For
the three months ended March 31, 2009, the Company's consolidated operations
generated net sales of $1,323,000 compared to prior year net sales of
$1,675,000. The $352,000 decrease in net sales is primarily attributable to
$436,000 decrease in Wireless Messaging Services attributable to prior year
sales with the El Dorado Golf and Beach Club of San Jose del Cabo, Mexico
project, without similar sales comparison in the same quarter 2009 and offset
with an increase of $59,000 in banking network installation and services and
increase of $25,000 in recurring wireless WISP services with the increased
growth attributed to recent WISP acquisitions. Product sales decrease $299,000
and service sales decrease $53,000. The decrease is primarily due to prior year
sales in the Wireless Messaging Services associated with El Dorado Golf and
Beach Club of San Jose del Cabo, Mexico project. For the three months ended
March 31, 2009, the Company had a gross profit margin of 39%, compared to a
gross profit margin of 50% for the prior year. The $321,000 decreased in gross
profit margin percentage is primarily due to net decrease in sales volume which
attributed to margins as follows; (i) approximately $115,000 decrease in gross
margin attributable to increase depreciation and third party services as result
of recent acquisitions  (ii) by approximately $298,000 decreased in
gross margin due to lower sales expectation in our wireless infrastructure
construction, and (iii) offset by $92,000 increase in gross margins for banking
network services due to efficient execution of current banking
contracts.




The
Company incurred a net loss of $2,360,000 for the three months ended March 31,
2009. The Company's principal components of the net loss for the three months
ended March 31, 2009, included approximately $618,000 in depreciation and
amortization expenses, $252,000 of interest expense, and $488,000 of other
general and administrative expense, $1,164,000 in employment expenses and
$586,000 in professional services expense.




SALES
INFORMATION




Set forth
below is a table presenting summarized sales information for our business
segments for the three months ended March 31, 2009 and 2008:




($
      in thousands)
              
              Three
      Months Ended March 31,Business
      Segment
              
              2009
              
              %
      of Total
              
              2008
              
              %
      of Total
              
              $
      Change
              
              %
      ChangeWireless
      Messaging Services
              
              $
              60
              
              4%
              
              $
              496
              
              30%
              
              $
              (436)
              
              -88%Wireless
      Bundled Services
              
              
              1,106
              
              84%
              
              
              1,081
              
              64%
              
              
              25
              
              2%Enterprise
      Network Services
              
              
              157
              
              12%
              
              
              98
              
              6%
              
              
              59
              
              60%Total
      Sales
              
              $
              1,323
              
              100%
              
              $
              1,675
              
              100%
              
              $
              (352)
              
              -21%


For the
three months ended March 31, 2009, net sales decreased to $1,323,000 from
$1,675,000 for the three months ended March 31, 2008. The overall decrease of
21% was attributable to a decrease of $436,000 of Wireless Messaging Services,
offset with an increase in Enterprise Network Services of $59,000 and an
increase in Wireless Bundled Services of $25,000. The $436,000 decrease in
Wireless Messaging Services was primarily attributable to prior year sales with
the El Dorado Golf and Beach Club of San Jose del Cabo, Mexico project, without
similar sales comparison in the same quarter 2009. The $59,000 increase in
banking network installation and services was primarily attributable to
executing current bank contracts. The $25,000 increase was primarily
attributable to recurring wireless WISP services with recent WISP asset
acquisitions.




18




COST
OF GOODS SOLD




The
following tables set forth summarized cost of goods sold information for the
three months ended March 31, 2009 and 2008:


($
      in thousands)
              
              Three
      Months Ended March 31,Business
      Segment
              
              2009
              
              %
      of Total
              
              2008
              
              %
      of Total
              
              $
      Change
              
              %
      ChangeWireless
      Messaging Services
              
              $
              45
              
              5%
              
              $
              184
              
              22%
              
              $
              (139)
              
              -76%Wireless
      Bundled Services
              
              
              625
              
              78%
              
              
              485
              
              58%
              
              
              140
              
              29%Enterprise
      Network Services
              
              
              134
              
              17%
              
              
              166
              
              20%
              
              
              (32)
              
