UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

|X|   Quarterly Report Under Section 13 or 15(d) of the Securities  Exchange Act
      of 1934

                For the quarterly period ended September 30, 2004

|_|   Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
      of 1934

             For the transition period from _________ to __________.

                          COMMISSION FILE NO. 001-15383

                               USURF AMERICA, INC.
        (Exact name of small business issuer as specified in its charter)

          NEVADA                                                91-2117796
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                            Identification Number)

           6005 DELMONICO DRIVE, SUITE 140, COLORADO SPRINGS, CO 80919
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (719) 260-6455
       ------------------------------------------------------------------

Check whether the issuer filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter  period
that the registrant was required to file such reports),  and has been subject to
such filing requirements for the past 90 days  |X| Yes |_| No

      As of  December 10, 2004, there were  201,960,088  shares of the  issuer's
outstanding common stock.

      Transitional Small Business Disclosure Format (Check One): [ ] Yes [X] No


                                       1
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                      USURF AMERICA, INC. AND SUBSIDIARIES

                              FINANCIAL STATEMENTS
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                     PAGE
<S>                                                                                                                    <C>
Consolidated Balance Sheets as of September 30, 2004 (Unaudited) and December 31, 2003                                 3

Consolidated Statements of Operations for the three months ended September 30, 2004 and 2003 (Unaudited) and the
nine months ended September 30, 2004 and 2003 (Unaudited)                                                              5

Consolidated Statements of Cash Flows for the nine months ended September 30, 2004 and 2003 (Unaudited)                6

Notes to Consolidated Financial Statements                                                                             9
</TABLE>


                                       2
<PAGE>

                      USURF AMERICA, INC. AND SUBSIDIARIES
                           COLORADO SPRINGS, COLORADO
                           CONSOLIDATED BALANCE SHEETS
                                DECEMBER 31, 2003
                             AND SEPTEMBER 30, 2004

                                     ASSETS

                                                    (UNAUDITED)
                                                      9/30/04       12/31/03
                                                    -----------    -----------
CURRENT ASSETS
  Cash and cash equivalents                         $   260,795    $    72,597
  Marketable securities                                 200,000        280,000
  Securities receivable                                 440,000            -0-
  Accounts receivable                                   253,707         69,205
  Financing Costs net of $210,183 of amortization       492,217            -0-
  Inventory                                              31,795         71,906
  Deposits and other assets                              52,075         44,910
                                                    -----------    -----------
    Total Current Assets                              1,730,589        538,618
                                                    -----------    -----------

PROPERTY AND EQUIPMENT
  Cost                                                1,309,863        681,511
  Less: accumulated depreciation                       (312,056)       (98,836)
                                                    -----------    -----------
    Total Property and Equipment                        997,807        582,675
                                                    -----------    -----------

INTANGIBLES                                           3,981,416        909,932
                                                    -----------    -----------

OTHER LONG TERM ASSETS                                   20,000        805,000
                                                    -----------    -----------

TOTAL ASSETS                                        $ 6,729,812    $ 2,836,225
                                                    -----------    -----------

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


                                       3
<PAGE>

                      USURF AMERICA, INC. AND SUBSIDIARIES
                           COLORADO SPRINGS, COLORADO
                           CONSOLIDATED BALANCE SHEETS
                                DECEMBER 31, 2003
                             AND SEPTEMBER 30, 2004

                      LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                   (UNAUDITED)
                                                                                     9/30/04        12/31/03
                                                                                   ------------    ------------
CURRENT LIABILITIES
<S>                                                                                <C>             <C>
  Notes payable, current portion (Net of unamortized discount of $225,383)         $  1,869,617    $    168,300
  Accounts payable
                                                                                        717,468         429,954
  Accrued liabilities and payroll                                                       186,660         119,825
  Other current liabilities                                                             393,759         156,379
  Customer deposits                                                                      14,270          17,867
  Deferred Revenues                                                                     259,971         403,333
                                                                                   ------------    ------------
    Total Current Liabilities                                                         3,441,745       1,295,658
                                                                                   ------------    ------------

