|   | U.S. SECURITIES AND EXCHANGE COMMISSION |   |
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| Washington, D.C. 20549 |
|------------------------|

| Form 10-KSB |
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| [X] | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934for the Fiscal Year Ended December 31, 2003 |
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| [ ] | Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934for the Transition Period From ________ to ________ |
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| Commission File No. 33-19961 |
|------------------------------|

|   | Air-Q Wi-Fi Corporation |   |
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| (Name of Small Business Issuer in its Charter) |
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|   | Delaware                                                      |   | 01-0623010                          |   |
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|   | (State or Other Jurisdiction ofIncorporation or Organization) |   | (IRS Employer IdentificationNumber) |   |

|   | 5555 Hilton Avenue, Suite 207, Baton Rouge, Louisiana 70808  |   |
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|   | (Address of Principal Executive Offices, Including Zip Code) |   |

|   | (225) 923-1034                                   |   |
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|   | (Issuer's Telephone Number, Including Area Code) |   |

|   | Securities Registered under Section 12(b) of the Exchange Act: None |   |
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| Securities Registered under Section 12(g) of the Exchange Act: None |
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| Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of theExchange Act during the past 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject of such filing requirements for the past90 days. Yes [X] No [ ]                               |
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| Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-Bcontained in this form, and no disclosure will be contained, to the best of registrant'sknowledge, in definitive proxy or information statements incorporated by reference in Part IIIof this Form 10-KSB or any amendment to this Form 10-KSB. [X] |
| Registrant's revenues for its most recent fiscal year were $0.                                                                                                                                                                                                                                                                                    |
| The aggregate market value of the voting stock held by non-affiliates computed based on theclosing price of such stock as of February 20, 2004, was approximately $30,400,000.                                                                                                                                                                    |
| The number of shares outstanding of the issuer's common equity as of February 20, 2004, was20,384,704 shares of common stock, par value $.001.                                                                                                                                                                                                    |
| Documents Incorporated by Reference: Current Report on Form 8-K, date of event: November13, 2003.                                                                                                                                                                                                                                                 |
| Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]                                                                                                                                                                                                                                                                       |

|   |
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| PART I |
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| Item 1. | Description of Business |   |
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| General |   |
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| We are a start-up business.  Our  management has committed all available current and futurecapital and other resources to expanding our “Wi-Fi” (wireless fidelity) Internet accessservices (these services are referred to as our Wi-Fi services).  We currently provide Wi-Fiservices to a small number of customers in Baton Rouge, Louisiana, and Phoenix, Arizona. |
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| What is Wireless Internet? |   |
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| “Wireless Internet” is a relatively new type of communications spectrum designated by theFederal Communications Commission.  Wireless Internet access requires a transmissionfacility connected directly to the Internet and maintained by an Internet service provider (ISP)that broadcasts radio frequencies allowing two-way communications.  A user’s wirelessmodem equipped with an antenna and installed in a stationary computer, a laptop computer orother wireless device, communicates with the transmission facility, thereby permitting the userto transmit data through the ISP’s transmission facility and onto the Internet. |
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| What is Wi-Fi? |   |
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| There are many wireless Internet system design structures.  Our wireless Internet systememploys Wi-Fi standard equipment.  The term “Wi-Fi” is short for “wireless fidelity” andrefers to an industry standard for wireless equipment that meets published 802.11(x) standards.Wi-Fi equipment operates in unlicensed spectra, such as 2.4 and 5.8 Ghz.  A Wi-Fitransmission point, the point through which users can access the Internet, is known as a“hotspot”. |
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| Industry Background |   |
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| Internet access services represent the means by which ISPs interconnect business andconsumer users to the Internet's resources.  Access services vary from dial-up modem access tohigh-speed dedicated transmission lines for broadband access by large organizations towireless Internet access systems, like our Wi-Fi services. |
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| The Wi-Fi hotspot industry is very young and is extremely fragmented.  Wi-Fi hotspotcoverage is available in limited areas in a limited number of U.S. markets.  We are not awareof other Wi-Fi hotspot companies that have “blanketed” a city with Wi-Fi hotspots, as we havebegun to do in Baton Rouge and as we intend to do in many of our future markets. |
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| Our Development Strategy |   |
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| We are attempting to establish, in as short a period of time as possible, as many Wi-Fi hotspotsin as many markets as we are able, that is, we are attempting to establish quickly a significant“footprint” of Wi-Fi service.  Currently, we are employing two methods to accomplish ourobjective: (1) securing development partners and (2) internal growth. |
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|   | Development Partners |   |
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|   | We intend to enter into Wi-Fi development agreements with individuals and companies allof the United States.  These development partners will secure locations for hotspots, suchas restaurants and hotels, install the hotspots and sell the hotspots to us.  We will pay forthese hotspots with shares of our common stock, cash or a combination thereof.  In someinstances, we will share future revenues derived by a hotspot with the development partnerwho sold us the hotspot.  This development partner system allows us to control our costs ofestablishing hotspots. |
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|   | We currently have three development partners and are negotiating with numerous potentialdevelopment partners.  Our Wi-Fi service in Phoenix, Arizona, is the result of the effortsof our development partner there. |
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|   | Internal Growth |   |
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|   | We also intend to “blanket” certain cities with Wi-Fi coverage, rather than to follow thetraditional approach of developing Wi-Fi coverage in very limited areas.  By providing Wi-Fi coverage in an entire city, we will be in a position to market our services throughout amarket as “mobile”, that is, Wi-Fi service available wherever a customer moves about inhis city.  In addition to our local business and residential customers in each market, we willderive roaming fees from visitors to our markets who avail themselves of our Wi-Fiservices during their visits. |
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|   | We have begun to establish a Wi-Fi service “blanket” in Baton Rouge, Louisiana.  Wecurrently have 20 operating hotspots there, with a total of 100 hotspots planned.  Our lackof significant capital during the last quarter of 2003 has slowed our efforts in completingthe Baton Rouge system. |
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| How We Provide Wi-Fi Internet Access |   |
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| We can provide Wi-Fi service by installing a hotspot in a single, discreet location, by installingtwo or more integrated hotspots in a single location ore by installing a large number ofintegrated hotspots designed to cover a large geographic area. |
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|   | Single-Site, Single-Hotspot Service |   |
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|   | We can provide our Wi-Fi service in a single, discreet location, such as a restaurant, byinstalling a single hotspot, including its attendant wire line connection to the Internet,within the premises that will provide radio frequency coverage throughout the premises.Once operating, the hotspot permits numerous (up to approximately 128) users withcompatible laptop computers or other wireless devices to access simultaneously theInternet while patronizing the host business.  Users are able to access our network bypurchasing an account from us, whether it be a daily, weekly or monthly account. |
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|   | Single-Site, Multiple-Hotspot Service |   |
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|   | We can provide our Wi-Fi services in a large single premises, such as a hotel, by installingtwo or more integrated hotspots within the premises that will, as a local area wirelessnetwork, provide radio frequency coverage throughout the premises.  Depending on thelevel of user demand, one or more of the integrated hotspots will be connected directly tothe Internet.  Once operating, this type of hotspot network permits numerous users toaccess simultaneously the Internet, while patronizing the host hotel or other property.Users of this type of hotspot network are able to purchase access to our network in thesame manner as those users accessing one of our hotspots located in a single, discreetlocation. |
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|   | Service for Large Geographic Areas |   |
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|   | We can provide our Wi-Fi services over broad geographic areas, such as a residentialsubdivision, a commercial center or an entire city, as we have begun to do in Baton Rouge.To provide this type of broad coverage, we deploy a large number of hotspots thateffectively “blanket” the target coverage area with radio frequencies.  Iin this type of Wi-Fisystem, we will market our Wi-Fi services in the same manner as other wireless and non-wireless Internet access providers.  We will solicit potential business and residentialcustomers to establish ongoing yearly or monthly accounts.  Also, as with our single-premises Wi-Fi service, visitors to our areas of broad coverage are able to purchase accessto our network on a daily or weekly basis. |
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|   | In our broad coverage system, we install integrated hotspots on tall structures, such ascommunications towers, tall buildings and billboards, throughout the target coverage area.Each of the hotspots acts as a server cell and is less than one cubic foot in size.  In a broadcoverage system, we will lease space needed for mounting hotspots for an average monthlypayment of approximately $500.  Most of the hotspots in this type of system relaytransmitted data directly to the Internet through a direct connection into an appropriately-sized telephone line or local cable television provider’s system.  The monthly charge for aT1 telephone line ranges from $600 to $2,000, depending on the market, and the monthlycharge for each cable television system connection ranges from $300 to $1,000, dependingon the market. |
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| In a broad coverage system, customer modems , or Wi-Fi “cards”, transmit data to, and receivedata from, a hotspot.  Should a customer desire, a wireless modem can be installed in thecustomer’s computer and connected by a thin cable to a small antenna that is mounted on theoutside of the customer’s place of business or home, as the case may be.  The installationprocess for these modems is quite similar to that of cable television: the installation crewinstalls the customer modem in the computer, mounts the antenna outside, connects themodem and antenna with the cable and tests the connection.  Depending on the market, eachcustomer installation is expected to cost approximately $100. |
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| The number of hotspots needed for a broad coverage system depends on a few factors: |
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| - | the geographic size of the city to be served - the signal of each hotspot covers an areaapproximately three-quarters of a mile in diameter; |
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| - | the population density of the city to be served - since each hotspot is capable ofhandling approximately 128 customers, the greater the population density, the greaterthe number of hotspots required; |
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| - | the terrain of the city to be served - the hillier the terrain, the greater the number ofhotspots required; and |
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| - | the density of foliage of the city to be served - more densely foliated areas require agreater number of hotspots. |
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| Within a broad coverage system, each hotspot is configured to share transmitted data with theother hotspots, so as to provide an uninterrupted connection to the Internet. |
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| Data transmission speeds remain constant within a broad coverage system’s transmissionradius, regardless of the distance from the transmission point.  On the fringes of a Wi-Fisystem’s transmission radius, a customer’s connection may fade in and out, similar to thereception of distant AM radio stations.  To avoid this circumstance, we will attempt to avoidinstalling a customer modem within the fringe areas. |
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| Wi-Fi Equipment and Facilities |   |
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| All of the equipment used in our Wi-Fi systems will be off-the-shelf.  Inasmuch as there areseveral manufacturers of Wi-Fi equipment, we expect no problems in obtaining neededequipment at competitive prices. |
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| We will not construct towers on which to establish Hotspots.  Instead, we will lease towerspaces, rooftop spaces or spaces on other tall structures.  We have secured an adequate numberof these types of spaces in Baton Rouge, Louisiana.  Based on our management’s experience,securing adequate locations to establish Hotspots is not expected to impede the construction ofa Wi-Fi system in any market. |
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| In each market, we will obtain the necessary telephone line or cable television systemconnections to the Internet from one of the companies capable of providing an adequateInternet connection.  Based on our management’s experience, we do not believe that we willencounter any difficulty in obtaining needed connections to the Internet at acceptable prices. |
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| Current Markets |   |
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|   | Baton Rouge, Louisiana |   |
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|   | We have begun to offer our Wi-Fi service in portions of Baton Rouge.  To date, we haveinstalled the first 20 integrated hotspots of our planned 100 hotspots there.  Currently, weare able to provide Wi-Fi service in approximately 10% of Baton Rouge.  We derive asmall amount of revenue from this system.  The speed with which we will be able tocomplete this system, as well as any other broad-coverage systems, is dependent upon theamount of capital we are able to obtain.  We cannot predict our future capital position. |
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|   | Phoenix, Arizona |   |
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|   | We currently have five operating hotspots in Phoenix.  All of these hotspots are located inrestaurants and were installed by, and purchased from, our development partner inPhoenix, JPM Holdings, Inc.  JPM is actively seeking locations to establish hotspots forsale to us under our development agreement.  JPM is paid a combination of cash andshares of our common stock for each hotspot, except for the first four hotspots, where JPMwas paid solely in shares of our common stock.  We expect our growth in Phoenix tocontinue as JPM’s development efforts mature.  However, we are unable to predict our rateof growth in the Phoenix market. |
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| Sales and Marketing |   |
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| We plan to increase our customer base in two ways.  First, we will attempt to expand our Wi-Fi “footprint” in conjunction with our development partners, the number of which we areattempting to increase from the three current development partners.  In this regard, we arecurrently negotiating with many individuals and companies who have expressed an interest inbecoming one of our Wi-Fi development partners. |
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| Second, in markets where we provide broad-area coverage, like Baton Rouge, we intend toemploy telephone marketing as the initial means for acquiring customers, primarily businesscustomers.  As a particular market begins to mature, we will employ mass media, includingradio advertising.  In conjunction with our mass media advertising, we will employ acommissioned sales force that will focus primarily on potential business customers.  Thisfocus on business customers is based on our management’s informal study of Internet usage bybusinesses versus home users that revealed businesses’ higher demand for high-speed Internetaccess.  Our management’s decision may prove to have been incorrect, which wouldsignificantly impair our ability to earn a profit.  In all of our marketing efforts, we will focuson creating awareness for our Wi-Fi services, educating potential customers and generatingnew sales opportunities. |
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| Competitive Features of Our Wi-Fi Services |   |
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| While we believe our Wi-Fi service possesses some competitive advantages over otherInternet access modes, it currently has three significant competitive disadvantages: |
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| - | No wide-spread brand name recognition; and |
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| - | Internet access only available locally, compared to dial-up Internet access that isavailable from virtually any telephone in any geographic location. |
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| It is possible that we could overcome the first two listed disadvantages, after a lengthy periodof marketing and product research and development.  However, we currently lack capital toovercome this disadvantage.  Further, it is likely that we will never overcome the thirddisadvantage, due to the inherent broadcast limitations of wireless technologies. |
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| We believe our Wi-Fi services offer the following competitive advantages: data transmissionspeed, lower cost, no telephone company involvement and security through encryption. |
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| Technology |   |
|------------|--------|

