Form 10-QSB

 

            SECURITIES AND EXCHANGE COMMISSION

                     Washington, D.C.

 

  [ X ] Quarterly Report Pursuant to Section 13 or 15(d)

         of the Securities Exchange Act of 1934

 

       For the quarterly period ended March 31, 2001

 

                            OR

 

  [ ] Transition Report Pursuant to Section 13 or 15(d)

         of the Securities Exchange Act of 1934

 

       For the transition period from to .

 

               Commission File No. 1-15383

 

                     USURF America, Inc.

           (Exact Name of Small Business Issuer

               as Specified in its Charter)

 

           NEVADA                                72-1346591 

(State or Other Jurisdiction of               (I.R.S. Employer 

incorporation or organization)              Identification Number)

 

    8748 Quarters Lake Road, Baton Rouge, Louisiana 70809

          (Address of Principal Executive Offices,

                     including Zip Code)

 

                       (225) 922-7744

      (Issuer's telephone number, including area code)

 

Indicate by check mark whether Registrant (1) has filed all

reports required to be filed by Section 13 or 15(d) of the

Securities Exchange Act of 1934 during the preceding 12

months (or for such shorter period that Registrant as

required to file such reports), and (2) has been subject to

such filing requirements for the past 90 days:

 

Yes [ X ] No [ ]

 

Indicate the number of shares outstanding of each of the

issuer's classes of common stock as of the latest

practicable date:

 

    Class                    Outstanding as of 5-11-01

 

Common Stock,

 $.0001 par value                 19,824,770

 

 

 

<PAGE>

 

 

 

                      PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

               INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

                            USURF America, Inc.

 

 

Consolidated Balance Sheets as of March 31,

 2001 (unaudited), and December 31, 2000

 

Consolidated Statements of Operations for

 the Three Months Ended March 31, 2001 and

 2000(unaudited)

 

Consolidated Statements of Cash Flows for

 the Three Months Ended March 31, 2001 and

 2000(unaudited)

 

Notes to Consolidated Financial Statements

 

 

 

<PAGE>

 

 

           USURF AMERICA, INC. AND SUBSIDIARIES

 

                CONSOLIDATED BALANCE SHEETS

 

 

                            12/31/00          3/31/01

                            (audited)       (unaudited)

 

ASSETS

 

CURRENT ASSETS

   Cash and cash

    equivalents            $     1,088       $  125,494

   Accounts receivable

    - net                            0              384

   Inventory                   246,721          246,721

                            ----------       ----------

 

      Total current

       assets                  247,809          372,599

                            ----------       ----------

 

PROPERTY AND EQUIPMENT,

   Cost                        138,954          138,954

   Less: accumulated

    depreciation               (69,476)         (81,056)

                            ----------       ----------

 

                                69,478           57,898

                            ----------       ----------

 

INVESTMENTS                     68,029           68,029

                            ----------       ----------

 

OTHER ASSETS                    25,000           25,000

                            ----------       ----------

 

                                25,000           25,000

                            ----------       ----------

 

      Total assets         $   410,316      $   523,526

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

CURRENT LIABILITIES

   Disbursements in excess of

    cash balances               42,469           42,469

   Accounts payable          1,472,030        1,473,817

   Accrued payroll             158,262          200,155

   Other current liabilities    41,824           51,824

   Property dividends

    payable                     43,750           43,750

   Notes payable to

    stockholder                  6,638           32,728

                            ----------       ----------

 

      Total current

       liabilities           1,764,973        1,844,743

                            ----------       ----------

 

LONG-TERM LIABILITIES

   Deferred income tax               0                0

                            ----------       ----------

 

         Total

          liabilities        1,764,973        1,844,743

 

STOCKHOLDERS' EQUITY

   Common stock, $.0001

    par value; Authorized:

    100,000,000; Issued

    and Outstanding:

    16,688,808 shares at

    December 31, 2000,

    and 18,052,770 shares

    at March 31, 2001            1,669            1,805

   Additional paid-in

    capital                 34,183,962       35,131,339

   Accumulated deficit     (34,502,160)     (35,403,419)

   Subscriptions

    receivable                 933,514          313,000

   Deferred consulting      (1,971,642)      (1,363,942)

                            ----------       ----------

 

                            (1,354,657)      (1,321,217)

                            ----------       ----------

 

TOTAL LIABILITIES AND

STOCKHOLDERS' EQUITY       $   410,316      $   523,526

 

 

<PAGE>

 

 

            USURF AMERICA, INC. AND SUBSIDIARIES

 

            CONSOLIDATED STATEMENTS OF OPERATIONS

 

                              Three Months Ended

                                   March 31,

                          2001                  2000

                       (unaudited)           (unaudited)

 

REVENUES

 Internet access

  revenues             $       384           $   597,392

 Internet access

  costs and cost

  of goods sold                  0              (269,136)

                        ----------            ----------

 

   Gross profit                384               328,256

                        ----------            ----------

 

OPERATING EXPENSES

 Depreciation

  and amortization          11,580             2,238,544

  Professional fees        707,288               390,038

  Rent                       5,361                61,570

  Salary and

   commissions             160,746               399,358

  Advertising                    0                15,179

  Other                     16,668               249,530

                        ----------            ----------

    Total

     Operating

     Expenses              901,643             3,354,219

                        ----------            ----------

 

LOSS FROM OPERATIONS      (901,259)           (3,025,963)

 

OTHER INCOME(EXPENSE)

 Other income                    0                 6,618

 Interest expense                0                (9,770)

                        ----------            ----------

 

LOSS BEFORE INCOME TAX    (901,259)           (3,029,115)

 

INCOME TAX BENEFIT               0               471,519

                        ----------            ----------

 

   NET LOSS               (901,259)           (2,557,596)

 

   Net loss per

    common share             (.05)               (0.20)

 

   Weighted average

    number of

    shares

    outstanding         18,208,215            12,937,499

 

 

<PAGE>

 

 

            USURF AMERICA, INC. AND SUBSIDIARIES

 

            CONSOLIDATED STATEMENTS OF CASH FLOWS

 

                      Three Months Ended  Three Months Ended 

                           3/31/01             3/31/00

                         (unaudited)         (unaudited)  

 

CASH FLOWS FROM

OPERATING ACTIVITIES

 Net loss               $(  901,259)        $(2,557,596)

 

 Adjustment to

  reconcile net loss

  to net cash used

  in operating

  activities    

   Depreciation and

    amortization             11,580           2,238,544

   Consulting fees

    recognized              670,400              311,750

   Compensation expense       3,300               24,000

   Deferred income

    taxes                         0             (471,519)

   Accounts receivable         (384)                 633

   Inventory                      0                6,301

   Other current

    liabilities              10,000              (16,823)

   Other assets and

    liabilities                   0                9,276

   Deferred revenue               0               68,051

   Accounts payable           1,786               49,464

   Prepaid expenses and

    other current assets          0               (3,381)

   Accrued payroll           41,893               35,521

                         ----------           ----------

 

     Net cash used

      in operating

      activities           (162,684)            (305,779)

                         ----------           ----------

CASH FLOWS FROM

INVESTING ACTIVITIES

 Cash acquired in

  acquisitions                    0                7,704

 Capital expenditures             0             (102,612)

                         ----------           ----------

 

    Net cash used

     in investing

     activities                   0              (94,908)

                         ----------           ----------

 

CASH FLOWS FROM

FINANCING ACTIVITIES

 Payments on notes

  payable and capital

  lease obligations               0               (5,910)

 Proceeds from sub-

  scriptions receivable     261,000              115,000

 Proceeds from note

  payable to stockholder     26,090              286,400

 Issuance of common

  stock for cash                  0                    0

 Payment on note

  payable to stockholder          0              (11,093)

                         ----------           ----------

 

    Net cash provided

     by financing

     activities             287,090              384,397

                         ----------           ----------

 

    Net increase

     (decrease)

     in cash and

     cash equivalents       124,406              (16,290)

 

Cash and cash equi-

 valents, beginning

 of period                    1,088               75,313

 

Cash and cash equi-

 valents, end of period     125,494               59,023

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING

AND OTHER CASH FLOW INFORMATION

 

Three Months March 31, 2001:

 

  -  In January 2001, the Company entered into a one-year

     consulting agreement, by issuing 200,000 shares of

     stock valued at $62,000.