LONG TERM LIABILITIES
  Notes payable (Net of unamortized discount of $134,932)                             2,190,068             -0-
                                                                                   ------------    ------------
    Total Long Term Liabilities                                                       2,190,068             -0-
                                                                                   ------------    ------------

STOCKHOLDERS' EQUITY
   Preferred stock, $.0001 par value; Authorized: 100,000,000, none
       Outstanding
  Common stock, $.0001 par value; Authorized: 400,000,000 shares;
    Issued and outstanding: 177,861,835 at September 30, 2004 and 114,684,486 at
    December 31, 2003                                                                    17,787          11,468
  Additional paid-in capital                                                         57,632,847      47,159,317
  Accumulated deficit                                                               (56,310,384)    (43,861,845)
  Deferred consulting                                                                   (62,251)     (1,608,373)
  Other comprehensive loss                                                             (180,000)       (160,000)
                                                                                   ------------    ------------
    Total Stockholders' Equity                                                        1,097,999       1,540,567
                                                                                   ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                         $  6,729,812    $  2,836,225
                                                                                   ------------    ------------
</TABLE>

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


                                       4
<PAGE>

                      USURF AMERICA, INC. AND SUBSIDIARIES
                           COLORADO SPRINGS, COLORADO
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                  NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                      Three Months Ended                 Nine Months Ended
                                                         September 30,                     September 30,
                                                     2004              2003            2004             2003
                                                  (Unaudited)       (Unaudited)     (Unaudited)      (Unaudited)
                                                 -------------    -------------    -------------    -------------
<S>                                              <C>              <C>              <C>              <C>
REVENUES
   Revenues                                      $   2,638,971    $     165,278    $   5,098,714    $     236,448
   Internet access costs, cost of goods sold          (918,791)        (103,391)      (2,471,969)        (131,070)
                                                 -------------    -------------    -------------    -------------
   Gross profit                                      1,720,180           61,887        2,626,745          105,378
                                                 -------------    -------------    -------------    -------------

OPERATING EXPENSES
  Professional fees                                  1,438,637          200,529        4,283,727          754,837
  Salaries and commissions                             467,475          256,246        1,030,871          582,086
  Rent                                                  23,043           30,923           95,001           78,033
  Depreciation and amortization                        303,674           41,040          717,293           67,902
  Other general and administrative                   1,401,953          296,422        2,993,418          604,588
                                                 -------------    -------------    -------------    -------------
    Total Operating Expenses                         3,634,782          825,160        9,120,309        2,087,446
                                                 -------------    -------------    -------------    -------------

LOSS FROM OPERATIONS                                (1,914,603)        (763,273)      (6,493,565)      (1,982,068)
                                                 -------------    -------------    -------------    -------------

OTHER (EXPENSE)
  Accretion of interest expense on convertible
  debt                                                (206,011)             -0-         (990,036)             -0-
  Other expense                                        (30,818)             548          (55,112)             556
  Write off of other assets and
    reclassification of related expenses            (3,273,258)      (3,273,258)
  Gain (loss) on debt modification                  (1,568,688)             -0-       (1,568,688)             -0-
  Gain (loss) on disposition of asset                  (24,234)             -0-           75,613              -0-
  Interest expense                                     (80,425)          (9,283)        (143,494)          (9,283)
                                                 -------------    -------------    -------------    -------------
    Total Other Expense                             (5,183,434)          (8,735)      (5,954,974)          (8,727)
                                                 -------------    -------------    -------------    -------------

NET LOSS                                            (7,098,037)        (772,008)     (12,448,539)      (1,990,795)
                                                 -------------    -------------    -------------    -------------

Imputed dividend attributable to rights
  applicable to certain shareholders                  (850,000)             -0-         (850,000)             -0-
                                                 -------------    -------------    -------------    -------------

NET LOSS APPLICABLE TO OTHER SHAREHOLDERS        $  (7,948,037)   $    (772,008)   $ (13,298,539)   $  (1,990,795)
                                                 -------------    -------------    -------------    -------------