| The technology incorporated into our Wi-Fi service is chosen by us to provide our customerswith reliability, quality of service, network security, policy enforcement, consolidated billingand scalability.  All of the technology used in providing our Wi-Fi service is off-the-shelf andreadily available.  The configuration of the technology is proprietary, however.  In the future, itis likely that we will develop technology, especially computer software, that enhances our Wi-Fi service.  Without additional capital, it will be difficult for us to develop our owntechnology, which may cause our business to suffer. |
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| Agreements with Network Providers |   |
|-----------------------------------|--------|

| We have established a relationship with Cox Cable that enables us to offer our Wi-Fi servicein Baton Rouge, and we may establish relationships with other network providers there.  Innew markets, we will establish one or more relationships with network providers, which couldinclude telephone service providers and local cable television providers.  We do not have anagreement with Cox Cable that relates to additional markets. |
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| Competition |   |
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| We believe that the primary competitive factors determining success as an Internet accessprovider are: a reputation for reliability and high-quality service; effective customer support;data transmission speed; pricing; effective marketing techniques for customer acquisition; easeof use; and scope of geographic coverage.  We believe that we will be able to addressadequately all of these factors, except that we will not be able to offer scope of geographiccoverage for the foreseeable future.  It is also possible that we will not address any of thesecompetitive factors successfully.  Should we fail to do so, our business would likely never earna profit.  We currently lack capital necessary to compete effectively. |
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| We face severe competition from other wireless Internet access providers, as well as large,national providers of cellular telephone service. |
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| The market for the provision of dial-up Internet access services, in which our Wi-Fi serviceswill compete, is extremely competitive and highly fragmented.  Current and prospectivecompetitors include many large, nationally-known companies that possess substantially greaterresources, financial and otherwise, market presence and brand name recognition than do we.We expect to compete, for the foreseeable future, with the following: national Internet serviceproviders, numerous regional and local Internet service providers, most of which havesignificant market share in their markets; established on-line information service providers,such as America Online, which provide basic Internet access, as well as proprietaryinformation not available through public Internet access; providers of web hosting, co-locationand other Internet-based business services; computer hardware and software and othertechnology companies that provide Internet connectivity with their products;telecommunications companies, including global long distance carriers, regional Belloperating companies and local telephone companies; operators that provide Internet accessthrough television cable lines; electric utility companies; communications companies;companies that provide television or telecommunications through participation in satellitesystems; and, to a lesser extent, non-profit or educational Internet access providers. |
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| With respect to potential competitors, we expect that manufacturers of computer hardware andsoftware products, as well as media and telecommunications companies will continue to enterthe Internet services market, which will serve to intensify competition.  In addition, as moreconsumers and businesses increase their Internet usage, we expect existing competitors toincrease further their emphasis on Internet access and electronic commerce initiatives,resulting in even greater competition.  The ability of competitors or others to enter intobusiness combinations, strategic alliances or joint ventures, or to bundle their services andproducts with Internet access, could place us at a significant competitive disadvantage.  Wecurrently lack capital necessary to compete effectively and we may never obtain enough capitalto permit us to compete effectively in our markets. |
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| Moreover, we expect to face competition in the future from companies that provideconnections to consumers' homes, such as telecommunications providers, cable companies andelectrical utility companies. For example, recent advances in technology have enabled cabletelevision operators to offer Internet access through their cable facilities at significantly higherspeeds than existing analog modem speeds. These types of companies could include Internetaccess in their basic bundle of services or offer such access for a nominal additional charge.Any such developments could reduce our market share, thereby impairing our ability to earn aprofit. |
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| Research and Development |   |
|--------------------------|--------|

| We believe that to compete favorably we must invest in research and development of ourservices. Our management expects that the focus of our future research and developmentefforts will be on improving our service offerings, as well as developing new proprietaryproducts and services.  However, due to our lack of capital, it is likely that our research anddevelopment activities will be minimal through the first six months of 2004. |
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| Employees |   |
|-----------|--------|

| We currently have six employees, two of whom are officers.  We also retain the services ofindependent contractors and needed outside professionals on an as-needed basis. |
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| Regulation |   |
|------------|--------|

|   | Wireless Internet Access |   |
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|   | Our Wi-Fi Internet access products operate in unregulated spectra, the 900 MHz and 2400MHz spectra (primarily the 2400 MHz spectrum), and we expect that such spectra willremain unregulated. |
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|   | Regulation of the Internet |   |
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|   | Due to the increasing popularity and use of the Internet by broad segments of thepopulation, it is possible that laws and regulations may be adopted with respect to theInternet pertaining to content of Web sites, privacy, pricing, encryption standards,consumer protection, electronic commerce, taxation, and copyright infringement and otherintellectual property issues.  No one is able to predict the effect, if any, that any futureregulatory changes or developments may have on the demand for our Internet access orother Internet-related services.  Changes in the regulatory environment relating to theInternet access industry, including the enactment of laws or promulgation of regulationsthat directly or indirectly affect the costs of telecommunications access or that increase thelikelihood or scope of competition from national or regional telephone companies, couldmaterially and adversely affect our business, operating results and financial condition. |
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|   | Regulation of Internet Access Services |   |
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|   | We provide Internet access, in part, using telecommunications services provided by third-party carriers. Terms, conditions and prices for telecommunications services are subject toeconomic regulation by state and federal agencies.  As an Internet access provider, we arenot currently subject to direct economic regulation by the FCC or any state regulatorybody, other than the type and scope of regulation that is applicable to businesses generally.In April 1998, the FCC reaffirmed that Internet access providers should be classified asunregulated "information service providers" rather than regulated "telecommunicationsproviders" under the terms of the Federal Telecommunications Act of 1996.  As a result,we are not subject to federal regulations applicable to telephone companies and similarcarriers merely because we provide our services using telecommunications servicesprovided by third-party carriers.  To date, no state has attempted to exercise economicregulation over Internet access providers. |
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| Risk Factors |   |
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| You should carefully consider the risks described below before you decide to buy our commonstock.  If any of the following risks occur, our business, financial condition or results ofoperations would likely suffer.  In such case, the trading price of our common stock coulddecline, and you could lose all or part of your investment. |
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| Risks Relating to Air-Q |   |
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|   | Because we have a short operating history, there is a limitedamount of information about us upon which you can evaluateour business and potential for future success. |   |
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| We have only a limited operating history upon which you can evaluate our full business andprospects.  You must consider the risks and uncertainties frequently encountered by early-stagecompanies in new and rapidly evolving markets, such as the market for Wi-Fi “hotspot”Internet access services. |
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|   | We may be unable to obtain sufficient capital to sustain ourbusiness or pursue our growth strategy. |   |
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| Currently, we do not have sufficient financial resources to implement our complete businessplan. There is no assurance that we will be able to generate revenues that are sufficient tosustain our operations, nor can we assure you that we will be able to obtain additional sourcesof financing in order to satisfy our working capital needs.  Should needed financing beunavailable or prohibitively expensive when we require it, it is possible that we would beforced to cease operations. |
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|   | Our future operating results may vary from period to period, and,as a result, we may fail to meet the expectations of our investorsand analysts, which could cause our stock price to fluctuate ordecline and inhibit our ability to obtain funds. |   |
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| Our revenues and results of operations are expected to fluctuate as we make financialcommitments to facilitate expected growth.  The following factors will influence our operatingresults: |
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| - | access to funds for capital expenditures, including Wi-Fi equipment purchases; |
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| - | market acceptance of our Wi-Fi services; |
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| - | the rates of new Wi-Fi services subscriber acquisition and retention; |
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| - | changes in our pricing policies or those of our competitors; and |
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| - | potential competition from large, well-funded national telecommunications companies. |
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| Our future personnel costs, marketing programs and overhead cannot be adjusted quickly andare, therefore, relatively fixed in the short term.  Our operating expense levels will be based, inpart, on our expectations of future revenue.  If actual revenues are below our expectations, ourresults of operations will suffer and we could be forced to cease operations. |
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| Period-to-period comparisons of our results of operations will likely not provide reliableindications of our future performance. |
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| Price fluctuations of our common stock could negatively impact our ability to obtain neededcapital. |
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|   | If we fail to address the Internet industry’s evolving standardsand rapid technological changes, our business could be harmed. |   |
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| The Internet access market is constantly evolving, due primarily to technological innovations,as well as evolving industry standards, changes in subscriber needs and frequent new serviceand product introductions.  New services and products based on new technologies or newindustry standards expose us to risks of equipment obsolescence.  We must use leadingtechnologies effectively, continue to develop our technical expertise and enhance our existingservices on a timely basis to remain competitive in this industry.  We cannot assure you thatwe will be able to do so. |
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| Our ability to compete successfully in our markets also depends on the continued compatibilityof our services with products and systems utilized and sold by various third parties.  Ourfailure to do so could cause us to lose a competitive position in our markets, thereby causingharm to our business. |
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|   | Our Wi-Fi services are new and consumer acceptance may notbe achieved. |   |
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| Our Wi-Fi services are new and do not enjoy wide-spread name recognition among consumers.If we are unable to achieve consumer acceptance of our products, it is unlikely that we wouldbe able to earn a profit. |
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|   | If our security measures are breached and unauthorized access isobtained to a customer’s internal network, our services may beperceived as not being secure and customers may curtail or stopusing our services. |   |
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| It is imperative that the data transfers of our customers be secure.  Important to our ability toattract and retain customers is our network security, the authentication of the end user’scredentials. These measures are designed to protect against unauthorized access to ourcustomers’ networks. Because techniques used to obtain unauthorized access or to sabotagenetworks change frequently and generally are not recognized until launched against a target,we may be unable to anticipate these techniques or to implement adequate preventativemeasures against unauthorized access or sabotage. If an actual or perceived breach of networksecurity occurs, regardless of whether the breach is attributable to our services, the marketperception of the effectiveness of our security measures could be harmed. We have notexperienced any significant security breaches to our network. |
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|   | We face strong competition in our market, which could make itdifficult for us to succeed. |   |
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| We compete for customers primarily with facilities-based carriers, as well as with othernon-facilities-based network operators. Some of our competitors have substantially greaterresources, larger customer bases, longer operating histories and greater name recognition thanwe have.  In addition, we face the following challenges from our competitors: |
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| - | Price.  Because many of our competitors own and operate physical networks, there isvery little incremental cost for them to provide additional Internet connections.  Shouldwe be forced to lower our prices to compete, we would likely suffer a reduction inrevenues. |
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| - | Additional Services. Some of our competitors provide services that we do not, such aslocal exchange and long distance services and voicemail services. Potential customersthat desire these services may choose to obtain their Internet access services from thecompetitor that provides these additional services. |
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| - | Other Business Relationships. Potential customers may be motivated to purchase theirInternet access services from a competitor in order to maintain or enhance theirrespective business relationships with that competitor. |
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|   | Our customers require a high degree of reliability in our servicesand, if we cannot meet their expectations, demand for ourservices will decline. |   |
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| Any failure to provide reliable Internet access or a satisfactory experience for our customers,whether or not caused by our own failure, could reduce demand for our services.  Because wehave only recently begun to place customers on our Wi-Fi system, we have yet to experienceany negative customer response. |
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|   | If wireless Internet access demand does not continue to expand,we may experience a shortfall in revenues or earnings orotherwise fail to meet public market expectations. |   |
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| The growth of our business is dependent, in part, upon the increased use of Wi-Fi Internetaccess services and our ability to capture a higher proportion of this market. If the demand forWi-Fi services does not continue to grow, then we may not be able to expand our business,achieve and maintain profitability or meet public market expectations.  We believe increasedusage of Wi-Fi services depends on numerous factors, including: |
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| - | the willingness of potential customers to make technology expenditures; |
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| - | the availability of security products necessary to ensure data privacy over the publicnetworks; |
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| - | the quality, cost and functionality of Wi-Fi services and competing services; |
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| - | the increased adoption of wired and wireless broadband Internet access methods; and |
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| - | the proliferation of electronic wireless devices and associated software applications. |
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|   | We could fail to overcome the severe competition for Internetaccess customers, which would impair our ability to earn a profitand cause our overall financial condition to deteriorate. |   |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| The market for Internet access services is extremely competitive and highly fragmented.  Asthere are no significant barriers to entry, we expect that competition will intensify over time.Our competitors include many large, nationally-known companies, such as America Onlineand Earthlink.  These and other companies possess greater resources, particularly access tocapital sources, market presence and brand name recognition than do we.  In addition, we willface competition from other wireless Internet access providers and larger, national cellulartelephone service providers.  If we are unable to overcome this severe competition, we do notexpect that we would earn a profit and our overall financial condition would decline. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The telecommunications industry has recently experienced adramatic decline, which may cause consolidation amongnetwork service providers and impair our ability to providereliable, redundant service coverage and negotiate favorablenetwork access terms. |   |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| The telecommunications industry has recently experienced dramatic technological change andincreased competition that have led to significant declines in network access pricing. Further,the revenues of network service providers have declined as a result of the general economicslowdown. As a result, network service providers have experienced operating difficulties inthe last several years, resulting in poor operating results and a number of these providersdeclaring bankruptcy. If these conditions continue, some of these service providers mayconsolidate or otherwise cease operations, which would reduce the number of network serviceproviders from which we would be able to obtain network access. To the extent this were tooccur, while we would still be able to maintain operations and our Wi-Fi services with a smallnumber of network service providers, we would potentially not be able to provide sufficientalternative access points in some geographic areas, which could diminish our ability to providebroad, reliable, redundant coverage. Further, our ability to negotiate favorable access ratesfrom network service providers could be impaired, which could increase our network accessexpenses and harm our operating results. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | If we are unable to manage future expansion effectively, ourbusiness may be adversely impacted. |   |
|--------|-------------------------------------------------------------------------------------------------|--------|