 

  -  In January 2001, the Company issued 800,000 shares of

     stock valued at $248,000, in payment of a commitment

     fee under a common stock purchase agreement.

 

  -  In January 2001, 774,162 shares were issued to the

     Company's president, pursuant to a debt conversion

     agreement, which shares were not issued in 2000, due

     to an administrative error.

 

Three Months March 31, 2000:

 

  -  In January 2000, the Company entered into a one-year

     legal and business consulting services agreement, by

     issuing 100,000 shares of stock valued at $300,000.

 

  -  In January 2000, the Company entered into a one-year

     business and communications consulting services

     agreement, by issuing 60,000 shares of stock valued at

     $180,000.

 

  -  In February 2000, the Company acquired all of the stock

     of The Spinning Wheel, Inc., by issuing 81,063 shares

     of stock valued at $324,252.  This acquisition was

     accounted for as a purchase business combination.

 

  -  In February 2000, the Company acquired all of the

     ownership interests of Internet Innovations, L.L.C.,

     by issuing 50,000 shares of stock valued at $437,500.

     This acquisition was accounted for as a purchase

     business combination.

 

 

<PAGE>

 

 

                   USURF AMERICA, INC.

 

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              Three Months Ended March 31, 2001

                        (Unaudited)

 

Note 1. Nature of Business, Organization and

          Basis of Presentation

 

Basis of Presentation

 

USURF America, Inc. (USURF), formerly Internet Media

Corporation, was incorporated as Media Entertainment, Inc.

in the State of Nevada on November 1, 1996. USURF currently

provides wireless Internet access services to a small number

of customers in Santa Fe, New Mexico. USURF's

original purpose was to operate as a holding company in the

wireless cable television and community (low power)

television industries, as well as other segments of the

communications industry. Until January 1999, the Company was

in the development stage. In 1998 the Company changed its

focus to concentrate its efforts in the wireless internet

communications industry. The Company later ceased efforts

to develop the wireless cable and low power television

business areas and assigned all of its assets from the low

power television activities to New Wave Media Corp. in

exchange for a 15% ownership interest in New Wave Media

Corp. 

 

Effective December 31, 1996, USURF acquired all of the

outstanding common stock of Winter Entertainment, Inc., a

Delaware corporation incorporated on December 28, 1995

(WEI), and Missouri Cable TV Corp., a Louisiana corporation

incorporated on October 9, 1996 (MCTV). WEI operates a

community television station in Baton Rouge, Louisiana; MCTV

owns wireless cable television channels in Poplar Bluff,

Missouri, which system has been constructed and is ready for

operation, and Lebanon, Missouri. Effective October 8,

1998, the Company formed Santa Fe Wireless Internet, Inc.

(Santa Fe), a New Mexico corporation, to hold the assets

acquired from Desert Rain Internet Services. Santa Fe was

organized to provide wireless internet access. The

acquisition of WEI and MCTV by USURF was accounted for as a

reorganization of companies under common control. The

assets and liabilities acquired were recorded at historical

cost in a manner similar to a pooling of interests. The

acquisition of Santa Fe was accounted for as a purchase

whereby cost is allocated to the assets acquired.

 

On January 29, 1999, the Company acquired all the stock of

CyberHighway, Inc., a Boise, Idaho-based ISP, by issuing

2,000,000 shares of stock valued at approximately

$15,940,000. In addition, 325,000 shares of common stock

were issued in payment of a finder's fee arising out of this

acquisition. This acquisition was accounted for as a

purchase business combination.

 

 

In June 1999, USURF acquired all the stock of Santa Fe Trail

Internet Plus, Inc., a Santa Fe, New Mexico-based ISP, by

issuing 100,000 shares of stock valued at approximately

$400,000. This acquisition was accounted for as a purchase

business combination.

 

In July 1999, USURF acquired all of the stock of Premier

Internet Services, Inc., an Idaho-based ISP, by issuing

127,000 shares of stock valued at approximately $508,000.

This acquisition was accounted for as a purchase business

combination.

 

In November 1999, the Company acquired the customer base of

Cyber Mountain, Inc. a Denver, Colorado-based ISP, for

25,000 shares of stock valued at approximately $75,000. In

December 1999, USURF acquired a portion of the ISP-related

equipment and customer base of Cyber Highway of North

Georgia, Inc., a Demorest, Georgia-based ISP for 54,000

shares of stock valued at approximately $212,000.

 

In February 2000, the Company acquired Spinning Wheel, Inc.,

an Idaho Springs, Idaho-based ISP, for 81,063 shares of

stock valued at approximately $325,000. This acquisition

has been accounted for as a purchase business combination. 

 

In February 2000, the Company acquired Internet Innovations,

LLC, a Baton Rouge, Louisiana based web design company, for

50,000 shares of common stock valued at approximately

$437,000. This acquisition has been accounted for as a

purchase business combination.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include

all the accounts of USURF and all wholly owned subsidiaries.

Inter-company transactions and balances have been eliminated

in the consolidation. 

Loss Per Common Share

 

Basic loss per common share has been computed by dividing

the net loss by the weighted average number of shares of

common stock outstanding throughout the period.

 

Note 2. Interim Consolidated Financial Statements

 

In the opinion of management, the accompanying consolidated

financial statements for the three months ended March 31,

2001 and 2000, reflect all adjustments (consisting only of

normal recurring adjustments) necessary to present fairly

the financial condition, results of operations and cash

flows of USURF, including subsidiaries, and include the

accounts of USURF and all of its subsidiaries. All material

inter-company transactions and balances are eliminated.

 

The financial statements included herein have been prepared

by USURF, without audit, pursuant to the rules and

regulations of the SEC. Certain information and footnote

disclosures normally included in financial statements

prepared in accordance with generally accepted accounting

principles have been condensed or omitted pursuant to such

rules and regulations. It is suggested that these unaudited

financial statements be read in conjunction with the

financial statements and notes thereto included in

USURF's Annual Report on Form 10-KSB/A for the year

ended December 31, 2000, as filed with the SEC. Certain

reclassifications and adjustments may have been made to the

financial statements for the comparative period of the prior

fiscal year to conform with the 2001 presentation. The

results of operations for the interim periods are not

necessarily indicative of the results to be obtained for the

entire year.