              -19%Total
      Cost of Goods
              
              $
              804
              
              100%
              
              $
              835
              
              100%
              
              $
              (31)
              
              -4%




Three
      Months Ended March 31,($
      in thousands)
              
              2009
              
              
              2008
              
              
              $
      Change
              
              
              %
      ChangeProducts
      and integration service
              
              $
              368
              
              
              $
              360
              
              
              $
              8
              
              
              
              2
              %Rent
      and maintenance
              
              
              96
              
              
              
              91
              
              
              
              5
              
              
              
              5
              %Salary
      and related costs
              
              
              17
              
              
              
              49
              
              
              
              (32
              )
              
              
              -65
              %Depreciation
              
              
              265
              
              
              
              196
              
              
              
              69
              
              
              
              35
              %Other
      costs
              
              
              58
              
              
              
              139
              
              
              
              (81
              )
              
              
              -58
              %Total
      Operating Expenses
              
              $
              804
              
              
              $
              835
              
              
              $
              (31
              )
              
              
              -4
              %


For the
three months ended March 31, 2009, cost of goods sold decreased by $31,000, or
4%, to $804,000 from $835,000 as compared to the three months ended March 31,
2008. The decrease of $31,000 in cost of goods sold is primarily attributable to
a decrease in cost of goods sold of $139,000 in WMS due to decreased sales in
wireless infrastructure construction, a decrease of cost of goods sold of
$32,000 in ENS due to efficient execution of current banking contracts and
offset with an increase of $140,000 in cost of goods sold in the WBS due to
increase depreciation and third party services as a result of recent
acquisitions.




OPERATIONS
EXPENSES




The
following table sets forth summarized operating expense information for the
three months ended March 31, 2009 and 2008:


Three
      Months Ended March 31,($
      in thousands)
              
              2009
              
              
              2008
              
              
              $
      Change
              
              
              %
      ChangeEmployment
      expenses
              
              $
              1,164
              
              
              $
              1,101
              
              
              $
              63
              
              
              
              6
              %Professional
      services
              
              
              586
              
              
              
              494
              
              
              
              92
              
              
              
              19
              %Rent
      and maintenance
              
              
              108
              
              
              
              90
              
              
              
              18
              
              
              
              20
              %Depreciation
      and amortization
              
              
              352
              
              
              
              230
              
              
              
              122
              
              
              
              53
              %Other
      general and administrative
              
              
              381
              
              
              
              418
              
              
              
              (37
              )
              
              
              -9
              %Total
      operating expenses
              
              $
              2,591
              
              
              $
              2,333
              
              
              $
              258
              
              
              
              11
              %


For the
three months ended March 31, 2009, operating expenses increased by 11% to
$2,591,000, as compared to $2,333,000 for the three months ended March 31, 2008.
The increases that occurred, as evidenced by the immediately preceding table,
are discussed below:




19




·
            A
      $63,000 increase in employment expense. The increase is primarily
      attributable to growth of the company through recent
      acquisitions;




·
            A
      $92,000 increase in professional services. The increase is primarily
      related to consulting expenses;




·
            A
      $18,000 increase in rent and maintenance. The increase is primarily
      attributable to growth of the company through recent
      acquisitions;




·
            A
      $122,000 increase in depreciation and amortization; The increase is
      primarily attributable to growth of the company through recent
      acquisitions; and




·
            A
      $37,000 decrease in other general and administrative
    expense.




OTHER
(INCOME) EXPENSE, NET




For the
three months ended March 31, 2009, the increase in other expense is primarily
attributable to interest expense, net on debt obligations totaling $252,000 and
a net derivative expense of $36,000 as compared to interest expense, net of
$178,000 and derivative income of $130,000 for the three months ended March 31,
2008. The derivative expense/income represents the net unrealized (non-cash)
charge during the three months ended December 31, 2009 and 2008, in the fair
value of our derivative instrument liabilities related to warrants and embedded
derivatives in our debt instruments that have been bifurcated and accounted for
separately.