| In the future, we may experience rapid growth in operations, which could place a significantstrain on our operations, in general, and development of services, our internal controls andother managerial, operating and financial resources, in particular. If we do not manage futureexpansion effectively, our business will be harmed. To manage any future expansioneffectively, we will need to improve our operational and financial systems and managerialcontrols and procedures, which include the following: |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | managing our research and development efforts for new and evolving technologies; |
|---|----------------------------------------------------------------------------------|

| - | expanding the capacity and performance of our network infrastructure; |
|---|-----------------------------------------------------------------------|

| - | developing our administrative, accounting and management information systems andcontrols; and |
|---|-----------------------------------------------------------------------------------------------|

| - | effectively maintaining coordination among our various departments. |
|---|---------------------------------------------------------------------|

|   | Litigation arising out of intellectual property infringement couldbe expensive and disrupt our business. |   |
|--------|----------------------------------------------------------------------------------------------------------|--------|

| We cannot be certain that our products do not, or will not, infringe upon patents, trademarks,copyrights or other intellectual property rights held by third parties, or that other parties willnot assert infringement claims against us. From time to time, we may be involved in disputeswith these third parties. Any claim of infringement of proprietary rights of others, even ifultimately decided in our favor, could result in substantial costs and diversion of our resources.Successful claims against us may result in an injunction or substantial monetary liability,which could, in either case, significantly impact our results of operations or materially disruptthe conduct of our business. If we are enjoined from using a technology, we will need to obtaina license to use the technology, but licenses to third-party technology may not be available tous at a reasonable cost, or at all. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | We depend on our key personnel; the loss of any key personnelcould disrupt our operations, adversely affect our business andresult in reduced revenues. |   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| Our future success will depend on the continued services and on the performance of our seniormanagement, particularly our president, David Loflin, and, as we grow, other key employees.We have entered into employment agreements with both of our officers.  The loss of theirservices for any reason could seriously impair our ability to execute our business plan, whichcould reduce our revenues and have a materially adverse effect on our business and results ofoperations.  We have not purchased any key-man life insurance. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Our directors and executive officers own enough of our commonstock effectively to control directors’ elections and therebycontrol our management policies. |   |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| Our directors and executive officers own, directly and indirectly, approximately 45% of ourcurrently outstanding common stock.  These shareholders may be able effectively to controlthe outcome of corporate actions requiring shareholder approval by majority action.  Theirstock ownership may have the effect of delaying, deferring or preventing a change in control ofAir-Q Wi-Fi Corporation. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Our business plan is not based on independent market studies, sowe cannot assure you that our strategy will be successful. |   |
|--------|----------------------------------------------------------------------------------------------------------------------------|--------|

| We have not commissioned any independent market studies concerning the extent to whichcustomers will utilize our Wi-Fi services and products.  Rather, our plans for implementingour business strategy and achieving profitability are based on the experience, judgment andassumptions of our key management personnel, and upon other available informationconcerning the communications industry.  If our management’s assumptions prove to beincorrect, we will not be successful in establishing our Wi-Fi services business. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | We may not be able to protect our intellectual property rights,which could dramatically reduce our ability to earn a profit. |   |
|--------|------------------------------------------------------------------------------------------------------------------------------|--------|

| We currently rely on common law principles for the protection of our copyrights andtrademarks and trade secret laws to protect our proprietary intellectual property rights.  We donot intend to file patent applications relating to our Wi-Fi system.  We have not yet filedtrademark applications relating to the “Air-Q Wi-Fi” and “Q-Spot” brand names. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Without patent or trademark protection, the existing trade secret and copyright laws afford usonly limited protection.  Third parties may attempt to disclose, obtain or use our technologies.Others may independently develop and obtain patents or copyrights for technologies that aresimilar or superior to our technologies.  If that happens, we may need to license thesetechnologies and we may not be able to obtain licenses on reasonable terms, if at all, therebycausing great harm to our business. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Risks Relating to Our Industry |   |
|--------------------------------|--------|

|   | Financial, political or economic conditions could adverselyaffect our revenues. |   |
|--------|---------------------------------------------------------------------------------|--------|

| Our revenues and profitability depend on the overall demand for Internet access services.Further acts of terrorism, such as occurred on September 11, 2001, international hostilities orother future financial, political, economic and other uncertainties could lead to a reduction inthe use of our Wi-Fi services, thereby reducing our revenues. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Government regulation of, and legal uncertainties regarding, theInternet could harm our business. |   |
|--------|---------------------------------------------------------------------------------------------------|--------|

| Internet-based communication services generally are not subject to federal fees or taxesimposed to support programs such as universal telephone service. Changes in the rules orregulations of the U.S. Federal Communications Commission or in applicable federalcommunications laws relating to the imposition of these fees or taxes could result insignificant new operating expenses for us, and could negatively impact our business. Any newlaw or regulation pertaining to Internet-based communication services, or changes to theapplication or interpretation of existing laws, could decrease the demand for our services,increase our cost of doing business or otherwise harm our business. It is possible that therewill be an increase in the number of laws and regulations pertaining to the Internet. These lawsor regulations may relate to taxation and the quality of products and services. Furthermore, theapplicability to the Internet of existing laws governing intellectual property ownership andinfringement, taxation, encryption, obscenity, libel, employment, personal privacy, export orimport matters and other issues is uncertain and developing and we are not certain how thepossible application of these laws may affect us. Some of these laws may not contemplate oraddress the unique issues of the Internet and related technologies. Changes in laws intended toaddress these issues could create uncertainty in the Internet market, which could reducedemand for our services, increase our operating expenses or increase our litigation costs. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Security concerns may delay the widespread adoption of theInternet by potential business customers, which would reducedemand for our Wi-Fi services. |   |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

| The Internet is a public network and information is sent over this network from many sources.Advances in computer capabilities, new discoveries in the field of code breaking or otherdevelopments could result in compromised security on our network or the networks of others.Security and authentication concerns with respect to the transmission over the Internet ofconfidential information, such as corporate access passwords and the ability of hackers topenetrate online security systems, may reduce the demand for our services. Further, new accessmethods, devices, applications and operating systems have also introduced additionalvulnerabilities which have been actively exploited by hackers. Any well-publicizedcompromises of confidential information may reduce demand for Internet-basedcommunications, including our Wi-Fi services. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Risks Relating to Our Common Stock |   |
|------------------------------------|--------|

|   | Concentration of ownership of our common stock may preventnew investors from influencing significant corporate decisions. |   |
|--------|---------------------------------------------------------------------------------------------------------------------------|--------|

| Prior to and following this offering, our directors, entities affiliated with our directors and ourexecutive officers will beneficially own a significant percentage of our outstanding commonstock.  Assuming the exercise of all outstanding warrants, after this offering, these persons andentities will own approximately 20% of our then-outstanding common stock. Theseshareholders, as a group, may be able to control our management and our affairs. Actingtogether, they could control most matters requiring the approval by our shareholders, includingthe election of directors, any merger, consolidation or sale of all or substantially all of ourassets, and any other significant corporate transaction. The concentration of ownership mayalso delay or prevent a change of control of Air-Q at a premium price, if these shareholdersoppose it.  See the “Principal Shareholders” section for details regarding our stock ownershipand how beneficial ownership is calculated. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Anti-takeover provisions in our corporate documents maydiscourage or prevent a takeover. |   |
|--------|------------------------------------------------------------------------------------------|--------|

| Provisions in our restated certificate of incorporation and bylaws may have the effect ofdelaying or preventing an acquisition or merger in which we are acquired or a transaction thatchanges our board of directors. Specifically, these provisions: |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | authorize the board to issue preferred stock without shareholder approval; |
|---|----------------------------------------------------------------------------|

| - | prohibit cumulative voting in the election of directors; |
|---|----------------------------------------------------------|

| - | limit the persons who may call special meetings of shareholders; and |
|---|----------------------------------------------------------------------|

| - | establish advance notice requirements for nominations for the election of the board ofdirectors or for proposing matters that can be acted on by shareholders at shareholdermeetings. |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In addition, we are governed by the provisions of Section 203 of the Delaware GeneralCorporation Law. These provisions may prohibit large shareholders, in particular those owning15% or more of the outstanding voting stock, from consummating a merger or combination towhich we are a party. These provisions could limit the price that investors might be willing topay in the future for our common stock. See “Description of Capital Stock” for a furtherdiscussion of these provisions. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | A large number of shares may be sold in the market inconnection with this offering, which may depress the marketprice of our common stock. |   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------|--------|

| You can expect that sales of a substantial number of shares of our common stock in thisoffering will occur.  These sales, or the perception that these sales could occur, could cause themarket price of our common stock to decline. Assuming the exercise of all of our outstandingwarrants, approximately 55% of our outstanding shares of common stock will be tradable inthe public markets upon commencement of this offering.  In addition, a large majority of theremaining shares of our common stock will be eligible for sale in the public markets beginningin June 2004, under Rule 144 of the SEC. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | You will suffer substantial dilution in the net tangible bookvalue of the common stock you purchase. |   |
|--------|------------------------------------------------------------------------------------------------------|--------|

| You will suffer substantial and immediate dilution, due to the lower book value per share ofour common stock compared to the purchase price per share of our common stock.  We cannotpredict your actual dilution. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The market price of our common stock will continue to beextremely volatile, and it may drop unexpectedly. |   |
|--------|-----------------------------------------------------------------------------------------------------------|--------|

| The stock market in general, and the market for technology-related stocks in particular, hasrecently experienced dramatic declines and fluctuations that have often been unrelated to theoperating performance of companies. If market-based or industry-based volatility continues,the trading price of our common stock could decline significantly independent of our actualoperating performance, and you could lose all or a substantial part of your investment. Themarket price of our common stock could fluctuate significantly as a result of several factors,including: |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | actual or anticipated variations in our results of operations; |
|---|----------------------------------------------------------------|

| - | announcements of innovations, new services or significant price reductions by us orour competitors; |
|---|-----------------------------------------------------------------------------------------------------|

| - | announcements by us or our competitors of significant contracts or acquisitions; |
|---|----------------------------------------------------------------------------------|

| - | our failure to meet the performance estimates of investment research analysts; |
|---|--------------------------------------------------------------------------------|

| - | changes in financial estimates by investment research analysts; and |
|---|---------------------------------------------------------------------|

| - | general economic and market conditions. |
|---|-----------------------------------------|

|   | Our common stock is a “penny stock”. |   |
|--------|--------------------------------------------------|--------|