 

Note 3. Notes Payable to Shareholder

 

                                     March 31, 2001

                                       (unaudited)

Notes payable to majority

stockholder, interest

accrues at 8%, due on

demand and unsecured                     $32,728

 

Note 4. Stock Sales

 

In February 2001, the Company sold, pursuant to a Securities

Purchase Agreement, 840,000 shares of common stock and

840,000 warrants with an exercise price of $.15, exercisable

for a period of three years from issuance. These securities

were sold for $126,000 in cash, with no portion of the

purchase price having been allocated to these warrants. In

connection with this transaction, the Company issued, as a

finder's fee, 84,000 shares of common stock and 336,000

warrants with an exercise price of $.15 per share,

exercisable for a period of three years from issuance.

 

In March 2001, the Company sold, pursuant a Securities

Purchase Agreement, 500,000 shares of common stock and

500,000 warrants with an exercise price of $.25, exercisable

for a period of three years from issuance. These securities

were sold for $125,000 in cash, with no portion of the

purchase price having been allocated to the warrants. In

connection with this transaction, the Company issued, as a

finder's fee, 50,000 shares of common stock and 200,000

warrants with an exercise price of $.25 per share,

exercisable for a period of three years from issuance.

 

Note 5. Other Material Stock Issuances

 

In January 2000, the Company issued 800,000 shares of its

common stock as a commitment fee under a common stock

purchase agreement to an unrelated company. See Note 7.

 

Note 6. Contingencies

 

  A. Bankruptcy

 

      On September 29, 2000, three creditors of

      CyberHighway filed an involuntary petition in the

      Idaho Federal Bankruptcy Court, styled In

      Re: CyberHighway, Inc., Case No. 00-02454. In

      December 2000, CyberHighway and the petitioning

      creditors filed a joint motion to dismiss this

      proceeding. The joint motion to dismiss requires the

      approval of CyberHighway's creditors. However, some

      of CyberHighway's creditors objected to the dismissal

      of the proceeding. The basis of the creditors'

      objection is their belief that CyberHighway's as-yet

      unasserted damage claims against the original

      petitioning creditors and their law firm and a claim

      against Dialup USA, Inc. represent CyberHighway's most

      valuable assets. These as-yet unasserted claims

      include claims for bad faith filing of the original

      bankruptcy petition as to the original petitioning

      creditors and their law firm, as well as claim for

      tortious interference with beneficial business

      relationships as to Dialup USA, Inc. The objecting

      creditors desire that all claims be adjudicated in the

      bankruptcy court. The Company believes it is likely

      that, at some time in the future, a final order of

      bankruptcy will be entered with respect to

      CyberHighway.

 

      Subsequent to the involuntary bankruptcy,

      CyberHighway lost nearly all of its customers. Due

      to this loss of customer base, the Company's

      intangible assets relating to those customers were

      determined to be worthless. The write-off of the

      intangible assets reflected on the Company's December

      31, 2000 balance sheet was $4,814,272 (net of deferred

      taxes). Due to this change in operating environment,

      the Company's revenues have decreased substantially as

      well as a decrease in expenses associated with the

      elimination of personnel previously required to

      operate the Company's network operations center, and

      accordingly goodwill has been impaired. The

      write-down of goodwill reflected on the Company's

      December 31, 2000, balance sheet was $4,425,037.

 

  B. Potential Rescission Claims

 

      Since January 2000, a total of 5,032,085 shares of

      the common stock of the Company may have been issued

      in violation of Section 5 of the Securities Act of

      1933, as amended. The aggregate value assigned to

      these shares upon their issuance totaled $5,521,502. 

      It is possible that each of the issues of these

      shares has a potential claim for rescission of

      their respective issuance transactions.

 

The Company believes that it is unlikely that any of these

potential rescission claims will be asserted against the

Company.

 

Note 7. Financing Transaction

 

On October 9, 2000, the Company signed a common stock

purchase agreement with an unrelated company to sell up to

$10,000,000 of its common stock. This agreement was

replaced by a similar agreement on April 25, 2001, as

amended May 9, 2001. The purchase price of the shares under

this agreement will vary, based on future market prices of

the Company's common stock. The agreement calls for the

Company to meet certain requirements and maintain certain

criteria with respect to its common stock in order to avoid

an event of default. Upon the occurrence of the event of

default, the buyer would no longer obligated to purchase any

additional shares of stock. The agreement will expire on

May 31, 2001, if all of the circumstances necessary to

effect the transaction have not occurred by that date,

including completion of a registration statement with

respect thereto. This registration statement is to be filed

in the near future.

 

 

<PAGE>

 

 

Item 2. Management's Discussion and Analysis of Financial

          Condition and Results of Operations.

 

Background

 

Our management has determined to commit all of our

available resources to the exploitation of our Quick-Cell

wireless Internet access products. We currently lack the

capital necessary to do so.

 

We were organized to operate in the wireless cable and

community (low power) television industries. Due to

existing market conditions, we have abandoned our wireless

cable business. Because our Quick-Cell wireless Internet

access system can be adapted for use on the wireless cable

frequencies, we believe our frequencies possess future

value. However, these frequencies will not be of value to

us, unless and until the FCC approves two-way communications

on them. Due to this circumstance, our wireless-cable-related

assets were determined to be impaired and their $188,091 book

value written off in December 2000.

 

Effective July 1, 1999, we assigned all of our

television-related assets to New Wave Media Corp., in

exchange for a 15% ownership interest in New Wave common

stock. This business segment was discontinued as of that

date and, since then, has not, and will not, generate any

revenues. Our board of directors has declared a dividend

with respect to all of the New Wave shares. These shares

will be distributed to our shareholders, upon New

Wave's completion of a Securities Act registration of

the distribution transaction. This registration proceeding

has not been commenced by New Wave, due to a lack of funds

necessary to pay related professional expenses. New Wave

has advised us that it is making its best efforts to obtain

capital for this purpose, but cannot provide an exact time

by which this will occur.

 

Since 1998, we have acquired seven dial-up Internet service

providers, including CyberHighway, the business of

www.e-tail.com and a web design firm, none of which was an

affiliated company nor were any acquired from an affiliate.

All but one of these acquisitions were made for shares of

our stock. All of these acquisitions were accounted for as

a purchase, which means that we did not include past

operations of the acquired businesses in our historical

statements of operations. Also in connection with these

acquisitions, we recorded large amounts of amortizable

customer base and goodwill values, as a result of the

acquisitions' valuations exceeding the values of the

tangible net assets. At December 31, 2000, all of these

values were written off, due to the demise of

CyberHighway's business. Please see the discussion

under "CyberHighway Bankruptcy" below.

 

All of the customers of the acquired Internet access

providers were assimilated into the dial-up operations of

our CyberHighway subsidiary, which has few remaining

customers; please see the discussion under

"CyberHighway Bankruptcy" below.

 

Current Overview

 

Our management has committed all available current and

future capital and other resources to the commercial

exploitation of our Quick-Cell wireless Internet access

products. It is these products upon which our future is

based.

 

As CyberHighway's business has become defunct while

in bankruptcy, we have determined not to attempt to revive

our dial-up Internet access business and, for the

foreseeable future, we have abandoned development of our

e-commerce business.