NET
LOSS




For the
three months ended March 31, 2009, our net loss was $2,360,000 compared to a
loss of $1,541,000 for the three months ended March 31, 2008. The increase in
the loss for the three months ended March 31, 2009, as compared to the three
months ended March 31, 2008 is primarily attributable to increase in employment,
professional services and depreciation and amortization.




CASH
FLOWS




The
Company's operating activities decreased net cash used by operating activities
to $434,000 in the three months ended March 31, 2009, compared to net cash used
of $1,035,000 in the three months ended March 31, 2008. The decrease in net cash
used by operating activities was primarily attributable to fund an increase in
the company's net operating loss $2,360,000, net of $1,482,000 non-cash charges
combined with derivative expense $36,000 to equal net non-cash charge of
$1,518,000, combined together with $408,000 of cash used by fluctuations in
working capital requirements consisting of the combination of accounts
receivable, inventory, prepaid expenses, accounts payable, accrued expenses,
cost and profit in excess of billings, deferred liability lease and deferred
revenue.




The
Company's investing activities used net cash of $141,000 in the three months
ended March 31, 2009, compared to use of net cash of $263,000 in the three
months ended March 31, 2008. The increase in investing activities is primarily
growing WISP capabilities through expansion of our infrastructure in Texas, New
Mexico and Louisiana.




The
Company's financing activities provided net cash of $883,000 in the three months
ended March 31, 2009, compared to $145,000 of cash provided in the three months
ended March 31, 2008. The cash provided in the three months ended March 31,
2009, was primarily associated with the proceeds from equity financings,
subordinated promissory financing, convertible debt financing and the line of
credit, net.




LIQUIDITY
AND CAPITAL RESOURCES




At March
31, 2009, the Company's current assets totaled $2,283,000 (including cash and
cash equivalents of $656,000); total current liabilities were $5,373,000,
resulting in negative working capital of $3,090,000. The Company has funded
operations to date primarily through a combination of utilizing cash on hand,
borrowings and raising additional capital through the sale of its securities.
The Company operation for the three months ended March 31, 2009, was primarily
funded by proceeds from the Company's line of credit totaling $355,000,
subordinated promissory financing of $550,000, sale of restricted common stock,
net to accredited investors of $169,000 and convertible debt financing of
$150,000.




20




CURRENT
DEBT FACILITY




At March
31, 2009, the Company had approximately $3,961,000 available on a $6.5 million
unsecured revolving credit facility with Angus Capital Partners, which matures
in March 2011. The terms of the two-year unsecured revolving credit facility
will allow us to draw upon the facility as financing requirements dictate and
provides for quarterly interest payments at an annual 12% rate. The loan may be
prepaid without penalty or repaid at maturity.




ISSUANCE
OF COMMON STOCK




During
the three months ended March 31, 2009, we issued to various accredited investors
and third parties (i) 1,151,000 shares of restricted common stock for net
consideration of $169,000, (ii) 1,697,000 shares for services rendered and debt
conversions, and (iii) 4,398,000 shares upon conversion of Series A Preferred
Stock. We relied on Section 4(2) of the Securities Act in effecting these
transactions. During the three months ended March 31, 2009, we issued 1,449,000
shares of common stock to employees and business consultants, for aggregate
consideration of $523,000 of services rendered, pursuant to a registration
statement on form S-8.




USE
OF WORKING CAPITAL




We
believe our cash and available credit facilities afford us adequate liquidity
for the balance of fiscal 2009.  We anticipate that we will need
additional capital in the future to continue to expand our business operations,
which expenditures may include acquisitions and capital
expenditures.  We have historically financed our operations through
private equity and debt financings. We do not have any commitments for
significant equity funding at this time, and additional funding may not be
available to us on favorable terms, if at all. As such there is no assurance
that we can raise additional capital from external sources, the failure of which
could cause us to curtail operations.