| Our common stock is quoted on the NASDAQ’s OTC Bulletin Board and is considered a“penny stock”, as long as it trades below $5.00 per share.  Broker-dealer practices inconnection with transactions in penny stocks are regulated by penny stock rules adopted by theSEC.  The penny stock rules require a broker-dealer, prior to a transaction in a penny stock nototherwise exempt from the rules, to deliver a standardized risk disclosure statement preparedby the SEC that provides information about penny stocks and the nature and level of risks inthe penny stock market.  The broker-dealer also must provide the customer with current bidand offer quotations for the penny stock, the compensation of the broker-dealer and itssalesperson in the transaction, as well as the monthly account statements showing the marketvalue of each penny stock held in the customer’s account.  In addition, the penny stock rulesrequire that, prior to a transaction in a penny stock not otherwise exempt from such rules, thebroker-dealer must make a special written determination that the penny stock is a suitableinvestment for the purchaser and receive the purchaser’s written agreement to the transaction. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| These disclosure requirements may have the effect of reducing the level of trading activity inthe secondary market for a stock that is subject to the penny stock rules.  In this regard, it canbe expected that investors in our common stock may find it more difficult to profit on theirinvestments in our common stock. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 2. | Description of Property |   |
|---------|-------------------------|--------|

| Facilities |   |
|------------|--------|

| We lease approximately 2,000 square feet of space for our headquarters in Baton Rouge,Louisiana, under a lease that expires in 2006.  We believe that this facility will be adequate forour needs for at least the next two years.  We expect that additional facilities will be availablein other jurisdictions as we expand our Wi-Fi business into new markets. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Intellectual Property |   |
|-----------------------|--------|

| We rely on a combination of trademark laws, trade secret laws and disclosure restrictions toprotect our intellectual property rights. We also enter into confidentiality agreements with ouremployees, consultants and other third parties who have access to sensitive and proprietaryinformation. Air-Q Wi-Fi(TM) and Q-Spot(TM) are designations that we use and for whichwe intend to obtain registered trademarks.  If a claim is asserted that we have infringed theintellectual property of a third party, we may be required to seek licenses to that technology.Licenses from third parties may not continue to be available to us at a reasonable cost, or at all.Additionally, the steps we have taken to protect our intellectual property rights may not beadequate. Third parties may infringe or misappropriate our proprietary rights. Competitors mayalso independently develop technologies that are substantially equivalent or superior to thetechnologies we employ in our Wi-Fi services. If we fail to protect our proprietary rightsadequately, our competitors could offer similar services, potentially significantly harming ourcompetitive position and decreasing our revenues. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 3. | Legal Proceedings |   |
|---------|-------------------|--------|

| We are not currently involved in any legal proceedings. |
|---------------------------------------------------------|

| Item 4. | Submission of Matters to Vote of Security Holders |   |
|---------|---------------------------------------------------|--------|

| On June 20, 2003, a majority of our shareholders, acting by written consent in lieu of ameeting, elected David Loflin and Waddell D. Loflin as directors and approved a change ofour name from Covenant Financial Corporation to Air-Q Wi-Fi Corporation. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| On September 23, 2003, a majority of our shareholders, acting by written consent in lieu of ameeting, approved our amended and restated certificate of incorporation and ratified theadoption of our new bylaws. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| PART II |
|---------|

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

| Market Information |   |
|--------------------|--------|

| Beginning on June 30, 2003, our common stock began to be quoted on the OTC BulletinBoard, under the symbol “AQWF”.  Prior to that date, our common stock was quoted on theOTC Bulletin Board, under the symbol “CVNT”.  The table below sets forth, for the periodindicated, the high and low bid prices for our common stock, as reported by the OTC BulletinBoard. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Quarter Ended |   | High Bid |   | Low Bid |   |
|--------|---------------|--------|----------|--------|---------|--------|

|   | March 31, 2002 |   | $5.50 |   | $.50 |   |
|--------|----------------|--------|-------|--------|------|--------|

|   | June 30, 2002 |   | $.50 |   | $.50 |   |
|--------|---------------|--------|------|--------|------|--------|

|   | September 30, 2002 |   | $1.50 |   | $.50 |   |
|--------|--------------------|--------|-------|--------|------|--------|

|   | December 31, 2002 |   | $1.50 |   | $1.50 |   |
|--------|-------------------|--------|-------|--------|-------|--------|

|   | March 31, 2003 |   | $1.50 |   | $1.50 |   |
|--------|----------------|--------|-------|--------|-------|--------|

|   | June 30, 2003 |   | $.75 |   | $.50 |   |
|--------|---------------|--------|------|--------|------|--------|

|   | September 30, 2003 |   | $2.08 |   | $.75 |   |
|--------|--------------------|--------|-------|--------|------|--------|

|   | December 31, 2003 |   | $4.10 |   | $2.14 |   |
|--------|-------------------|--------|-------|--------|-------|--------|

| These prices represent quotations between dealers without adjustment for retail mark-ups,mark-downs or commissions, and may not necessarily represent actual transactions. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| You should note that our common stock, like many technology-related stocks, is likely toexperience significant fluctuations in its price and trading volume.  We cannot predict thefuture trading patterns of our common stock. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| On February 20, 2004, the number of record holders of our common stock, excludingnominees and brokers, was 108 holding 20,384,704 shares.                                                                                       |

| Item 6. | Management’s Discussion and Analysis of Financial Condition and Resultsof Operations |   |
|---------|--------------------------------------------------------------------------------------------|--------|

| Background |   |
|------------|--------|

| On June 20, 2003, there occurred a change in control of Air-Q Wi-Fi Corporation, formerlyCovenant Financial Corporation.  Pursuant to a stock purchase agreement, FMF Investments,Ltd., a Texas limited partnership, purchased 611,000 shares, or 54.59%, of our outstandingcommon stock from Eric Anderson.  FMF Investments paid Mr. Anderson a total of $70,000in cash, which funds were obtained by FMF Investments through its other business activitiesand not as a loan. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Following FMF Investments’ acquiring control, our then-directors resigned and FMFInvestments, acting by written consent in lieu of a meeting of a majority of shareholders,elected David Loflin and Waddell D. Loflin as our directors. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Also, on June 20, 2003, pursuant to a stock purchase agreement, we acquired all of theoutstanding capital stock of Air-Q Corp., a Nevada corporation (“Air-Q NV”), by issuing atotal of 11,000,000 shares, or approximately 95% of the then-outstanding shares, of ourcommon stock to the shareholders of Air-Q NV.  Our board of directors did not employ anystandard valuation formula or any other standard measure of value. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| For accounting purposes, the reverse-merger will be treated as an acquisition of CovenantFinancial Corporation (now Air-Q Wi-Fi Corporation) and a recapitalization of Air-Q Corp.(now a subsidiary of Air-Q Wi-Fi Corporation). |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Change in Business Plan |   |
|-------------------------|--------|

| We are a start-up business.  Our new management has committed all available current andfuture capital and other resources to the commercial exploitation of our “Wi-Fi” (wirelessfidelity) Internet access products (these proprietary products are referred to as our Wi-Fiproducts).  Our first market will be Baton Rouge, Louisiana.  Our business plan is based on themarketing of our wireless Internet access services (these services are referred to as our Wi-Fiservices) to businesses and residential customers using our Wi-Fi products, as well as tovisitors to our markets with Wi-Fi compatible laptop computers and other wireless devices.We will derive our revenues from monthly Internet access customer charges, as well as fromhourly and daily Internet access charges paid by visitors to our markets. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Recent Sales of Equity |   |
|------------------------|--------|

| In June 2003, we entered into four separate securities purchase agreements.  Under eachagreement, we issued securities for cash in the amount of $125,000, as follows:  1,250,000shares of our common stock, 1,250,000 common stock purchase warrants to purchase a likenumber of shares at an exercise price of $.20 per share, 1,250,000 common stock purchasewarrants to purchase a like number of shares at an exercise price of $.30 per share, 1,250,000common stock purchase warrants to purchase a like number of shares at an exercise price of$.40 per share and 1,250,000 common stock purchase warrants to purchase a like number ofshares at an exercise price of $.50 per share.  For more information about these agreements,please see the discussion under “Certain Transactions - Securities Purchases”. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Critical Accounting Policies |   |
|------------------------------|--------|

| There were no material changes to our critical accounting policies during the year endedDecember 31, 2003. |
|------------------------------------------------------------------------------------------------------------|

| Management's Discussion and Analysis discusses the results of operations and financialcondition as reflected in our consolidated financial statements, which have been prepared inaccordance with accounting principles generally accepted in the United States of America. Thepreparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities, disclosure of contingentassets and liabilities at the date of the financial statements and reported amounts of revenuesand expenses during the reporting period. On an ongoing basis, management evaluates itsestimates and judgments, including those related to accounts receivable, inventory valuation,amortization and recoverability of long-lived assets, including goodwill, litigation accruals andrevenue recognition. Management bases its estimates and judgments on relevant factors, theresults of which form the basis for making judgments about the carrying values of assets andliabilities that are not readily apparent from other sources. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| While we believe that the factors considered provide a meaningful basis for the accountingpolicies applied in the preparation of the consolidated financial statements, we cannotguarantee that our estimates and assumptions will be accurate. If such estimates andassumptions prove to be inaccurate, we may be required to make adjustments to theseestimates in future periods. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Revenue Recognition |   |
|--------|---------------------|--------|

|   | We will charge our customers monthly service fees and recognize the revenue in the monththe services are provided or equipment is sold. Allowances for estimated returns anddiscounts will be recognized when sales are recorded and will be based on the experienceof our management. Significant management judgments and estimates must be made andused in connection with establishing these allowances in any accounting period. Materialdifferences may result in the amount and timing of revenues for any period if managementmakes different judgments or utilizes different estimates. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Asset Impairment |   |
|--------|------------------|--------|

|   | In assessing the recoverability of our fixed assets, goodwill and other non-current assets,we consider changes in economic conditions and make assumptions regarding estimatedfuture cash flows and other factors. If these estimates or their related assumptions changein the future, we may be required to record impairment charges. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Litigation and Tax Assessments |   |
|--------|--------------------------------|--------|

|   | Should we become involved in lawsuits, we intend to assess the likelihood of any adversejudgments or outcomes of any of these matters as well as the potential range of probablelosses. A determination of the amount of accrual required, if any, for these contingencieswill be made after careful analysis of each matter. The required accrual may change fromtime to time, due to new developments in any matter or changes in approach (such as achange in settlement strategy) in dealing with these matters. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Additionally, in the future, we may become engaged in various tax audits by federal andstate governmental authorities incidental to our business activities. We anticipate that wewill record reserves for any estimated probable losses for any such proceeding. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Inventories |   |
|--------|-------------|--------|

|   | Our inventories are valued at the lower of cost or market value. We also identify obsoleteitems of inventory that are not forecasted to be used in our future operations and record anallowance for those items. We expect to perform a full physical inventory count on anannual basis for the foreseeable future. However, as we expand our operations, it ispossible that we may instead rely on cycle counts at warehouses and distribution centers tomeasure inventory. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Accounts Receivable |   |
|--------|---------------------|--------|

|   | We will maintain an allowance for doubtful accounts for estimated losses resulting fromthe inability of our customers to make required payments. We will provide a generalallowance for customer accounts based on historical collection and write-off experiencefrom the telecommunications industry, and a specific allowance for any individuallysignificant customers who are known to be experiencing financial difficulties. Judgment iscritical because some customers may experience financial difficulties. If the financialcondition of any such customer were to worsen, additional allowances might be required. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Results of Operations |   |
|-----------------------|--------|

| During the year ended December 31, 2003, our business operations did not generate revenues.We currently lack the capital necessary to pursue aggressively our business objectives, and wemay never possess enough capital with which to do so.  In this circumstance, it is likely thatwe would never earn a profit. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| We began to generate revenues from our Wi-Fi services in Baton Rouge and Phoenix duringJanuary 2004.  These revenues will be reflected in our statement of operations for the firstquarter of 2004. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Due to our severe lack of capital, during the year ended December 31, 2003, we issued a totalof 3,152,500 shares of our common stock to consultants in payment of their services.  The fairvalue of the shares issued to consultants is $2,024,826 and is included in our statement ofexpenses.  Issuing shares of our common stock was the only means by which we could obtainthe consultants’ services.  The value of the consulting services received by us under eachagreement was expensed in the month in which the consulting agreement was signed. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Liquidity and Capital Resources |   |
|---------------------------------|--------|