 

In April 2001, we entered into a common stock purchase

agreement with Fusion Capital Fund II, LLC, which was

amended in May 2001. This agreement replaced a similar

agreement entered into in October 2000. Pursuant to the

agreement, Fusion Capital may purchase up to $10 million of

our common stock. We intend to file, in the very near

future, a registration statement with respect to the shares

issued and to be issued pursuant to the Fusion Capital

agreement. Please see the discussion under the heading

"Management's Plans Relating to Future

Liquidity", for a more thorough explanation of the

impact this agreement could have on our business. Should we

obtain this funding, we would be able to begin to pursue our

wireless Internet business plan. We have commenced

marketing of our Quick-Cell service through a reseller. We

will need more capital thereafter, as we continue to expand

our wireless Internet business. We may never possess enough

capital to permit us to earn a profit.

 

CyberHighway Bankruptcy

 

On September 29, 2000, an involuntary bankruptcy petition

was filed against CyberHighway in the Idaho Federal

Bankruptcy Court, styled In Re: CyberHighway, Inc., Case No.

00-02454, by ProPeople Staffing, CTC Telecom, Inc. and

Hawkins-Smith. In December 2000, CyberHighway and the

petitioning creditors filed a joint motion to dismiss this

proceeding. The joint motion to dismiss requires the

approval of CyberHighway's creditors. However, some of

CyberHighway's creditors have objected to the

dismissal of the proceeding. The basis of the

creditors' objection is their belief that

CyberHighway's as-yet unasserted damage claims against

the original petitioning creditors and their law firm and a

claim against Dialup USA, Inc. represent

CyberHighway's most valuable assets. These as-yet

unasserted claims include claims for bad faith filing of the

original bankruptcy petition as to the original petitioning

creditors and their law firm, as well as a claim for

tortious interference with beneficial business relationships

as to Dialup USA, Inc. The objecting creditors desire that

these claims be adjudicated in the bankruptcy court. It is

likely that, at some time in the future, a final order of

bankruptcy will be entered with respect to CyberHighway. No

prediction of the timing of such an order can be made,

although we believe that such an order would come only after

the final adjudication of the claims described above.

 

The January 1999 acquisition of CyberHighway fundamentally

altered our company. Our annual revenues went from nearly

zero to about $2.5 million. Throughout 2000, operating

losses at CyberHighway, primarily personnel costs and leased

telephone-line charges, steadily increased, while revenues

began to decrease slightly each quarter. This trend

continued until September 2000.

 

As a means to achieve immediate cost savings at

CyberHighway, in September 2000, the following actions were

taken:

 

     - CyberHighway sold its affiliate-ISP business for

       $40,500, in cash; and

 

     - CyberHighway contracted with Dialup USA for all

       "backroom and customer support services, which

       took effect at the end of October 2000.

 

These actions did reduce monthly operating costs by

approximately $50,000.

 

However, the involuntary bankruptcy proceeding started the

demise of CyberHighway's business, in effect rendering

our September 2000 actions meaningless. Since that time,

CyberHighway's company-owned dial-up customer base has

gone from approximately 8,500 to none. The filing of the

involuntary bankruptcy and CyberHighway's switch-over

to the network of Dialup USA were the primary causes of

CyberHighway's customer base demise. We will not

apply any available future capital to the revitalization of

our dial-up Internet access business.

 

This sudden and permanent demise of CyberHighway's

customer base has rendered our intangible assets relating to

those customers to become worthless. The write-off of these

intangible assets totalled $4,814,272, net of deferred

taxes, as reflected in our December 31, 2000, financial

statements. Due to this change in operating environment,

monthly revenues have decreased substantially, and,

accordingly, goodwill has been impaired. The write-down of

goodwill totalled $4,425,037, as reflected in our December

31, 2000, balance sheet.

 

Shareholder Loans - Conversion to Equity

 

In August 2000, our president, David M. Loflin, converted

all loan amounts owed to him, including accrued interest,

into a total of 774,162 shares of our common stock. The

total amount of indebtedness converted to common stock was

$967,703. Since August 2000, Mr. Loflin has made small

loans to us to ease periods of restricted cash flow. At

March 31, 2001, we owed Mr. Loflin $32,728.

 

Results of Operations

 

General. By the end of February 2001, CyberHighway had

lost all of its dial-up Internet access customers and we do

not foresee the revitalization of CyberHighway's

business. You should not purchase our common stock

expecting that CyberHighway's business will assist in

making us profitable.

 

Our revenues for the first quarter of 2000 were derived

from CyberHighway's business. During the first

quarter of 2001, we derived no revenue from

CyberHighway's business.

 

For the first three months of 2001, our small amount of

revenues were dervied from our Quick-Cell wireless Internet

access system in Santa Fe, New Mexico. With the demise of

CyberHighway, any future revenues will be derived from sales

of our Quick-Cell wireless Internet access service. We

currently lack the capital necessary to pursue our

Quick-Cell business plan, and we may never possess enough

capital with which to exploit fully our Quick-Cell products.

In this circumstance, it is likely that we would never earn

a profit.

 

Before the demise of CyberHighway, our revenues were

derived primarily from monthly customer payments for dial-up

access and from per-customer royalty payments from our

CyberHighway affiliate-ISPs.

 

Beginning in March 2000, we began initial Quick-Cell

wireless Internet access operations in Santa Fe, New Mexico.

Currently, we have approximately 120 Quick-Cell customers.

Throughout 2000, these customers were in their one-year

"free-use" period. Beginning in March 2001, we

began to bill the customers who had completed their one-year

of free use. The lack of growth of our wireless Internet

access business during 2000 is due to the fact that our

available monies were applied to CyberHighway expenses and

corporate overhead. We had no available capital to apply to

the expansion of the Santa Fe market.

 

In the middle of 2000, we began marketing our Quick-Cell

systems to local exchange telephone companies, independent

telephone companies, digital subscriber line resellers and

Internet service providers. We sold three Quick-Cell

systems in a short time, and received approximately 200

additional indications of interest via e-mail and telephone

from other telecommunications companies and others, 25% of

which our management considered to be of a serious nature.

Due to a lack of capital, however, this marketing effort was

suspended before we investigated the nature of the other

inquiring companies. No paying customers use these systems,

due to circumstances involving these companies that are

beyond our control. During 2001, we do not expect to derive

significant revenues from customer modem sales to these

Quick-Cell purchasers.

 

In cities in which we construct company-owned Quick-Cell

systems, we intend to employ telephone marketing as the

initial means for acquiring customers and, later, mass

media. We will employ a sales force that will focus

primarily on potential business customers. This focus on

business customers is based on our management's

informal study of Internet usage by businesses versus home

users that revealed businesses' higher demand for

high-speed Internet access. Our management's decision

may prove to have been incorrect, which would significantly

impair our ability to earn a profit. Our management

believes, based on its collective business experience, that

effective marketing techniques can overcome

Quick-Cell's lack of name recognition, although this

belief may also prove to be incorrect. Our Quick-Cell

business will not be able to succeed without additional

capital.

 

In cities where a Quick-Cell reseller operates, we will not

have final approval of the reseller's marketing

strategies. Our resellers will be permitted to market our

Quick-Cell service in any commercially reasonable manner. We

cannot, therefore, assure you that any of our resellers will

ever achieve high enough sales levels that would permit us

to earn a profit.