Net loss per common share                        $     (0.0453)   $     (0.0083)   $     (0.0853)   $     (0.0240)
                                                 -------------    -------------    -------------    -------------

Weighted average number of shares outstanding      175,491,835       93,359,842      155,878,255       83,109,557
                                                 -------------    -------------    -------------    -------------
</TABLE>

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


                                       5
<PAGE>

                      USURF AMERICA, INC. AND SUBSIDIARIES
                           COLORADO SPRINGS, COLORADO
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                               Nine Months Ended September 30,
                                                                                   2004            2003
                                                                                (Unaudited)    (Unaudited)
                                                                               ------------    ------------
<S>                                                                            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                                     $(12,448,539)   $ (1,990,795)
  Adjustments to reconcile net loss to net cash used in operating activities
    Depreciation and amortization                                                   717,292          67,902
    Consulting and other fees paid with stock                                     4,249,931       1,183,511
    Accretion of interest expense on convertible debt                               990,036             -0-
    Loss on debt modification                                                     1,568,688             -0-
    Write off advances                                                            1,830,000             -0-
     Loss on Sale of assets for securities                                          (99,847)            -0-

  Changes in operating assets and liabilities
    Accounts receivable                                                            (184,502)        (66,342)
    Marketable Securities and Securities Receivable                                 (80,000)            -0-
    Inventory                                                                        40,111          (1,383)
    Accounts payable                                                                287,514         130,996
    Accrued Payroll                                                                 (73,640)            -0-
    Accrued Interest                                                                140,475             -0-
    Deferred revenue                                                               (198,312)            -0-
    Other assets and  liabilities                                                  (485,894)         12,268
                                                                               ------------    ------------
      Net cash used in operating activities                                      (3,190,063)       (663,843)
                                                                               ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Capital expenditures for property and equipment                                 (709,412)       (384,715)
   Cash paid for other assets                                                    (1,045,000)            -0-
   Cash paid for intangibles and other long term assets                          (1,319,028)        (28,434)
                                                                               ------------    ------------
    Net cash used in investing activities                                        (3,073,440)       (413,149)
                                                                               ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Disbursement for notes receivable                                                (111,300)       (332,000)
  Payments on subscriptions receivable                                                  -0-        (468,875)
  Proceeds from notes payable                                                     4,963,000          (1,000)
  Issuance of common stock for cash                                               1,600,000       1,433,876
  Warrants exercised                                                                    -0-         593,732
                                                                               ------------    ------------
    Net cash provided by financing activities                                     6,451,700       1,225,733
                                                                               ------------    ------------

    Net increase in cash and cash equivalents                                       188,198         148,741
  Cash and cash equivalents, beginning of period                                     72,597         111,568
                                                                               ------------    ------------
  Cash and cash equivalents, end of period                                     $    260,795    $    260,309
                                                                               ------------    ------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest                                                       $      3,019            $-0-
                                                                               ------------    ------------
  Stock issued for acquisition of assets                                       $  2,656,999    $    531,720
                                                                               ------------    ------------
</TABLE>

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


                                       6
<PAGE>

SUPPLEMENTAL DISCLOSURE
OF NON-CASH INVESTING AND
OTHER CASH FLOW INFORMATION

NINE MONTHS ENDED SEPTEMBER 30, 2004

      In January  2004,  the Company  issued  57,550  shares  under a consulting
      agreement, which shares were valued at $13,812.00.

      In January  2004,  the Company  issued  55,380  shares  under a consulting
      agreement, which shares were valued at $13,291.00.

      In January  2004,  the Company  issued  28,000  shares  under a consulting
      agreement, which shares were valued at $7,840.00.

      In January  2004,  the Company  issued  246,000  shares under a consulting
      agreement, which shares were valued at $59,040.00.

      In January  2004,  the Company  issued  130,000  shares under a consulting
      agreement, which shares were valued at $24,000.00.

      In January  2004,  the Company  issued  273,000  shares under a consulting
      agreement, which shares were valued at $65,520.00.