| Since our inception, we have lacked adequate capital with which to accomplish our businessobjectives.  Currently, we are not in a liquid position, although we are able to pay ouroperating expenses as they are incurred.  During the fourth quarter of 2003, we altered ourstrategy for expanding our Wi-Fi services “footprint”.  Now, in addition to internally generatedgrowth, we are seeking individuals and companies to become Wi-Fi development partners.  Todate, we have entered into Wi-Fi development agreements with three entities.  Our growth inPhoenix, Arizona, is attributable to the efforts of our development partner there. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Until we obtain funds through the exercise of our outstanding warrants, or otherwise, we willnot aggressively pursue additional development partners.  Our management has made thisdetermination because of its desire not to over-commit our resources.  Our management’sphilosophy is to make capital and related commitments only to the extent our available capitalpermits.  Our management’s philosophy may prove to have been flawed, to the extremedetriment to our business and, ultimately, our shareholders. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Our Capital Needs |   |
|--------|-------------------|--------|

|   | Our current level of operations can be maintained for the next six months, as we receivedfunds during 2003 from sales of securities.  However, to begin the aggressive pursuit ofour business objectives, we will require approximately $1 million. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Currently, we do not possess enough capital to pursue aggressively our business objectives.                                                                                                                                                         |

| Management's Plans Relating to Future Liquidity |   |
|-------------------------------------------------|--------|

| We possess adequate capital to sustain our current level of operations for the next six months.                                                                                                                                                                                                                                                                          |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Our best opportunity for obtaining funds needed to pursue aggressively our business objectivesis through the exercise of the 24,000,000 outstanding warrants, which, if exercised, wouldprovide a total of $8,400,000.  There is no assurance that these warrants will be exercised.  Wedo not currently possess another potential source of capital on a similar scale. |

| Capital Expenditures |   |
|----------------------|--------|

| In 2003, we purchased approximately $32,000 of equipment.  We currently have limitedcapital with which to make any significant capital expenditures.  Should we obtain significantfunding, of which there is no assurance, we would be able to make significant expenditures forequipment.  The amount of these equipment purchases cannot be predicted due to theuncertainty of funding levels and timing.  However, without additional capital, we will makeno capital expenditures. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 7. | Financial Statements |   |
|---------|----------------------|--------|

| The financial statements required to be furnished under this Item 7 are attached at the end ofthis Annual Report on Form 10-KSB. An index to our financial statements is also includedbelow in Item 13(a). |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 8. | Changes In and Disagreements With Accountants on Accounting andFinancial Disclosure |   |
|---------|-------------------------------------------------------------------------------------|--------|

| During 2003, we did not change our independent auditor and had no disagreements with ourauditor with respect to any issue relating to accounting or financial disclosure. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| PART III |
|----------|

| Item 9. | Directors, Executive Officers, Promoters and Control Persons; Compliancewith Section 16(a) of the Exchange Act |   |
|---------|----------------------------------------------------------------------------------------------------------------|--------|

| Directors and Officers |   |
|------------------------|--------|

| The following table sets forth the officers and directors of Air-Q Wi-Fi Corporation. |
|---------------------------------------------------------------------------------------|

|   | Name |   | Age |   | Position(s) |
|--------|------|--------|-----|--------|-------------|

|   | David M. Loflin |   | 46 |   | President, Acting Chief Financial Officer andDirector |
|--------|-----------------|--------|----|--------|-------------------------------------------------------|

|   | Waddell D. Loflin |   | 53 |   | Vice President, Secretary and Director |
|--------|-------------------|--------|----|--------|----------------------------------------|

|   | Gregory A. Bonner |   | 46 |   | Director |
|--------|-------------------|--------|----|--------|----------|

|   | Ira R. Witkin |   | 44 |   | Director |
|--------|---------------|--------|----|--------|----------|

|   | David M. Loflin and Waddell D. Loflin are brothers. |
|--------|-----------------------------------------------------|

| Our current officers and directors serve until the next annual meeting of our board of directorsor until their respective successors are elected and qualified.  All officers serve at thediscretion of our board of directors.  Family relationships between our officers and directorsare noted above.  Certain information regarding the backgrounds of each of the officers anddirectors is set forth below. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | DAVID LOFLIN |   |
|--------|--------------|--------|

|   | Mr. Loflin is our founder.  He resigned as an executive officer and director of USURFAmerica, Inc. (AMEX Symbol: UAX) in October 2003, after serving in those capacitiesfor seven years.  . |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | WADDELL D. LOFLIN |   |
|--------|-------------------|--------|

|   | Mr. Loflin is one of our original officers and directors.  For more than the five years priorto April 2003, Mr. Loflin served as vice president, secretary and director of USURFAmerica, Inc.  From April to June 2003, Mr. Loflin  worked as a private consultant. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | GREGORY A. BONNER |   |
|--------|-------------------|--------|

|   | For over 20 years, Mr. Bonner served Albemarle Corporation, a large chemicals company,in several capacities, including business development manager, product/marketingmanager and customer service specialist.  Recently, Mr. Bonner has been engaged inprivate entrepreneurial endeavors.  Mr. Bonner is a graduate of Georgia Institute ofTechnology in Atlanta, with a BS degree in Chemistry. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | IRA R. WITKIN |   |
|--------|---------------|--------|

|   | Mr. Witkin is currently a program director at IBM. In that capacity, Mr. Witkin hasresponsibility for over 200 developers and marketing professionals worldwide. During his24 year career, Mr. Witkin has held numerous positions with a focus on informationtechnology as it relates to the travel and transportation, computer servicer, financial,manufacturing and communications industries. Mr. Witkin is a graduate of RensselaerPolytechnic Institute in Troy, New York, with a BS degree in Computer Science andminors in management and marketing. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Board of Directors |   |
|--------------------|--------|

| Our full board did not meet during 2003; however, it took action by unanimous writtenconsent in lieu of a meeting on eighteen occasions. |
|------------------------------------------------------------------------------------------------------------------------------------------|

| Executive Committee |   |
|---------------------|--------|

| Our board of directors created an executive committee to facilitate management betweenmeetings of the full board of directors. The executive committee is composed of David Loflin(chairman), Waddell D. Loflin and Gregory A. Bonner. Pursuant to our bylaws, betweenmeetings of the full board, the executive committee has the full power and authority of theboard in the management of our business and affairs, except to the extent limited by Delawarelaw. Pursuant to the bylaws of the executive committee, as adopted by the full board, theexecutive committee has the authority to exercise all powers of the board, except the power: |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to declare dividends; |
|---|-----------------------|

| - | to sell or otherwise dispose of all or substantially all of our assets; |
|---|-------------------------------------------------------------------------|

| - | to recommend to our shareholders any action requiring their approval; and |
|---|---------------------------------------------------------------------------|

| - | to change the membership of any committee, fill the vacancies thereon or dischargeany committee. |
|---|--------------------------------------------------------------------------------------------------|

| During 2003, the Executive Committee did not meet or otherwise take action. |
|-----------------------------------------------------------------------------|

| Audit Committee |   |
|-----------------|--------|

| The audit committee of our board of directors is composed of Ira R. Witkin (chairman),Gregory A. Bonner and David Loflin. Our board appointed Messrs. Witkin, Bonner and Loflinto the audit committee effective as of November 13, 2003. The purposes of the auditcommittee are: |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to oversee the quality and integrity of the financial statements and other financialinformation we provide to any governmental body or the public; |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to oversee the independent auditors’ qualifications and independence; |
|---|-----------------------------------------------------------------------------|

| - | to oversee the performance of our independent auditors; |
|---|---------------------------------------------------------|

| - | to oversee our systems of internal controls regarding finance, accounting, legalcompliance and ethics that management and the board have established or willestablish in the future; |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to establish procedures for the receipt, retention and treatment of complaints regardingaccounting, internal controls, and other auditing matters and for the confidential,anonymous submission by our employees of concerns regarding questionableaccounting or auditing matters; |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to provide an open avenue of communication among the independent auditors,financial and senior management, the internal auditing department, and the board,always emphasizing that the independent auditors are accountable to the auditcommittee; and |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to perform such other duties as are directed by the board. |
|---|------------------------------------------------------------|

| Compensation of Directors |   |
|---------------------------|--------|

| We do not pay any of our directors for their services as directors.  It is possible that ourmanagement could begin to pay our directors for meetings attended, grant a small number ofstock options or issue shares of our common stock for their services.  However, no specificdetermination in this regard has been made. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In August 2003, one of our directors, Waddell D. Loflin, was issued, as a bonus, 500,000shares of our common stock.  These shares were valued, for financial reporting purposes, at$50,000. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In November 2003, two our directors, Gregory A. Bonner and Ira R. Witkin, were issued10,000 shares our common stock each, in payment of future services as directors.  There shareswere valued, for financial reporting purposes, at $3.85 per share, or $77,000, in the aggregate. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Limitation of Liability and Indemnification |   |
|---------------------------------------------|--------|

| Our restated certificate of incorporation contains provisions limiting the liability of directors.Our restated certificate of incorporation provides that a director will not be personally liable tous or to our shareholders for monetary damages for any breach of fiduciary duty as a director,but will continue to be subject to liability for the following: |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | any breach of the director’s duty of loyalty to us or to our shareholders; |
|---|----------------------------------------------------------------------------------|

| - | acts or omissions not in good faith or that involve intentional misconduct or a knowingviolation of law; |
|---|----------------------------------------------------------------------------------------------------------|

| - | unlawful payment of dividends or unlawful stock repurchases or redemptions; and |
|---|---------------------------------------------------------------------------------|

| - | any transaction from which the director derived an improper personal benefit. |
|---|-------------------------------------------------------------------------------|

| If Delaware law is amended to authorize corporate action further eliminating or limiting thepersonal liability of a director, then the liability of our directors will be eliminated or limited tothe fullest extent permitted by Delaware law, as so amended. Our restated certificate ofincorporation does not eliminate a director’s duty of care and, in appropriate circumstances,equitable remedies such as injunctive or other forms of non-monetary relief remain availableunder Delaware law. Our restated certificate of incorporation does not affect a director’sresponsibilities under any other laws, such as state or federal securities laws or state or federalenvironmental laws. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In addition, we have entered into agreements to indemnify our directors and executive officersto the fullest extent permitted under Delaware law, including the non-exclusivity provisions ofDelaware law, and under our bylaws, subject to limited exceptions. These agreements, amongother things, provide for indemnification of our directors and executive officers for fees,expenses, judgments, fines, and settlement amounts incurred by any of these persons in anyaction or proceeding to which any of those persons is, or is threatened to be, made a party byreason of the person’s service as a director or officer, including any action by us, arising out ofthat person’s services as our director or officer or that person’s services provided to any othercompany or enterprise at our request. We believe that these bylaw provisions and agreementsare necessary to attract and retain qualified persons as directors and officers. We also intend tomaintain liability insurance for our officers and directors. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| The limitation of liability and indemnification provisions in our restated certificate ofincorporation and bylaws may discourage shareholders from bringing a lawsuit againstdirectors for breach of their fiduciary duties. They may also reduce the likelihood of derivativelitigation against directors and officers, even though an action, if successful, might benefit usand our shareholders. A shareholder’s investment may be adversely affected to the extent wepay the costs of settlement and damage awards against directors and officers pursuant to theseindemnification provisions. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 10. | Executive Compensation |   |
|----------|------------------------|--------|

| None of our executive officers has ever received total salary and bonus exceeding $100,000during any fiscal year.  Neither of our officers was paid, nor did they accrue, any salary duringthe year ended December 31, 2003.  Beginning in January 2004, our executive officers beganto accrue a portion of their salaries.  Our officers will not be paid their salaries unless and untilwe obtain adequate funding. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Employment Contracts and Termination of Employment andChange-in-Control Agreements |   |
|------------------------------------------------------------------------------------|--------|

|   | David Loflin Employment Agreement |   |
|--------|-----------------------------------|--------|

|   | In September 2003, David Loflin  entered into an employment agreement to serve as ourpresident for three years.  Mr. Loflin’s annual salary is $150,000.  Through December 31,2003, Mr. Loflin had not been paid, nor had he accrued , any salary.  In connection with hisemployment agreement, Mr. Loflin executed a confidentiality agreement and an agreementnot to compete. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Waddell D. Loflin Employment Agreement |   |
|--------|----------------------------------------|--------|

|   | In September 2003, Waddell D. Loflin  entered into an employment agreement to serve asour vice president and secretary for three years.  Mr. Loflin’s annual salary is $100,000.Through December 31, 2003, Mr. Loflin had not been paid, nor had he accrued , anysalary.  In connection with his employment agreement, Mr. Loflin executed aconfidentiality agreement and an agreement not to compete. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| We have no compensatory plan or arrangement that results or will result from the resignation,retirement or any other termination of an executive officer’s employment or from a change incontrol or a change in an executive officer’s responsibilities following a change in control. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Option/SAR Grants |   |
|-------------------|--------|

| We have never granted any stock options to any person, though we may do so in the future.We have never granted any stock appreciation rights (SARs), nor do we expect to grant anySARs in the foreseeable future. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| The following table sets forth, as of the date of this prospectus, information regardingbeneficial ownership of our capital stock by the following: |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| - | each person, or group of affiliated persons, known by us to be the beneficial owner ofmore than five percent of any class of our voting securities; |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| - | each of our directors; |
|---|------------------------|