 

Under our Quick-Cell reseller agreement with Wireless

WebConnect!, Inc., we expect to derive revenues as follows:

 

     - WebConnect's purchase of each Quick-Cell cell site;

 

     - WebConnect's purchase of all customer modems;

 

     - Charges for installation services on behalf of

       every customer acquired by WebConnect; and

 

     - Monthly per-Quick-Cell-customer royalties'

       while we anticipate that this monthly per-customer royalty

       will average approximately $12.00, we cannot assure you that

       the monthly per-customer will be that high; in any event,

       given the number of customers that can use a single

       Quick-Cell cell site, approximately 2,000, the lowest

       monthly per-customer royalty to be paid by WebConnect will

       be about $9.00.

 

We expect our revenues for all of 2001 to be significantly

below those of 2000, since we no longer will derive revenues

from the operations of CyberHighway. In 2001, we will

produce significant revenues only if:

 

     - our Quick-Cell reseller is as successful selling

       our wireless Internet access products as it has been

       in the past in reselling a competing wireless

       Internet access service; or

 

     - we are able to obtain at least $2,500,000 under the

       Fusion Capital agreement.

 

Our reseller may not be successful enough for us to make a

profit, nor can we assure you that funding under the Fusion

Capital agreement will permit us to make a profit.

 

Three Months Ended March 31, 2001, versus Three Months

Ended March 31, 2000. During the 2000 period, all of our

revenues were generated by CyberHighway's dial-up

Internet access operations. We derived our revenues from

monthly customer payments for dial-up Internet access, which

averaged approximately $18.00 per customer. We also derived

revenue from per-customer royalty payments from our

CyberHighway affiliate-ISPs, which averaged approximately

$1.75 per customer. This affiliate-ISP business was sold in

September 2000.

 

During the 2001 period, we had only small revenues from our

wireless Internet access business. We derived no revenues

from CyberHighway's operations. Whether or not we

obtain capital, our existing operations in Santa Fe will

increase slightly from month to month, as our customers end

their free-use periods and begin to pay for our wireless

Internet access services.

 

Our revenues for all of 2001 can be expected to be

significantly below our revenue levels of 2000. However,

due to uncertainties relating to the timing of receipt of

expected funds under the Fusion Capital agreement, we can

make no prediction of our actual revenues.

 

Our operating results for the first quarters of 2001 and

2000 are summarized in the following table:

 

                               First              First

                           Quarter 2001      Quarter 2000

 

     Revenues               $      384        $   597,392

     Internet access costs

      and cost of

      goods sold                     0            269,136

     Gross Profit                  384            328,256

     Operating Expenses        901,643          3,354,219

     Loss from Operations      901,259          3,025,963

     Net Loss                  901,259          2,557,596

 

Our net loss of $901,259 for the first quarter of 2001 was

significantly less than our net loss for the 2000 period of

$2,557,596. This reduced net loss is attributable primarily

to:

 

     - Depreciation and amortization decreasing from

$2,238,544 for the 2000 period to $11,580 for the 2001

period. This reduction is due to the demise of

CyberHighway's business and the write-off of all of

our intangible assets associated with that business, which

occurred during December 2000. We no longer amortize those

intangible assets.

 

     - Professional fees increased from $390,038 in the 2000

period to $707,288 in the 2001 period. This increase is due

to the issuance of 800,000 shares as a commitment fee under

a common stock purchase agreement, which shares were valued

at $248,000, as well as the monthly amortization of various

consulting agreements under which we issued stock for

services during 2000 and 2001.

 

     - Salary and commissions fell from $399,358 in 2000 to

$160,746 in 2001. Our lower salary and commissions during

2001 is attributable to CyberHighway's demise, its

personnel having been reduced from about 30 during the first

quarter of 2000 to none, now.

 

     - Rent expense decreased from $61,570 during the first

quarter of 2000 to $5,361 during the 2001 period. This

large decrease is the result of our abandoning all leased

premises of CyberHighway, following the filing of the

involuntary bankruptcy proceeding. Our monthly lease

expense for the remainder of 2001 will be higher, due to our

recent leasing of a small assembly facility in Baton Rouge,

Louisiana.

 

     - Other expenses fell from $249,530 in 2000 to $16,668

in 2001. The reduction in this line item is attributable to

the demise of CyberHighway's business, as well as our

severe lack of capital during the last half of 2000 and most

of the first quarter of 2001.

 

Our statements of operations reflect an income tax benefit

of $471,519 for the 2000 period and no such benefit for the

2001 period. This income tax benefit was attributable to

the difference in the bases of our acquired customer bases

for book versus tax purposes. Since our intangible assets

were completely written-off as of December 31, 2000, we no

longer derive any similar income tax benefit.

 

We expect that our results of operations for the second

quarter of 2001 will be similar to those of the first

quarter of 2001.

 

During the first quarter of 2001, we issued 320,000 shares

of common stock under two consulting agreements; these

shares were valued for financial accounting purposes at

$99,200, in the aggregate. This amount will be expensed in

equal monthly amounts during 2001. Subsequent to March 31,

2001, we issued 300,000 shares under a consulting agreement;

these shares have been valued for financial accounting

purposes at $150,000, in the aggregate, and will be expensed

in equal monthly amounts during the remainder of 2001 and

the first quarter of 2002.

 

During the first quarter of 2000, we issued 160,000 shares

of common stock under two separate consulting agreements;

these shares were valued for financial accounting purposes

at $480,000, in the aggregate. This amount was expensed in

equal monthly amounts during 2000.

 

Liquidity and Capital Resources

 

General. Since our inception, we have had a significant

working capital deficit. Following the CyberHighway

acquisition and until the recent demise of

CyberHighway's business, we generated significant

monthly revenues, yet continued to have a working capital

deficit. Currently, we are substantially illiquid, although

we do possess approximately $100,000 in cash, the result of

recent securities sales to private investors. Without

additional capital, it is possible that we would be forced

to cease operations.

 

Our Capital Needs. To sustain our current level of

operations for the next twelve months, we will require

additional capital of approximately $300,000. To accomplish

our goals of expanding our Quick-Cell business, we will

require at least $2.5 million. If we are unable to obtain

this needed capital, we could be forced to cease our

operations.

 

Currently we do not possess enough capital to accomplish

our goals for our Quick-Cell wireless Internet access

business, including the construction of Quick-Cell systems.

When we refer to the construction of a Quick-Cell system in

any city, that process requires the following expenditures:

 

     - A single Quick-Cell cell site, including a

Quick-Cell server modem, parts and configuration -

projected average cost: $25,000;

 

     - Tower lease site - projected average cost: $500 per month;

 

     - Direct T1 telephone line connection to the Internet -

projected average cost: $1,200 per month; and

 

     - Initial inventory of customer modems - approximate

cost: $70,000.

 

Each Quick-Cell cell site added to an existing system will

cost approximately $25,000 for the server modem, parts and

configuration, plus tower lease costs and, if customer usage

requires, the cost of a direct T1 telephone line connection

to the Internet.

 

Should we be able to obtain the minimum of $400,000 per

month pursuant to the Fusion Capital agreement, we would

have enough money to pay for the construction of the initial

Quick-Cell cell site in at least three markets per month.

We cannot assure you that we will be able to construct

Quick-Cell cell sites at that rate.