CONTRACTUAL
OBLIGATIONS




The
following table sets forth contractual obligations as of March 31,
2009:




Payments
      Due by PeriodTotal
              
              
              Less
      than 1
                Year
              
              
              1-3
      Years
              
              
              3-5
      Years
              
              
              More
      than 5 YearsContractual
      obligations:Long-term
      debt obligations
              
              $
              5,329
              
              
              $
              1,697
              
              
              $
              3,632
              
              
              $
              -
              
              
              $
              -Capital
      lease obligations
              
              
              2,894
              
              
              
              920
              
              
              
              1,707
              
              
              
              256
              
              
              
              11Operating
      lease obligations
              
              
              1,541
              
              
              
              465
              
              
              
              1,034
              
              
              
              19
              
              
              
              23Total
      contractual obligations
              
              $
              9,764
              
              
              $
              3,082
              
              
              $
              6,373
              
              
              $
              275
              
              
              $
              34


The
Company's contractual obligations consist of long-term debt of $4,185,000,
derivative liabilities of $193,000, unamortized debt discount of $127,000 and
interest expense of $825,000 as set forth in Note 7 to the company's
financial statements, Notes Payable and Long-Term Debt, and certain obligations
for operating leases requiring future minimal commitments under non-cancelable
leases set forth in Note 9 - Commitments and Contingencies.




OFF-BALANCE
SHEET ARRANGEMENTS




As of
March 31, 2009, the Company did not have any significant off-balance-sheet
arrangements other than certain office and tower facility operating leases
requiring minimal commitments under non-cancelable leases disclosed in the table
above.




21




CRITICAL
ACCOUNTING POLICIES AND ESTIMATES




Property
and Equipment




Property
and equipment are stated at cost less accumulated depreciation. Major renewals
and improvements are capitalized; minor replacements, maintenance and repairs
are charged to current operations. Depreciation is computed by applying the
straight-line method over the estimated useful lives which are generally three
to seven years.




Impairment
losses are recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. No impairment losses
have been recorded since inception.





Long-Lived
Assets





We review
our long-lived assets, to include intangible assets subject to amortization, for
recoverability whenever events or changes in circumstances indicate that the
carrying amount of such long-lived asset or group of long-lived assets
(collectively referred to as "the asset") may not be recoverable. Such
circumstances include, but are not limited to:





·
            a
      significant decrease in the market price of the
  asset;




·
            a
      significant change in the extent or manner in which the asset is being
      used;




·
            a
      significant change in the business climate that could affect the value of
      the asset;




·
            a
      current period loss combined with projection of continuing loss associated
      with use of the asset;




·
            a
      current expectation that, more likely than not, the asset will be sold or
      otherwise disposed of before the end of its previously estimated useful
      life;




We
continually evaluate whether such events and circumstances have occurred. When
such events or circumstances exist, the recoverability of the asset's carrying
value shall be determined by estimating the undiscounted future cash flows (cash
inflows less associated cash outflows) that are directly associated with and
that are expected to arise as a direct result of the use and eventual
disposition of the asset. To date, no such impairment has occurred. To the
extent such events or circumstances occur that could affect the recoverability
of our long-lived assets, we may incur charges for impairment in the
future.





Derivative
Instruments




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




The
Company's derivative instrument liabilities are re-valued at the end of each
reporting period, with changes in the fair value of the derivative liability
recorded as charges or credits to income in the period in which the changes
occur. For options, warrants and bifurcated embedded derivative features that
are accounted for as derivative instrument liabilities, the Company estimates
fair value using either quoted market prices of financial instruments with
similar characteristics or other valuation techniques. The valuation techniques
require assumptions related to the remaining term of the instruments and
risk-free rates of return, our current common stock price and expected dividend
yield, and the expected volatility of our common stock price over the life of
the option. Because of the limited trading history for our common stock, the
Company estimates the future volatility of its common stock price based on not
only the history of its stock price but also the experience of other entities
considered comparable to the Company.




22


Recent
Accounting Pronouncements




In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 162, “Hierarchy of Generally Accepted Accounting Principles” (“SFAS
162”). This statement is intended to improve financial reporting by identifying
a consistent framework, or hierarchy, for selecting accounting principles to be
used in preparing financial statements of nongovernmental entities that are
presented in conformity with GAAP. The effective date of this statement was
November 15, 2008. The adoption of SFAS 162 did not have a material impact
on the Company’s consolidated financial statements.