| - | each of the named executive officers; and |
|---|-------------------------------------------|

| - | all directors and executive officers as a group. |
|---|--------------------------------------------------|

| Beneficial ownership is determined in accordance with the rules of the SEC, based on votingor investment power with respect to the securities. In computing the number of sharesbeneficially owned by a person and the percentage ownership of that person, shares ofcommon stock underlying warrants held by that person are deemed to be outstanding if thewarrants are exercisable within 60 days of the date hereof. All percentages in this table arebased on a total of 44,384,704 shares of common stock outstanding as of the date hereof,which amount includes a total of 24,000,000 shares underlying currently outstanding andexercisable warrants.  Except as indicated in the footnotes below, we believe, based oninformation furnished to us, that the persons and entities named in the table below have solevoting and investment power with respect to all shares of common stock shown as beneficiallyowned by them. Unless otherwise indicated, the address for each of the shareholders in thetable below is c/o Air-Q Wi-Fi Corporation, 5555 Hilton Avenue, Suite 206, Baton Rouge,Louisiana 70808. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Beneficially Owned |   |
|--------|--------------------|--------|

|   | Name and Address of Beneficial Owner |   | Shares |   | Percent(1) |   |
|--------|--------------------------------------|--------|--------|--------|------------|--------|

|   | David Loflin |   | 7,590,000(2) |   | 17.10% |   |
|--------|--------------|--------|--------------|--------|--------|--------|

|   | Waddell D. Loflin |   | 1,200,000 |   | 2.70% |   |
|--------|-------------------|--------|-----------|--------|-------|--------|

|   | Gregory A. Bonner(3) |   | 10,000 |   | * |   |
|--------|----------------------|--------|--------|--------|---|--------|

|   | Ira R. Witkin(4) |   | 10,000 |   | * |   |
|--------|------------------|--------|--------|--------|---|--------|

|   | All executive officers and directors as agroup (4 persons) |   | 8,810,000(2) |   | 19.85% |   |
|--------|------------------------------------------------------------|--------|--------------|--------|--------|--------|

|   | Loflin Children’s Trust(5) |   | 3,000,000(6) |   | 6.76% |   |
|--------|----------------------------------|--------|--------------|--------|-------|--------|

|   | FMF Investments, Ltd.(7) |   | 2,311,000 |   | 5.20% |   |
|--------|--------------------------|--------|-----------|--------|-------|--------|

|   | Heyer Capital Fund(8)(18) |   | 6,250,000(9) |   | 14.08% |   |
|--------|---------------------------|--------|--------------|--------|--------|--------|

|   | 1008212 Alberta Ltd.(10)(18) |   | 6,250,000(11) |   | 14.08% |   |
|--------|------------------------------|--------|---------------|--------|--------|--------|

|   | Douglasdale Capital Ltd.(12)(18) |   | 6,250,000(13) |   | 14.08% |   |
|--------|----------------------------------|--------|---------------|--------|--------|--------|

|   | Douglasbank Capital Ltd.(14)(18) |   | 6,250,000(15) |   | 14.08% |   |
|--------|----------------------------------|--------|---------------|--------|--------|--------|

|   | Shelter Capital Ltd.(16) |   | 4,000,000(17) |   | 9.01% |   |
|--------|--------------------------|--------|---------------|--------|-------|--------|

| * | Less than 1% |
|---|--------------|

| (1) | Based on 44,384,704 shares outstanding, including a total of 24,000,000 sharesunderlying currently outstanding and exercisable warrants. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | 3,000,000 of these shares are beneficially owned by the Loflin Children’s Trust;250,000 of these shares are owned by the Phoenix Trust.  The beneficiaries of bothentities are the minor children of David Loflin.  Mr. Loflin is the trustee of eachentity and possesses voting and investment control over the shares owned by each.Mr. Loflin disclaims any beneficial ownership of the shares owned by either trust. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Mr. Bonner’s address is 5223 Hagerstown Avenue, Baton Rouge, Louisiana 70817. |
|-----|-------------------------------------------------------------------------------------|

| (4) | Mr. Witkin’s address is 980 Crepe Myrtle Lane, Copper Canyon, Texas 76226. |
|-----|----------------------------------------------------------------------------------|

| (5) | Loflin Children’s Trust’s address is 7635 Jefferson Highway, #309, Baton Rouge,Louisiana 70809.  David Loflin is the trustee of this entity and possesses voting andinvestment control of the shares owned by it |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | See footnote 2. |
|-----|-----------------|

| (7) | FMF Investments’ address is 819 Office Park Circle, Lewisville, Texas 75057.  L.A. Newlan, Jr. and Eric Newlan are officers of the general partner of this entityand, in these capacities, possess votiing and investment control of the shares ownedby it. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Heyer Capital’s address is 418 Douglas Park View S.E., Calgary, Alberta, CanadaT2Z 2R1. Peter Rochow is the owner of this entity and possesses voting andinvestment control of the shares owned by it. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | 1,250,000 of these shares have been issued; 5,000,000 of these shares have notbeen issued, but underlie currently exercisable warrants. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------|

| (10) | 1008212 Alberta’s address is 418 Douglas Park View S.E., Calgary, Alberta,Canada T2Z 2R1.  Peter Rochow possesses voting and investment control of theshares owned by this entity.  Mr. Rochow disclaims any beneficial ownership of theshares owned by this entity. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | 1,250,000 of these shares have been issued; 5,000,000 of these shares have notbeen issued, but underlie currently exercisable warrants. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------|

| (12) | Douglasdale Capital’s address is 418 Douglas Park View S.E., Calgary, Alberta,Canada T2Z 2R1. Peter Rochow possesses voting and investment control of theshares owned by this entity.  Mr. Rochow disclaims any beneficial ownership of theshares owned by this entity. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (13) | 1,250,000 of these shares have been issued; 5,000,000 of these shares have notbeen issued, but underlie currently exercisable warrants. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------|

| (14) | Douglasbank Capital’s address is 418 Douglas Park View S.E., Calgary, Alberta,Canada T2Z 2R1. Peter Rochow possesses voting and investment control of theshares owned by this entity.  Mr. Rochow disclaims any beneficial ownership of theshares owned by this entity. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (15) | 1,250,000 of these shares have been issued; 5,000,000 of these shares have notbeen issued, but underlie currently exercisable warrants. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------|

| (16) | Shelter Capital’s address is P.O. Box 64, Providenciales, Turks and Caicos Islands.Peter Rochow possesses voting and investment control of the shares owned by thisentity.  Mr. Rochow disclaims any beneficial ownership of the securities owned bythis entity. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (17) | None of these shares has been issued, but underlie currently exercisable warrants. |
|------|------------------------------------------------------------------------------------|

| (18) | Heyer Capital Fund, 1008212 Alberta Ltd., Douglasdale Capital Ltd. andDouglasbank Capital Ltd. have common management, Mr. Peter Rochow, whopossess the power of disposition over the securities owned by these entities; thebeneficial ownership of each of these entities is different. Mr. Rochow disclaimsany beneficial ownership of the shares owned by these entities, except for thoseowned by Heyer Capital Fund, of which he is the beneficial owner. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 12. | Certain Relationships and Related Transactions |   |
|----------|------------------------------------------------|--------|

| Change in Control Transaction |   |
|-------------------------------|--------|

| On June 20, 2003, there occurred a change in control of Air-Q Wi-Fi Corporation, formerlyCovenant Financial Corporation.  Pursuant to a stock purchase agreement, FMF Investments,Ltd., a Texas limited partnership, purchased 611,000 shares, or 54.59%, of our outstandingcommon stock from Eric Anderson.  FMF Investments paid Mr. Anderson a total of $70,000in cash, which funds were obtained by FMF Investments through its other business activitiesand not as a loan. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Following FMF Investments’ acquiring control, our then-directors resigned and FMFInvestments, acting by written consent in lieu of a meeting of a majority of shareholders,elected David Loflin and Waddell D. Loflin as our directors. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Stock Purchase Agreement |   |
|--------------------------|--------|

| On June 20, 2003, pursuant to a stock purchase agreement, we acquired all of the outstandingcapital stock of Air-Q Corp., a Nevada corporation (Air-Q NV), by issuing a total of11,000,000 shares of our common stock to the shareholders of Air-Q Corp.  In connection withour acquiring Air-Q NV, our president, David Loflin, was issued 9,000,000 shares of ourcommon stock and FMF Investments, Ltd. was issued 2,000,000 shares of our common stock.In determining the number of shares of our common stock to be issued to the shareholders ofAir-Q Corp., our board of directors did not employ any standard valuation formula or anyother standard measure of value. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Securities Purchases |   |
|----------------------|--------|

| In June 2003, we entered into four securities purchase agreements.  We entered intoagreements with Douglasdale Capital Ltd., Douglasbank Capital Ltd., Heyer Capital Fund and1008212 Alberta Ltd.  Under each of these agreements, we issued securities for cash in theamount of $125,000 (as of the date hereof, we had received $400,000 of the $500,000 underthese agreements).  We sold Douglasdale Capital (1) 1,250,000 shares of our common stock,(2) 1,250,000 common stock purchase warrants to purchase a like number of shares at anexercise price of $.20 per share, (3) 1,250,000 common stock purchase warrants to purchase alike number of shares at an exercise price of $.30 per share, (4) 1,250,000 common stockpurchase warrants to purchase a like number of shares at an exercise price of $.40 per shareand (5) 1,250,000 common stock purchase warrants to purchase a like number of shares at anexercise price of $.50 per share.  All of the warrants are exercisable for five years. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Each of the entities that purchased securities from us is under the common management ofPeter Rochow.  The beneficial ownership of these entities is different and Mr. Rochowdisclaims any beneficial ownership of these entities, except for Heyer Capital Fund. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Finder’s Fee |   |
|--------------------|--------|

| In connection with the sales of securities described under “Securities Purchases” above, wepaid Shelter Capital, Ltd. a finder’s fee.  For its efforts as a finder, Shelter Capital received10% of the cash proceeds derived by us and warrants, as follows:  (1) 1,000,000 warrants topurchase a like number of shares at an exercise price of $.20 per share; (2) 1,000,000 warrantsto purchase a like number of shares at an exercise price of $.30 per share; (3) 1,000,000warrants to purchase a like number of shares at an exercise price of $.40 per share; and (4)1,000,000 warrants to purchase a like number of shares at an exercise price of $.50 per share.All of these warrants are exercisable for five years.  Shelter Capital is managed by PeterRochow, a principal in each of the entities who purchased securities from us, who disclaimsany beneficial ownership of Shelter Capital. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Stock Bonus - Director |   |
|------------------------|--------|

| In August 2003, one of our directors, Waddell D. Loflin, was issued 500,000 shares of ourcommon stock as a bonus for his service as a director.  These shares were valued at $50,000for financial reporting purposes. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Employment Agreements |   |
|-----------------------|--------|

|   | David Loflin Employment Agreement |   |
|--------|-----------------------------------|--------|

|   | In September 2003, David Loflin  entered into an employment agreement to serve as ourpresident for three years.  Mr. Loflin’s annual salary is $150,000.  Through December 31,2003, Mr. Loflin had not been paid, nor had he accrued , any salary.  In connection with hisemployment agreement, Mr. Loflin executed a confidentiality agreement and an agreementnot to compete. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Waddell D. Loflin Employment Agreement |   |
|--------|----------------------------------------|--------|

|   | In September 2003, Waddell D. Loflin  entered into an employment agreement to serve asour vice president and secretary for three years.  Mr. Loflin’s annual salary is $100,000.Through December 31, 2003, Mr. Loflin had not been paid, nor had he accrued , anysalary.  In connection with his employment agreement, Mr. Loflin executed aconfidentiality agreement and an agreement not to compete. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Director and Officer Indemnification |   |
|--------------------------------------|--------|

| Our restated certificate of incorporation contains provisions limiting liability of directors.  Inaddition, we have entered into agreements to indemnify our directors and officers to the fullestextent permitted under Delaware law.  Please see “Management - Limitation of Liability andIndemnification”. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | (a)(1) Financial Statements |   |
|--------|-----------------------------|--------|

|   | Index to Financial Statements of Air-Q Wi-FiCorporation |   |
|--------|---------------------------------------------------------|--------|

|   | Independent Auditors’ Report |
|--------|------------------------------------|

|   | Consolidated Balance Sheet as of December 31, 2003 |
|--------|----------------------------------------------------|

|   | Consolidated Statement of Expenses for the Period from June 17, 2003 (Inception),Through December 31, 2003 |
|--------|------------------------------------------------------------------------------------------------------------|