 

In light of the relatively small amount of capital required

to construct each Quick-Cell cell site, we believe that the

expected funding under the Fusion Capital agreement would

provide us with enough capital to construct the initial

Quick-Cell cell site and commence marketing activities in

approximately 60 markets. With the Quick-Cell construction

permitted by this amount of capital, we will be able to

determine whether our Quick-Cell wireless Internet access

business is a viable business, as presently offered.

However, the funds expected under the Fusion Capital

agreement will not be adequate for us to pursue our complete

Quick-Cell business plan, and we cannot assure you that we

will be able to obtain capital when needed. Our inability

to obtain further capital when needed would lessen our

chance of earning a profit, as we would become illiquid.

 

Expected Proceeds from the Fusion Capital Agreement.

Beginning near the end of the second quarter of 2001, we

expect to begin to receive the first funds of up to $10

million under our agreement with Fusion Capital. Assuming

we receive the entire $10 million under that agreement, of

which there is no assurance, we anticipate that we will

apply these funds as follows:

 

Purchase of Quick-Cell Equipment     $6,000,000

Construction of Quick-Cell Systems    1,300,000

Marketing                             1,000,000

General and Administrative Expenses     200,000

Finder's Fee                            800,000

Working Capital                         700,000

 

                        Total       $10,000,000

 

Should all of our outstanding warrants, including all of

the warrants to be issued in connection with the Fusion

Capital agreement, be exercised, we would receive cash

proceeds of approximately $2,540,000. Funds received from

the exercise of warrants would be used to purchase

Quick-Cell equipment, to construct Quick-Cell systems, to

market our Quick-Cell wireless Internet access service and

for working capital.

 

You should note that we may never receive any of the funds

discussed above. Our failure to obtain capital from these

sources could cause us to cease our operations.

 

March 31, 2001. Historically, we have had a significant

working capital deficit. At March 31, 2001, our working

capital deficit was $1,472,144, which is slightly lower than

our $1,517,164 deficit at December 31, 2000. Although we

had slightly higher accounts payable, accrued payroll and

notes payable to a shareholder at March 31, 2001, compared

to December 31, 2000, these increases were offset by our

receipt of cash pursuant to private sales of securities of

$251,000 during the first quarter of 2001. Most of our

accounts payable are accounts payable of CyberHighway.

Without additional capital, our working capital deficit can

be expected to become larger each quarter.

 

The following table sets forth our current assets and

current liabilities at March 31, 2001, and December 31,

2000:

 

                                   3/31/01        12/31/00

 

Current Assets    Cash            $125,494        $   1,088

                  Accounts

                   Receivable          384                0

                  Inventory        246,721          246,721

 

Current

 Liabilities      Disbursements

                   in excess of

                   cash balances  $ 42,469        $  42,469

                  Accounts

                   payable       1,473,817        1,472,030

                  Accrued

                   payroll         200,155          158,262

                  Other current

                   liabilities      51,824           41,824

                  Property divi-

                   dends payable    43,750           43,750

                  Notes payable

                   to stockholder   32,728            6,638

 

Our accrued payroll at March 31, 2001, as well as at

December 31, 2000, is attributable to accrued salary of our

president and two of our vice presidents.

 

The increase in notes payable to stockholder, from $6,638

at December 31, 2000, to $32,728 at March 31, 2001,

represents loans made to us by our president, David M.

Loflin. All of this indebtedness is due on demand and bears

interest at 8% per annum. The funds loaned during 1Q 2000

were used primarily for operating expenses. Mr. Loflin has

advised us that he does not intend to demand payment of his

loans, until their repayment would not adversely affect our

financial position. Without outside funding, it is possible

that Mr. Loflin may loan us additional funds, though no

assurance or prediction can be made in this regard.

 

In addition to Mr. Loflin's loans, during the first

quarter of 2001, we obtained a total of $261,000 in cash

from private sales of our securities.

 

- In February 2001, we sold 840,000 units of securities,

each unit being comprised of one share of our stock and one

warrant with an exercise price of $.15 per share, to a

private investor for $126,000 in cash. The warrants are

exercisable for a period of three years. In connection with

this sale of securities, we issued to a finder 84,000 shares

of our common stock and a warrant to purchase 336,000 shares

of our common stock at an exercise price of $.15 per share.

These warrants are exercisable for a period of three years.

The 84,000 shares issued to the finder were valued at $.15

per share, a total value of $12,600. No value was placed on

the warrants issued.

 

- In March 2001, we sold 500,000 units of securities, each

unit being comprised of one share of our stock and one

warrant with an exercise price of $.25 per share, to a

private investor for $125,000 in cash. The warrants are

exercisable for a period of three years. In connection with

this sale of securities, we issued to a finder 50,000 shares

of our common stock and a warrant to purchase 200,000 shares

of our common stock at an exercise price of $.25 per share.

These warrants are exercisable for a period of three years.

The 50,000 shares issued to the finder were valued at $.25

per share, a total value of $12,500. No value was placed on

the warrants issued.

 

The funds received were used for working capital and for

the initial costs associated with the establishment of a new

company-owned Quick-Cell wireless Internet access system.

 

Without obtaining at least $1,000,000 in new capital, we

will continue to have a significant working capital deficit

and will not be able to operate from a position of

liquidity. This will impair our ability to pursue our

Quick-Cell business plan and, thus, our ability ever to earn

a profit.

 

If we are unable to obtain significant additional capital,

it is possible that we would be forced to cease operations.

 

Cash Flows from Operating Activities. During the first

quarter of 2001, our operations used $162,684 in cash

compared to cash used of $305,779 during the first quarter

of 2000. In both periods, the use of cash in operations was

a direct result of the lack of revenues compared to our

operating expenses, particularly salary and commissions.

 

Cash Flows from Investing Activities. During the first

quarter of 2001, our investing activities neither provided

nor used cash. In the first quarter of 2000, we used cash

of $94,908 in our investing activities, where our equipment

purchases were offset, in part, by cash acquired in

acquisitions. Because we lack working capital, we cannot

predict our cash flows from investing activities for the

remainder of 2001.

 

Cash Flows from Financing Activities. For the first

quarter of 2001, our financing activities provided $287,090

in cash. Of this amount, $26,090 is attributable to loans

from our president and $261,000 is attributable to private

sales of securities. For the first quarter of 2000, our

financing activities provided $384,397 in cash, $115,000 of

which is attributable to private sales of our securities and

$286,400 of which is attributable to loans from our

president. We continue to seek capital and cannot,

therefore, predict future levels of cash flows from

financing activities.

 

Management's Plans Relating to Future Liquidity

 

To sustain our current level of operations for the next

twelve months, we will require additional capital of

approximately $300,000. To accomplish our goals of

expanding our Quick-Cell business, we will require at least

$2.5 million.

 

Our best opportunity for obtaining needed funds is pursuant

to the Fusion Capital agreement. The following summarizes

the important terms under the Fusion Capital agreement:

 

- Fusion Capital may purchase up to $10 million of our

common stock;

 

- The selling price to Fusion Capital will be equal to a

price based upon the future market price of the common stock

without any fixed discount to the market price;

 

- We have the right to require Fusion Capital to purchase

up to $20,000 each trading day during the agreement;

 

- Should our stock price be $5.00 or higher for five

consecutive trading days, we have the right to require

Fusion Capital to purchase up to the full remaining portion

of the $10 million commitment; and

 

 

- During the term of the Fusion Capital agreement, we may

not issue, or agree to issue, any variable-priced equity or

variable-priced "equity-like" securities, unless

we have obtained Fusion Capital's prior written consent.