      In January  2004,  the Company  issued  320,000  shares under a consulting
      agreement, which shares were valued at $76,800.00.

      In January  2004,  the Company  issued  300,000  shares under a consulting
      agreement, which shares were valued at $72,000.00.

      In January  2004,  the Company  issued  175,000  shares under a consulting
      agreement, which shares were valued at $43,750.00.

      In January  2004,  the Company  issued  61,000  shares  under a consulting
      agreement, which shares were valued at $14,640.00.

      In January  2004,  the Company  issued  61,000  shares  under a consulting
      agreement, which shares were valued at $14,640.00.

      In January  2004,  the Company  issued  612,350  shares under a consulting
      agreement, which shares were valued at $89,490.00.

      In January  2004,  the Company  issued  66,500  shares  under a consulting
      agreement, which shares were valued at $11,280.00.

      In January 2004, the Company issued 134,000 shares to a new employee as an
      inducement to employment, which shares were valued at $36,180.00.

      In February  2004,  the Company  issued  49,150  shares under a consulting
      agreement, which shares were valued at $13,762.00.

      In February  2004,  the Company  issued  34,000  shares under a consulting
      agreement, which shares were valued at $9,520.00.

      In February  2004,  the Company  issued  25,000  shares under a consulting
      agreement, which shares were valued at $7,000.00.


                                       7
<PAGE>

      In February  2004,  the Company  issued  81,600  shares under a consulting
      agreement, which shares were valued at $22,848.00.

      In February  2004,  the Company  issued  73,500  shares under a consulting
      agreement, which shares were valued at $20,580.00.

      In February  2004,  the  Company  issued  75,000  shares to an employee as
      compensation for services rendered, which shares were valued at $5,250.00.

      In February  2004,  the  Company  issued  50,000  shares to an employee as
      compensation   for  services   rendered,   which  shares  were  valued  at
      $11,000.00.

      In February  2004,  the  Company  issued  60,000  shares to an employee as
      compensation for services rendered, which shares were valued at $9,600.00.

      In February  2004,  the Company  issued  250,000  shares  under a one-year
      consulting  agreement for services rendered during 2003, which shares were
      valued at $17,500.00.

      In February  2004,  the Company  issued  300,000  shares  under a one-year
      consulting  agreement for services rendered during 2004, which shares were
      valued at $72,000.00.

      In February  2004,  the Company  issued  600,000 shares as full payment of
      principal and accrued  interest under a promissory note, which shares were
      valued at $96,000.00.

      In February 2004, the Company issued 1,514,500 shares to a new employee as
      an inducement to employment, which shares were valued at $302,900.00.

      In February 2004, the Company issued 1,514,500 shares to a new employee as
      an inducement to employment, which shares were valued at $302,900.00.

      In February  2004,  the Company issued 160,000 shares to a new employee as
      an inducement to employment, which shares were valued at $32,000.

      In February  2004,  the Company issued 120,000 shares to a new employee as
      an inducement to employment, which shares were valued at $24,000.00.

      In February  2004,  the Company issued 120,000 shares to a new employee as
      an inducement to employment, which shares were valued at $24,000.00.

      In February  2004,  the Company issued 200,000 shares to a new employee as
      an inducement to employment, which shares were valued at $40,000.00.

      In February 2004,  the Company  issued  431,818 shares to acquire  certain
      assets, which shares were valued at $95,000.

      In February 2004, the Company issued  1,188,679  shares to acquire certain
      assets, which shares were valued at $199,698.

      In February 2004,  the Company  issued  282,031 shares to acquire  certain
      assets, which shares were valued at $47,381.

      In February  2004,  the Company  issued 39,189  shares to acquire  certain
      assets, which shares were valued at $6,584.


                                       8
<PAGE>

      In February 2004,  the Company  issued  849,786 shares to acquire  certain
      assets, which shares were valued at $142,764.

      In February 2004,  the Company  issued  494,482 shares to acquire  certain
      assets, which shares were valued at $83,073.