|   | Consolidated Statement of Stockholders' Equity for the Period from June 17, 2003(Inception), Through December 31, 2003 |
|--------|------------------------------------------------------------------------------------------------------------------------|

|   | Consolidated Statement of Cash Flows for the Period from June 17, 2003(Inception), Through December 31, 2003 |
|--------|--------------------------------------------------------------------------------------------------------------|

|   | Notes to Consolidated Financial Statements |
|--------|--------------------------------------------|

|   | (a)(2) Exhibits |   |
|--------|-----------------|--------|

|   | Exhibit No. |   | Description |   |
|--------|-------------|--------|-------------|--------|

|   | 31.1 |   | Certification of Chief Executive Officer required by Rule13a-14(a) or Rule 15d-14(b). |   |
|--------|------|--------|---------------------------------------------------------------------------------------|--------|

|   | 31.2 |   | Certification of Chief Financial Officer required by Rule13a-14(a) or Rule 15d-14(b). |   |
|--------|------|--------|---------------------------------------------------------------------------------------|--------|

|   | 32.1 |   | Certification of Chief Executive Officer Pursuant to 18U.S.C. Section 1350 enacted by Section 906 of the Sarbanes-Oxley Act of 2002. |   |
|--------|------|--------|--------------------------------------------------------------------------------------------------------------------------------------|--------|

|   | 32.2 |   | Certification of Chief Financial Officer Pursuant to 18U.S.C. Section 1350 enacted by Section 906 of the Sarbanes-Oxley Act of 2002. |   |
|--------|------|--------|--------------------------------------------------------------------------------------------------------------------------------------|--------|

|   | (b) Reports on Form 8-K |   |
|--------|-------------------------|--------|

|   | During the three months ended December 31, 2002, we filed a Current Report on Form8-K: |
|--------|----------------------------------------------------------------------------------------|

| - | Date of event: November 13, 2003, wherein we reported the election of twoindependent directors. |
|---|-------------------------------------------------------------------------------------------------|

|   | Since December 31, 2003, we have not filed a Current Report on Form 8-K. |
|--------|--------------------------------------------------------------------------|

| Item 14. | Controls and Procedures |   |
|----------|-------------------------|--------|

| As of December 31, 2003, an evaluation was performed by our President and Acting ChiefFinancial Officer of the effectiveness of the design and operation of our disclosure controlsand procedures. Based on that evaluation, our management, including our President andActing Chief Financial Officer, concluded that our disclosure controls and procedures wereeffective as of December 31, 2003. There have been no significant changes in our internalcontrols or in other factors that could significantly affect internal controls subsequent toDecember 31, 2003. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|
|   |

| SIGNATURES |
|------------|

| In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this reportto be signed on its behalf by the undersigned, thereunto duly authorized. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | AIR-Q WI-FI CORPORATION |
|--------|-------------------------|

|   |
|--------|

|   | By: | /s/ DAVID LOFLIN |   |
|--------|-----|------------------|--------|

|   | David LoflinPresident |   |
|--------|-----------------------|--------|

| Pursuant to the requirements of the Securities Act of 1933, as amended, this RegistrationStatement on Form S-8 has been signed by the following persons in the capacities and on thedates included: |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|             |   |                                                                                                            |   |             |
|------------------|--------|-----------------------------------------------------------------------------------------------------------------|--------|------------------|
| /s/ DAVID LOFLIN |   |                                                                                                            |   | February 24,2004 |
| David Loflin     |   | President (Principal ExecutiveOfficer), Acting ChiefFinancial Officer (PrincipalFinancial Officer) and Director |   |             |

|   |
|--------|

| /s/ WADDELL D. LOFLIN |   |                                  |   | February 24,2004 |
|-----------------------|--------|---------------------------------------|--------|------------------|
| Waddell D. Loflin     |   | Vice President, Secretary andDirector |   |             |

|   |
|--------|

| /s/ GREGORY A. BONNER |   |     |   | February 24,2004 |
|-----------------------|--------|----------|--------|------------------|
| Gregory A. Bonner     |   | Director |   |             |

|   |
|--------|

| /s/ IRA R. WITKIN   |   |     |   | February 24,2004 |
|---------------------|--------|----------|--------|------------------|
|  Ira R. Witkin |   | Director |   |             |

|   |
|--------|

| Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of theExchange Act by Non-reporting Issuers. |
|------------------------------------------------------------------------------------------------------------------------------------|

| As of the date of this Annual Report on Form 10-KSB, no annual report or proxy material hasbeen sent to security holders of Air-Q Wi-Fi Corporation.  It is anticipated that an annualreport and proxy material will be furnished to security holders subsequent to the filing of thisAnnual Report on Form 10-KSB. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|
|   |

|   | AIR-Q WI-FI CORPORATION AND SUBSIDIARIES |   |
|--------|------------------------------------------|--------|

|   | FINANCIALSTATEMENTSDECEMBER 31, 2003 |   |
|--------|--------------------------------------|--------|

|   | INDEX TO FINANCIAL STATEMENTS OF AIR-Q WI-FICORPORATION |   |
|--------|---------------------------------------------------------|--------|

|   | Page |
|--------|------|

|   | Independent Auditors’ Report | F-2 |
|--------|------------------------------------|-----|

|   | Consolidated Balance Sheet as of December 31, 2003 | F-3 |
|--------|----------------------------------------------------|-----|

|   | Consolidated Statement of Expenses for the Period from June 17, 2003(Inception), Through December 31, 2003 | F-4 |
|--------|------------------------------------------------------------------------------------------------------------|-----|

|   | Consolidated Statement of Stockholders' Equity for the Period from June17, 2003 (Inception), Through December 31, 2003 | F-5 |
|--------|------------------------------------------------------------------------------------------------------------------------|-----|

|   | Consolidated Statement of Cash Flows for the Period from June 17, 2003(Inception), Through December 31, 2003 | F-6 |
|--------|--------------------------------------------------------------------------------------------------------------|-----|

|   | Notes to Consolidated Financial Statements | F-8 |
|--------|--------------------------------------------|-----|

|   |
|--------|
|   |

| INDEPENDENT AUDITORS’ REPORT |
|------------------------------------|

|   |
|--------|

| To the Board of Directors |
|---------------------------|

| Air-Q Wi-Fi Corporation |
|-------------------------|

|   |
|--------|

| We have audited the accompanying balance sheet of Air-Q Wi-Fi Corporation (formerlyCovenant Financial Corporation) as of December 31, 2003, and the related consolidatedstatements of expenses, stockholders’ equity, and cash flows for the period from inception,June 17, 2003, through December 31, 2003.  These financial statements are the responsibilityof the Company’s management.  Our responsibility is to express an opinion on these financialstatements based on our audit. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| We conducted our audit in accordance with auditing standards generally accepted in theUnited States of America.  Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of materialmisstatement.  An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements.  An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating theoverall financial statement presentation.  We believe that our audit provides a reasonable basisfor our opinion. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of Air Q Wi-Fi Corporation as of December 31, 2003,and the results of its operations and its cash flows for the  period from inception, June 17,2003, through December 31, 2003, in conformity with accounting principles generallyaccepted in the United States of America. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| /s/ MALONE & BAILEY, PLLC |
|-------------------------------|

| Malone & Bailey,PLLC Houston,Texaswww.malone-bailey.com |   |
|-------------------------------------------------------------|--------|

|   |
|--------|

| February 12, 2004 |
|-------------------|

|   |
|--------|

|   |
|--------|

|   | AIR-Q WI-FI CORPORATION |   |
|--------|-------------------------|--------|

|   | (Formerly Covenant FinancialCorporation) (a development stagecompany) |   |
|--------|-----------------------------------------------------------------------|--------|

|   |
|--------|

|   | CONSOLIDATED BALANCESHEET |   |
|--------|---------------------------|--------|

|   | December 31, 2003 |   |
|--------|-------------------|--------|

|   |
|--------|

|   | ASSETS |   |
|--------|--------|--------|

| Current Assets: |
|-----------------|

|   | Cash |   | $98,709 |   |
|--------|------|--------|---------|--------|

|   | Total current assets | 98,709 |   |
|--------|----------------------|--------|--------|

| Equipment, net of accumulated depreciation of $4,228 | 28,392 |   |
|------------------------------------------------------|--------|--------|

|   | Total assets | $127,101 |   |
|--------|--------------|----------|--------|

|   |
|--------|

|   | LIABILITIES AND STOCKHOLDERS’ EQUITY |   |
|--------|--------------------------------------------|--------|

| Current liabilities: |
|----------------------|

|   | Accounts payable |   | $4,587 |   |
|--------|------------------|--------|--------|--------|

|   | Note payable |   | 55,000 |   |
|--------|--------------|--------|--------|--------|

|   | Total current liabilities | 59587 |   |
|--------|---------------------------|-------|--------|

|   |
|--------|

| Stockholders’ equity: |
|-----------------------------|

|   | Preferred stock, $.001 par value, 50,000,000shares authorized, none issued |   | 0 |   |
|--------|----------------------------------------------------------------------------|--------|---|--------|

|   | Common stock, $.001 par value, 200,000,000shares authorized, 20,271,704 shares issued andoutstanding |   | 20,272 |   |
|--------|------------------------------------------------------------------------------------------------------|--------|--------|--------|

|   | Additional paid-in capital |   | 2,456,673 |   |
|--------|----------------------------|--------|-----------|--------|

|   | Deficit accumulated during the developmentstage |   | (2,409,431) |   |
|--------|-------------------------------------------------|--------|-------------|--------|

|   | Total stockholders’ equity | 67,514 |   |
|--------|----------------------------------|--------|--------|

| Total liabilities and stockholders’ equity | $127,101 |   |
|--------------------------------------------------|----------|--------|

|   |
|--------|

| See accompanying summary of accounting policies and notes to financial statements. |
|------------------------------------------------------------------------------------|

|   |
|--------|
|   |

|   | AIR-Q WI-FI CORPORATION |   |
|--------|-------------------------|--------|

|   | (Formerly Covenant FinancialCorporation) (a development stagecompany) |   |
|--------|-----------------------------------------------------------------------|--------|

|   |
|--------|

|   | CONSOLIDATED STATEMENT OFEXPENSES |   |
|--------|-----------------------------------|--------|

|   |  Period from June 17, 2003 (Inception), Through December31, 2003 |   |
|--------|-----------------------------------------------------------------------|--------|

|   |
|--------|

| Operating Expenses: |
|---------------------|

|   | General and administrative |   | $2,409,431 |   |
|--------|----------------------------|--------|------------|--------|

| Net loss | (2,409,431) |   |
|----------|-------------|--------|

|   |
|--------|

| Net loss per share: |
|---------------------|

|   | Basic and diluted |   | $(.15) |   |
|--------|-------------------|--------|--------|--------|

|   |
|--------|

| Weighted average shares outstanding: |
|--------------------------------------|

|   | Basic and diluted |   | 15,696,386 |   |
|--------|-------------------|--------|------------|--------|

|   |
|--------|

| See accompanying summary of accounting policies and notes to financial statements. |
|------------------------------------------------------------------------------------|

|   |
|--------|
|   |

|   | AIR-Q WI-FI CORPORATION |   |
|--------|-------------------------|--------|

|   | (Formerly Covenant FinancialCorporation) (a development stagecompany) |   |
|--------|-----------------------------------------------------------------------|--------|

|   |
|--------|

|   | CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY |   |
|--------|------------------------------------------------------|--------|

|   |  Period from June 17, 2003 (Inception), Through December 31, 2003 |   |
|--------|------------------------------------------------------------------------|--------|

|   |
|--------|

|   | Common Stock |   |
|--------|--------------|--------|

|   | Shares |   | Amount |   | AdditionalPaid-inCapital |   | DeficitAccumulated DuringtheDevelopment Stage |   | StockholderReceivable |   |   |
|--------|--------|--------|--------|--------|--------------------------|--------|-----------------------------------------------|--------|-----------------------|--------|--------|

| Issuance of common stock tofounders | 11,000,000 |   | $11,000 |   | $(10,000) |   | $0 |   | $1,000 |   |   |
|-------------------------------------|------------|--------|---------|--------|-----------|--------|----|--------|--------|--------|--------|

| Stock issued in reverse acquisition | 1,119,204 |   | 1,119 |   | 2,021,673 |   | 0 |   | 1,119 |   |   |
|-------------------------------------|-----------|--------|-------|--------|-----------|--------|---|--------|-------|--------|--------|

| Stock issued for services | 3,152,500 |   | 3,153 |   | 2,021,673 |   | 0 |   | 2,024,826 |   |   |
|---------------------------|-----------|--------|-------|--------|-----------|--------|---|--------|-----------|--------|--------|

| Stock issued for cash and warrants,net of cost | 5,000,000 |   | 5,000 |   | 445,000 |   | 0 |   | 450,000 |   |   |
|------------------------------------------------|-----------|--------|-------|--------|---------|--------|---|--------|---------|--------|--------|