In April
2008, the FASB issued FASB Staff Position (“FSP”) No. SFAS 142-3, “Determination
of the Useful Life of Intangible Assets” (“FSP SFAS 142-3”). FSP SFAS 142-3
amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset
under SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”).
The intent of FSP SFAS 142-3 is to improve the consistency between the useful
life of a recognized intangible asset under SFAS 142 and the period of expected
cash flows used to measure the fair value of the asset under SFAS No. 141R
(revised 2007), “Business Combinations” (“SFAS 141R”) and other applicable
accounting literature. FSP SFAS 142-3 is effective for financial statements
issued for fiscal years beginning after December 15, 2008 and must be
applied prospectively to intangible assets acquired after the effective date.
The Company has not acquired any intangible assets since adopting FSP SFAS
142-3. As such, there has been no impact to the Company’s financial statements
since the January 1, 2009 adoption date.




In March
2008, the FASB issued SFAS No. 161, “Disclosures About Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No. 133”
(“SFAS 161”), which expands the disclosure requirements in SFAS 133 about an
entity’s derivative instruments and hedging activities. SFAS 161’s disclosure
provisions apply to all entities with derivative instruments subject to SFAS 133
and its related interpretations. The provisions also apply to related hedged
items, bifurcated derivatives, and nonderivative instruments that are designated
and qualify as hedging instruments. Entities with instruments subject to SFAS
161 must provide more robust qualitative disclosures and expanded quantitative
disclosures. Such disclosures, as well as existing SFAS 133 required
disclosures, generally will need to be presented for every annual and interim
reporting period. SFAS 161 is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008. For the
three months ended March 31, 2009, we have included the statement’s
expanded disclosures about derivative instruments and hedging activities within
the Company’s financial statements.




In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141R”), which replaces SFAS 141. SFAS 141R establishes
principles and requirements for how an acquirer recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed,
any non-controlling interest in the acquiree and the goodwill acquired in
connection with a business combination. The Statement also establishes
disclosure requirements that will enable users to evaluate the nature and
financial effect of the business combination. SFAS 141R applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of an entity’s first fiscal year that begins after December 15,
2008. The Company applied the provisions of SFAS 141R in connection with the
acquisition that closed during the first quarter of 2009 (see Note 2 below). The
adoption of SFAS 141R did not have a material impact on the Company’s
consolidated financial statements.




In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS 160”).
SFAS 160 requires that accounting and reporting for minority interests will be
recharacterized as noncontrolling interests and classified as a component of
equity. SFAS 160 also establishes reporting requirements that provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. This Statement is
effective as of the beginning of an entity’s first fiscal year beginning after
December 15, 2008. The adoption of SFAS 160 did not have a material impact
on the Company’s consolidated financial statements.




In
February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective
Date of FASB Statement No. 157” (“FSP FAS 157-2”), which delayed the
effective date of SFAS 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on at least an annual basis, until fiscal years beginning
after November 15, 2008. Nonfinancial assets and liabilities that the
Company measures at fair value on a non-recurring basis consist primarily of
property and equipment, goodwill, and intangible assets, which are subject to
fair value adjustments in certain circumstances (for example, when there is
evidence of impairment). The adoption of FSP FAS 157-2 did not have a material
impact on the Company’s consolidated financial statements.




23




ITEM
3. CONTROLS AND PROCEDURES




We
maintain controls and procedures designed to ensure that information required to
be disclosed in the reports that we file or submit under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange
Commission. Based upon their evaluation of those controls and procedures
performed as of the end of the period covered by this report, our chief
executive officer and principal financial officer concluded that our disclosure
controls and procedures were adequate.




There
were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.




24


PART
II - OTHER INFORMATION




ITEM
1. LEGAL PROCEEDINGS




None.




ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS




The
following transactions were completed pursuant to either Section 4(2) of the
Securities Act or Regulation D of the Securities Act. With respect to issuances
made pursuant to Section 4(2) of the Securities Act, the transactions did not
involve any public offering and were sold to a limited group of persons. Each
recipient either received adequate information about ERF Wireless or had access,
through employment or other relationships, to such information, and ERF Wireless
determined that each recipient had such knowledge and experience in financial
and business matters that they were able to evaluate the merits and risks of an
investment in the Company.




With
respect to issuances made pursuant to Regulation D of the Securities Act, ERF
Wireless determined that each purchaser was an "accredited investor" as defined
in Rule 501(a) under the Securities Act, or if such investor was not an
accredited investor, that such investor received the information required by
Regulation D.




Except as
otherwise noted, all sales of the Company's securities were made by officers of
the Company who received no commission or other remuneration for the
solicitation of any person in connection with the respective sales of securities
described above. The recipients of securities represented their intention to
acquire the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed to
the share certificates and other instruments issued in such
transactions.




Common
Stock Issued for Cash Consideration




On
January 21, 2009, an accredited investor acquired 26,215 shares of common stock
at $.44 per share.




On
February 9, 2009, accredited investors acquired 89,799 shares of common stock at
$0.28 per share.




On
February 9, 2009, accredited investors acquired 104,866 shares of common stock
at $0.24 per share.




On
February 9, 2009, accredited investors acquired 33,422 shares of common stock at
$0.30 per share.




On
February 9, 2009, accredited investors acquired 534,567 shares of common stock
at $0.28 per share.




On
February 9, 2009, accredited investors acquired 83,556 shares of common stock at
$0.30 per share.




On
February 9, 2009, accredited investors acquired 233,671 shares of common stock
at $0.18 per share.




On March
03, 2000, accredited investors acquired 45,033 shares of common stock at $0.37
per share.




Common
Stock Issued for Debt Conversions and Services Rendered




On
February 09, 2009, accredited investors acquired 76,687 shares of common stock
at $0.33 per share pursuant to a conversion of E-series bonds.




On
February 09, 2009, accredited investors acquired 81,699 shares of common stock
at $0.31 per share pursuant to a conversion of E-series bonds.




On
February 09, 2009, accredited investors acquired 90,744 shares of common stock
at $0.28 per share pursuant to a conversion of E-series bonds.




On
February 09, 2009, accredited investors acquired 81,699 shares of common stock
at $0.31 per share pursuant to a conversion of E-series bonds.




25




On
February 09, 2009, accredited investors acquired 181,488 shares of common stock
at $0.28 per share pursuant to a conversion of E-series bonds.




In
January, 2009, 254,002 shares of common stock at average price of $.29 per share
were issued for services rendered.




In
February, 2009, 484,344 shares of common stock at average price of $.35 were
issued for services rendered.




In March,
2009, 446,028 shares of common stock at average price of $.32 were issued for
services rendered.




Common
Stock Issued Upon Conversion of Series A Preferred Stock




On
January 20, 2009, an accredited investor acquired 29,789 shares of common stock
pursuant to Preferred A Conversions.




On
January 27, 2009, an accredited investor acquired 1,500,010 shares of common
stock pursuant to Preferred A Conversions.




On
February 02, 2009, an accredited investor acquired 1,000,000 shares of common
stock pursuant to Preferred A Conversions.




On March
25, 2009, an accredited investor acquired 1,867,634 shares of common stock
pursuant to Preferred A Conversions.




ITEM
3. DEFAULT IN SENIOR SECURITIES




None.




ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




None.




ITEM
5. OTHER INFORMATION




None.




ITEM
6. EXHIBITS





Exhibit
      31
            Certification
      of Chief Executive officer and Chief Financial officer pursuant to Rules
      13a-14 (a) and 15d-14 (a), as adopted pursuant to section 302 of the
      Sarbanes-Oxley Act of 2002





Exhibit
      32
            Certification
      of Chief Executive Officer and Chief Financial Officer Pursuant to 18
      U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002








26





SIGNATURES




In
accordance with the requirements of the Exchange Act, the registrant has caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.




ERF Wireless,
    Inc.By:
              /s/
      H. Dean CubleyH.
      Dean CubleyChief
      Executive OfficerDate:
              May
      20, 2009








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