 

We may never realize proceeds under the Fusion Capital

agreement.

 

Should we obtain at least $2.5 million under the Fusion

Capital agreement, we expect that we will be able to

accomplish our two primary objectives:

 

- Placing at least 20,000 customers on our Quick-Cell

systems during the next year; and

 

- proving the commercial viability of our Quick-Cell

wireless Internet access service.

 

We cannot assure you that we will accomplish these

objectives.

 

Currently, we have no other sources for funding on the

scale of the Fusion Capital transaction.

 

If we do not obtain the necessary funding, we would be

forced to cease operations.

 

Capital Expenditures

 

During 2000, we made approximately $195,000 in equipment

purchases, approximately 40% for wireless Internet equipment

and approximately 60% for needed equipment in our network

operations center. We currently have no capital with which

to make any significant capital expenditures. Should we

obtain funding under the Fusion Capital agreement, we will

be able to make major expenditures on Quick-Cell-related

equipment, as described above. However, without additional

capital, we will make no capital expenditures. During

Fiscal 1999, we made $614,193 in equipment purchases.

 

 

CERTAIN STATEMENTS CONTAINED IN THIS

"MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS" ARE

"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING

OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND

ARE, THUS, PROSPECTIVE. THESE FORWARD-LOOKING STATEMENTS

ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH

COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM FUTURE

RESULTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING

STATEMENTS. THE MOST SIGNIFICANT OF SUCH RISKS,

UNCERTAINTIES AND OTHER FACTORS IS OUR ABILITY TO OBTAIN

CAPITAL IN AMOUNTS NECESSARY FOR US TO ACCOMPLISH OUR PLAN

FOR THE EXPLOITATION OF OUR QUICK-CELL WIRELESS INTERNET

ACCESS PRODUCTS, AS WELL AS CONSUMER ACCEPTANCE OF THESE

PRODUCTS.

 

                PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

CyberHighway Involuntary Bankruptcy

 

On September 29, 2000, an involuntary bankruptcy petition

was filed against CyberHighway in the Idaho Federal

Bankruptcy Court, styled In Re: CyberHighway, Inc., Case No.

00-02454. The petitioning creditors were ProPeople

Staffing, CTC Telecom, Inc. and Hawkins-Smith. In December

2000, CyberHighway and the petitioning creditors filed a

joint motion to dismiss this proceeding. The joint motion

to dismiss requires the approval of CyberHighway's

creditors. However, some of CyberHighway's creditors

have objected to the dismissal of the proceeding. The basis

of the creditors' objection is their belief that

CyberHighway's as-yet unasserted damage claims against

the original petitioning creditors and their law firm and a

claim against Dialup USA, Inc. represent

CyberHighway's most valuable assets. These as-yet

unasserted claims include claims for bad faith filing of the

original bankruptcy petition as to the original petitioning

creditors and their law firm, as well as claim for tortious

interference with beneficial business relationships as to

Dialup USA, Inc. The objecting creditors desire that these

claims be adjudicated in the bankruptcy court. It is likely

that, at some time in the future, a final order of

bankruptcy will be entered with respect to CyberHighway, no

prediction of the timing of such an order can be made,

although we believe that such an order would come only after

the final adjudication of the claims described above.

 

Other Litigation

 

In November 2000, CyberHighway requested and received a

temporary restraining order against Darrell Davis, formerly

one of our officers, and his wife, Deanna Davis. We have

alleged that the Davises have diverted dial-up customers

from CyberHighway to a company controlled by him, all while

he was an employee of USURF America. We expect that a

hearing for our motion for a permanent injunction will occur

in the very near future. In addition, we are seeking

monetary damages in this action. This case is in its early

stages and no prediction as to its final outcome can be

made. This case is styled: CyberHighway, Inc. versus Deanna

Davis, individually and d/b/a Cyber-Trail, Inc., and Darrell

D. Davis, 19th Judicial District Court, Parish of East Baton

Rouge, State of Louisiana.

+OK Message follows

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From: Stephanie Edwards <sedwards@sabrerealty.com>

To: "'Michelle \"Roni\"  Wiseman'" <michelle.wiseman@airmail.net>

Subject: Super Staples

Date: Mon, 14 May 2001 15:20:52 -0500

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Content-Type: text/plain; charset="us-ascii"

Content-Transfer-Encoding: quoted-printable

X-Airmail-Delivered: Mon, 14 May 2001 16:01:52 -0500 (CDT)

X-Airmail-Spooled:   Mon, 14 May 2001 15:24:58 -0500 (CDT)

 

Hey, so remind me---which brand of staples were our "super staples?"  I =

am in dire need...

 

Also, on an unrelated subject, check out this website:

 

www.tenayas.com

 

They have a new location at Park & the Tollway & they take reservations =

for weekday lunches.  I'm going tomorrow & will let you know how it is.  =

The menu looks interesting!

 

R

During the three months ended March 31, 2001, we issued

securities as follows:

 

     1.(a) Securities Sold. In January 2000, we issued

800,000 shares of Common Stock.

       (b) Underwriters and Other Purchasers. Such shares

were issued to Fusion Capital Fund II, LLC.

       (c) Consideration. Such shares were issued as a

commitment fee under a common stock purchase agreement and

were valued at $.31 per share.

       (d) Exemption from Registration Claimed. The Company

relied upon the exemption from registration afforded by

Section 4(2) of the Securities Act of 1933, as amended, but

this exemption may not have been available

       (e) Terms of Conversion or Exercise. Not applicable.

 

  2. (a) Securities Sold. In January 2001, 200,000 shares

of Company Common Stock were issued.

     (b) Underwriter or Other Purchasers. Such shares of

Common Stock were issued to Fair Market, Inc.

     (c) Consideration. Such shares of Common Stock were

issued pursuant to a letter agreement, at a price of $.375

per share.

     (d) Exemption from Registration Claimed. The Company

relied upon the exemption from registration afforded by

Section 4(2) of the Securities Act of 1933, as amended, but

this exemption may not have been available.

     (e) Terms of Conversion or Exercise. Not applicable.

 

  3. (a) Securities Sold. In January 2001, 120,000 shares

of Company Common Stock were issued.

     (b) Underwriter or Other Purchasers. Such shares of

Common Stock were issued to Nostas/Faessel Group.

     (c) Consideration. Such shares of Common Stock were

issued pursuant to a letter agreement, at a price of $.375

per share.

     (d) Exemption from Registration Claimed. The Company

relied upon the exemption from registration afforded by

Section 4(2) of the Securities Act of 1933, as amended, but

this exemption may not have been available.

     (e) Terms of Conversion or Exercise. Not applicable.

 

  4. (a) Securities Sold. In January 2001, 20,000 shares

of Company Common Stock were issued.

     (b) Underwriter or Other Purchasers. Such shares of

Common Stock were issued to CyberHighway of North Georgia.

     (c) Consideration. Such shares of Common Stock were

issued pursuant to a letter agreement, at a price of $.375

per share.