| Net loss | 0 |   | 0 |   | 0 |   | (2,409,431) |   | (2,409,431) |   |   |
|----------|---|--------|---|--------|---|--------|-------------|--------|-------------|--------|--------|

| Balance, December 31, 2003 | 20,271,704 |   | $20,272 |   | $2,456,673 |   | $(2,409,431) |   | $67,514 |   |   |
|----------------------------|------------|--------|---------|--------|------------|--------|--------------|--------|---------|--------|--------|

|   |
|--------|

| See accompanying summary of accounting policies and notes to financial statements. |
|------------------------------------------------------------------------------------|

|   |
|--------|
|   |

|   | AIR-Q WI-FI CORPORATION |   |
|--------|-------------------------|--------|

|   | (Formerly Covenant FinancialCorporation) (a development stagecompany) |   |
|--------|-----------------------------------------------------------------------|--------|

|   |
|--------|

|   | CONSOLIDATED STATEMENT OF CASHFLOWS |   |
|--------|-------------------------------------|--------|

|   |  Period from June 17, 2003 (Inception), Through December31, 2003 |   |
|--------|-----------------------------------------------------------------------|--------|

|   |
|--------|

|   |   | Inception throughDecember 31, 2003 |   |
|--------|--------|------------------------------------|--------|

| CASH FLOWS FROM OPERATING ACTIVITIES: |
|---------------------------------------|

|   | Net loss | $(2,409,431) |   |
|--------|----------|--------------|--------|

|   | Adjustments to reconcile net lossto cash used in operatingactivities: |   |   |
|--------|-----------------------------------------------------------------------|--------|--------|

|   | Depreciation | 4,228 |   |
|--------|--------------|-------|--------|

|   | Stock issued for services | 2,024,826 |   |
|--------|---------------------------|-----------|--------|

|   | Changes in assets and liabilities: |   |   |
|--------|------------------------------------|--------|--------|

|   | Accounts payable | 6,706 |   |
|--------|------------------|-------|--------|

|   | Cash Flows Used in Operating Activities | (373,671) |   |
|--------|-----------------------------------------|-----------|--------|

|   |
|--------|

| CASH FLOWS FROM INVESTING ACTIVITIES: |
|---------------------------------------|

|   | Purchase of equipment | (32,620) |   |
|--------|-----------------------|----------|--------|

|   |
|--------|

| CASH FLOWS FROM FINANCING ACTIVITIES: |
|---------------------------------------|

|   | Sales of common stock | 450,000 |   |
|--------|-----------------------|---------|--------|

|   | Note payable | 55,000 |   |
|--------|--------------|--------|--------|

|   | Cash Flows Provided by Financing Activities | 505,000 |   |
|--------|---------------------------------------------|---------|--------|

|   |
|--------|

| NET INCREASE IN CASH | $98,709 |   |
|----------------------|---------|--------|

| Cash, beginning of period | 0 |   |
|---------------------------|---|--------|

| Cash, end of period | $98,709 |   |
|---------------------|---------|--------|

|   |
|--------|

|   | Supplemental information: |   |   |
|--------|---------------------------|--------|--------|

|   | Income taxes paid | $0 |   |
|--------|-------------------|----|--------|

|   | Interest paid | $0 |   |
|--------|---------------|----|--------|

|   |
|--------|

| NON-CASH FINANCING ACTIVITIES: |
|--------------------------------|

|   | Liabilities assumed in merger | $8,922 |   |
|--------|-------------------------------|--------|--------|

|   |
|--------|

| See accompanying summary of accounting policies and notes to financial statements. |
|------------------------------------------------------------------------------------|

|   |
|--------|
|   |

|   | AIR-Q WI-FI CORPORATION |   |
|--------|-------------------------|--------|

|   | (Formerly Covenant FinancialCorporation) (a development stagecompany) |   |
|--------|-----------------------------------------------------------------------|--------|

|   |
|--------|

|   | NOTES TO CONSOLIDATED FINANCIALSTATEMENTS |   |
|--------|-------------------------------------------|--------|

|   |
|--------|

| NOTE 1 - BASIS OF PRESENTATION |   |
|--------------------------------|--------|

| Nature of Company |   |
|-------------------|--------|

| On June 20, 2003, Air-Q Wi-Fi Corporation (“Air-Q”), formerly Covenant FinancialCorporation (“Covenant”), a U.S. public company issued 11,000,000 shares of common stockfor 100% of the outstanding common stock of Air-Q Corp, a privately held corporation. Afterthe merger the stockholders of Air-Q Corp. owned approximately 95% of the outstandingcommon stock of Covenant and Covenant changed its name to Air-Q Wi-Fi Corporation (seenote 2). |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| On June 17, 2003 Air-Q Corp. (“Corp”) was incorporated in Nevada. Corp. is a development-stage company that is establishing a wireless internet access system in Baton Rouge,Louisiana. Corp’s internet access systems will operate on a platform comprised of Wi-Fi(wireless fidelity) standard equipment that has been configured in a proprietary manner. Theterm Wi-Fi refers to an industry standard for wireless equipment that meets published802.11(x) standards. Wi-Fi equipment operates in unlicensed spectra, such as 2.4 and 5.8 Ghz.Corp’s business plan focuses on the marketing of its wireless Internet access services tobusinesses and residential customers. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Hereinafter, all references to Air-Q include the operations and financial condition of Corp. forthe period from inception, June 17, 2003 through December 31, 2003. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Consolidation |   |
|---------------|--------|

| As of December 31, 2003, Air-Q had one wholly owned subsidiaries, Air-Q Corp. All materialinter-company balances and inter-company transactions have been eliminated for the purposeof presenting the accompanying consolidated financial statements. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Use of Estimates |   |
|------------------|--------|

| The preparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities at the date of the balancesheet.  Actual results could differ from those estimates. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Cash and Cash Equivalents |   |
|---------------------------|--------|

| Cash and cash equivalents include cash and all highly liquid financial instruments withpurchased maturities of three months or less. |
|--------------------------------------------------------------------------------------------------------------------------------------|

| Equipment |   |
|-----------|--------|

| Equipment consists of computer equipment stated at cost.  Depreciation is computed using thestraight-line method over the estimated economic lives of three years. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Income Taxes |   |
|--------------|--------|

| Income taxes are computed using the asset and liability method.  Under the asset and liabilitymethod, deferred income tax assets and liabilities are determined based on the differencesbetween the financial reporting and tax bases of assets and liabilities and are measured usingthe currently enacted tax rates and laws.  A valuation allowance is provided for the amount ofdeferred tax assets that, based on available evidence, are not expected to be realized. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Comprehensive Income (Loss) |   |
|-----------------------------|--------|

| Comprehensive income (loss) is defined as all changes in shareholders’ equity, exclusive oftransactions with owners, such as capital instruments.  Comprehensive income (loss) includesnet income or loss, changes in certain assets and liabilities that are reported directly in equitysuch as translation adjustments on investments in foreign subsidiaries, changes in market valueof certain investments in securities and certain changes in minimum pension liabilities.  TheCompany’s comprehensive loss was equal to its net loss for the period ended December 31,2003. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Basic Loss Per Share |   |
|----------------------|--------|

| Air-Q is required to provide basic and dilutive earnings (loss) per common share information. |
|-----------------------------------------------------------------------------------------------|

| The basic net loss per common share is computed by dividing the net loss applicable tocommon stockholders by the weighted average number of common shares outstanding. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Diluted net loss per common share is computed by dividing the net loss applicable to commonstockholders, adjusted on an "as if converted" basis, by the weighted average number ofcommon shares outstanding plus potential dilutive securities.  For 2003, potential dilutivesecurities had an anti-dilutive effect and were not included in the calculation of diluted net lossper common share. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Basic loss per share has been calculated based on the weighted average number of shares ofcommon stock outstanding during the period. |
|---------------------------------------------------------------------------------------------------------------------------------------|

| Recent Accounting Pronouncements |   |
|----------------------------------|--------|

| The Company accounts for its stock-based compensation plans under Accounting PrinciplesBoard ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. Statement ofFinancial Accounting Standard ("FAS") No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, issued in December 2002 requires pro forma net income (loss) andpro forma net income (loss) per share to be disclosed in interim financial statements. For theperiod ended December 31, 2003, Air-Q’s pro form net loss and net loss per share are equal tothe net loss and net loss per share reported herein. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| NOTE 2 - REVERSE ACQUISITION |   |
|------------------------------|--------|

| On June 20, 2003, Air-Q Wi-Fi Corporation, formerly Covenant Financial Corporation(“Covenant”), a U.S. public company issued 11,000,000 shares of common stock for 100% ofthe outstanding common stock of Air-Q Corp., a privately held corporation. After the mergerthe stockholders of Air-Q Corp. owned approximately 95% of the outstanding common stockof Covenant and on June 24, 2003 changed its name to Air-Q Wi-Fi Corporation. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| For accounting purposes, the merger will be treated as an acquisition of Covenant and arecapitalization of Air-Q, Corp. using the purchase method of accounting. Air-Q Corp.’shistorical financial statements replace Air-Q Wi-Fi’s in the accompanying financialstatements. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| NOTE 3 - INCOME TAXES |   |
|-----------------------|--------|

| Air-Q has had losses since inception and therefore has no income tax liability. The netdeferred tax asset generated by the loss carry-forward has been fully reserved.  The cumulativenet operating loss carry-forward is approximately $300,000 at December 31, 2003, and willexpire in various years through 2023. Air-Q recorded an increase in the valuation allowance of$102,000 for the period from inception, June 17, 2003 through December 31, 2003. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Deferred income taxes consist of the following at December 31, 2003: |
|----------------------------------------------------------------------|

Long-term:

Deferred tax assets     $102,000

Valuation allowance   (102,000)

                                   $     0      

|   |
|--------|

| NOTE 4 - NOTE PAYABLE |   |
|-----------------------|--------|

| Air-Q has a $55,000 unsecured note payable with a third party bearing interest at 8%. The noteis due two business days after Air-Q raises $200,000 from the exercise of warrants. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| NOTE 5 - CAPITAL STOCK |   |
|------------------------|--------|

| On September 23, 2003, Air-Q amended and restated its certificate of incorporation to increasethe number of authorized shares of stock to 250,000,000. Air-Q is authorized to issue200,000,000 shares of common and 50,000,000 shares of preferred stock. The board ofdirectors is authorized to determine the designation, preferences, and rights of the preferredstock. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| On June 20, 2003, Air-Q entered into four securities purchase agreements for a total of5,000,000 shares of common stock at $.10 per share. Air-Q received proceeds totaling$450,000, net of $50,000 cost of raising the capital. As part of the securities purchaseagreements, Air-Q issued warrants to acquire 5,000,000 shares of common stock at .$20 pershare, 5,000,000 shares of common stock at $.30 per share, 5,000,000 shares of common stockat $.40 and 5,000,000 shares of common stock at $.50 per share. All warrants expire on June19, 2008. In addition, Air-Q issued warrants to acquire 1,000,000 shares of common stock at..$20 per share, 1,000,000 shares of common stock at $.30 per share, 1,000,000 shares ofcommon stock at $.40 and 1,000,000 shares of common stock at $.50 per share to a third partyas a fee related to raising the capital. These warrants expire on September 14, 2008. Thewarrants were valued using black scholes and charged against equity as a financing cost,resulting in no change in net equity. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| During 2003, Air-Q issued 2,656,500 shares of common stock to third-party consultants forservices; resulting in $1,514,825 in non-cash compensation expense included in general andadministrative expense in the accompanying statement of expenses |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| During 2003, Air-Q issued 500,000 shares of common stock valued at $470,000 to thesecretary and vice-president as an employment bonus to serve as an officer of Air-Q. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Air-Q measured the transactions at the date of issuance at the quoted market price at pricesranging from $.10 to $3.85 per share There are no performance commitments or penalties fornon-performance, therefore Air-Q recorded the expense at the date of issuance. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| NOTE 6 - WARRANTS |   |
|-------------------|--------|

| Air-Q issued warrants to acquire 24,000,000 shares of common stock at prices ranging from$.20 per share to $.50 per shares. 20,000,000 warrants expire on June 19, 2008 and 4,000,000expire on September 14, 2008. The weighted average exercise price for the warrants grantedduring 2003 is $.35. As of December 31, 2003, no warrants have been exercised. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |
|--------|

| NOTE 7 - COMMITMENTS |   |
|----------------------|--------|

| On September 5, 2003, Air-Q entered into employment agreements with the President andVice-President for terms of three years at $150,000 and $100,000 per year, respectively. Air-Qdid not pay any amounts and the employees have forfeited the amounts due under theagreement from September through December 31, 2003. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|