     (d) Exemption from Registration Claimed. The Company

relied upon the exemption from registration afforded by

Section 4(2) of the Securities Act of 1933, as amended, but

this exemption may not have been available.

     (e) Terms of Conversion or Exercise. Not applicable.

 

  5. (a) Securities Sold. In January 2001, 10,000 shares

of Company Common Stock were issued.

     (b) Underwriter or Other Purchasers. Such shares of

Common Stock were issued to Fusion Capital Fund II, LLC.

     (c) Consideration. Such shares of Common Stock were

issued pursuant to a letter agreement, at a price of $.375

per share.

     (d) Exemption from Registration Claimed. The Company

relied upon the exemption from registration afforded by

Section 4(2) of the Securities Act of 1933, as amended, but

this exemption may not have been available.

     (e) Terms of Conversion or Exercise. Not applicable.

 

  6. (a) Securities Sold. In February 2001, 840,000 shares

of Company Common Stock were issued.

     (b) Underwriter or Other Purchasers. Such shares of

Common Stock were issued to Claymore Asset Management Group

Ltd.

     (c) Consideration. Such shares of Common Stock were

issued pursuant to a securities purchase agreement, at a

price of $.15 per share.

     (d) Exemption from Registration Claimed. These

securities are exempt from registration under the Securities

Act of 1933, as amended, pursuant to the provisions of

Regulation S thereunder.

     (e) Terms of Conversion or Exercise. Not applicable.

 

  7. (a) Securities Sold. In February 2001, 840,000 common

stock purchase warrants of the Company were issued.

     (b) Underwriter or Other Purchasers. Such warrants

were issued to Claymore Asset Management Group Ltd.

     (c) Consideration. Such warrants were issued for no

additional consideration pursuant to a securities purchase

agreement.

     (d) Exemption from Registration Claimed. These

securities are exempt from registration under the Securities

Act of 1933, as amended, pursuant to the provisions of

Regulation S thereunder.

      (e) Terms of Conversion or Exercise. Exercise price

of the warrants is $.15 per share and exercisable for a

period of three years from issuance.

 

  8. (a) Securities Sold. In February 2001, 84,000 shares

of Company Common Stock were issued.

     (b) Underwriter or Other Purchasers. Such shares of

Common Stock were issued to Shelter Capital Ltd.

     (c) Consideration. Such shares of Common Stock were

issued pursuant to a finder's fee agreement, at a

price of $.15 per share.

     (d) Exemption from Registration Claimed. These

securities are exempt from registration under the Securities

Act of 1933, as amended, pursuant to the provisions of

Regulation S thereunder.

     (e) Terms of Conversion or Exercise. Not applicable.

 

  9. (a) Securities Sold. In February 2001, 336,000 common

stock purchase warrants of the Company were issued.

     (b) Underwriter or Other Purchasers. Such warrants

were issued to Shelter Capital Ltd.

     (c) Consideration. Such warrants were issued for no

additional consideration pursuant to a finder's fee

agreement.

     (d) Exemption from Registration Claimed. These

securities are exempt from registration under the Securities

Act of 1933, as amended, pursuant to the provisions of

Regulation S thereunder.

      (e) Terms of Conversion or Exercise. Exercise price

of the warrants is $.15 per share and exercisable for a

period of three years from issuance.

 

  10. (a) Securities Sold. In March 2001, 500,000 shares

of Company Common Stock were issued.

     (b) Underwriter or Other Purchasers. Such shares of

Common Stock were issued to Atlas Securities Inc.

     (c) Consideration. Such shares of Common Stock were

issued pursuant to a securities purchase agreement, at a

price of $.25 per share.

     (d) Exemption from Registration Claimed. These

securities are exempt from registration under the Securities

Act of 1933, as amended, pursuant to the provisions of

Regulation S thereunder.

     (e) Terms of Conversion or Exercise. Not applicable.

 

  11. (a) Securities Sold. In March 2001, 500,000 common

stock purchase warrants of the Company were issued.

     (b) Underwriter or Other Purchasers. Such warrants

were issued to Atlas Securities Inc.

     (c) Consideration. Such warrants were issued for no

additional consideration pursuant to a securities purchase

agreement.

     (d) Exemption from Registration Claimed. These

securities are exempt from registration under the Securities

Act of 1933, as amended, pursuant to the provisions of

Regulation S thereunder.

     (e) Terms of Conversion or Exercise. Exercise price of

the warrants is $.25 per share and exercisable for a period

of three years from issuance.

 

  12. (a) Securities Sold. In December 2000, 50,000 shares

of Company Common Stock were issued.

     (b) Underwriter or Other Purchasers. Such shares of

Common Stock were issued to Shelter Capital Ltd.

     (c) Consideration. Such shares of Common Stock were

issued pursuant to a finder's fee agreement, at a

price of $.25 per share.

     (d) Exemption from Registration Claimed. These

securities are exempt from registration under the Securities

Act of 1933, as amended, pursuant to the provisions of

Regulation S thereunder.

     (e) Terms of Conversion or Exercise. Not applicable.

 

  13. (a) Securities Sold. In December 2000, 200,000

common stock purchase warrants of the Company were issued.

     (b) Underwriter or Other Purchasers. Such warrants

were issued to Shelter Capital Ltd.

     (c) Consideration. Such warrants were issued for no

additional consideration pursuant to a finder's fee

agreement.

     (d) Exemption from Registration Claimed. These

securities are exempt from registration under the Securities

Act of 1933, as amended, pursuant to the provisions of

Regulation S thereunder.

      (e) Terms of Conversion or Exercise. Exercise price

of the warrants is $.25 per share and exercisable for a

period of three years from issuance.

 

Subsequent to March 31, 2001, the Company has issued

unregistered securities, as follows:

 

     1.(a) Securities Sold. In April 2000, we issued

300,000 shares of Common Stock.

       (b) Underwriters and Other Purchasers. Such shares

were issued to IBC.TV, LLC.

       (c) Consideration. Such shares were sold for cash in

the amount of $.50 per share.

       (d) Exemption from Registration Claimed. The Company

relied upon the exemption from registration afforded by

Section 4(2) of the Securities Act of 1933, as amended, but

this exemption may not have been available.

       (e) Terms of Conversion or Exercise. Not applicable.

 

Item 3. Defaults upon Senior Securities.

 

     None.

 

Item 4. Submission of Matters to a Vote

          of Security Holders.

 

     None.

 

Item 5. Other Information.

 

     None.

 

Item 6. Exhibits and Reports on Form 8-K.

 

     (a) Exhibits.

 

          None.

 

     (b) Reports on From 8-K.

 

          During the three months ended March 31, 2001, on

          or about March 14, 2001, we filed a Current

          Report on Form 8-K in which we reported the

          resignation of one of our directors.

 

          Subsequent to March 31, 2001, on or about April

          5, 2001, we filed a Current Report on Form 8-K

          in which we made disclosure pursuant to

          Regulation FD.

 

                          SIGNATURES

 

In accordance with the requirements of the Securities

Exchange Act of 1934, Registrant has duly caused this report

to be signed on its behalf by the undersigned, thereunto

duly authorized.

 

      Dated: May 14, 2001.

 

                        USURF AMERICA, INC.

 

 

                        By: /s/ David M. Loflin

                              David M. Loflin

                              President and Acting

                              Principal Financial Officer