      In March 2004, the Company issued 50,000 shares to a vendor as payment for
      services  rendered or to be rendered,  which shares were valued at $3,000.
      In April 2004, the Company  issued  1,333,334  shares to obtain  exclusive
      licensing  rights in certain  intellectual  property,  which  shares  were
      valued at $200,000.

      In April 2004, the Company issued 14,250,000 shares to acquire a business,
      which shares were valued at $1,425,000.

      In April  2004,  the  Company  issued  450,000  shares to an  employee  as
      compensation for services rendered, which shares were valued at $27,000.

      In April  2004,  the  Company  issued  375,000  shares to an  employee  as
      compensation for services rendered, which shares were valued at $22,500.

      In April 2004, the Company  issued 250,000 shares to a former  employee as
      compensation for services rendered, which shares were valued at $15,000.

      In April  2004,  the  Company  issued  125,000  shares to an  employee  as
      compensation for services rendered, which shares were valued at $7,500.

      In April  2004,  the  Company  issued  175,000  shares to an  employee  as
      compensation for services rendered, which shares were valued at $10,500.

      In April 2004, the Company issued  1,250,000 shares to acquire a business,
      which shares were valued at $90,000.

      In May 2004,  the  Company  issued  1,000,000  shares  under a  consulting
      agreement  for  services to be rendered  during  2004,  which  shares were
      valued at $120,000.

      In May 2004, the Company issued  1,000,000  shares to a new employee as an
      inducement to employment, which shares were valued at $100,000.

      In May 2004, the Company issued  1,000,000  shares to a new employee as an
      inducement to employment, which shares were valued at $100,000.

      In May 2004, the Company issued  1,000,000  shares to a new employee as an
      inducement to employment, which shares were valued at $100,000.

      In  May  2004,  the  Company  issued  400,000  shares  to an  employee  as
      compensation for services rendered, which shares were valued at $40,000.

      In May 2004, the Company issued 50,000 shares for professional services to
      be rendered during 2004, which shares were valued at $5,000.

      In May 2004, the Company  issued  625,000  shares for consulting  services
      rendered in  connection  with a business  acquisition,  which  shares were
      valued at $75,000.

      In June 2004, the Company issued 122,000 shares to a vendor as payment for
      services rendered or to be rendered, which shares were valued at $12,200.


                                       9
<PAGE>

      In June 2004, the Company  issued  475,000 shares for consulting  services
      rendered in  connection  with a financing  transaction,  which shares were
      valued at $47,500.

      In June 2004, the Company  issued  250,000 shares for consulting  services
      rendered in  connection  with a financing  transaction,  which shares were
      valued at $25,000.

      In June 2004, the Company  issued  275,000 shares for consulting  services
      rendered in  connection  with a financing  transaction,  which shares were
      valued at $27,500.

      In June 2004,  the Company  issued  100,000 shares to an employee as bonus
      compensation  for services  rendered in 2003,  which shares were valued at
      $10,000.

      In June 2004,  the Company  issued  25,000  shares to an employee as bonus
      compensation  for services  rendered in 2003,  which shares were valued at
      $2,500.

      In June 2004,  the Company  issued  15,000  shares to an employee as bonus
      compensation  for services  rendered in 2003,  which shares were valued at
      $1,500.

      In June 2004,  the Company  issued  50,000  shares to an employee as bonus
      compensation  for services  rendered in 2003,  which shares were valued at
      $5,000.

      In June 2004,  the Company  issued  15,000  shares to an employee as bonus
      compensation  for services  rendered in 2003,  which shares were valued at
      $1,500.

      In June 2004,  the Company  issued  15,000  shares to an employee as bonus
      compensation  for services  rendered in 2003,  which shares were valued at
      $1,500.

      In June 2004, the Company issued 600,000 shares for professional  services
      to be rendered during 2004, which shares were valued at $60,000.

      In June 2004, the Company  issued  950,000 shares for consulting  services
      rendered in  connection  with a business  acquisition,  which  shares were
      valued at $95,000.

      In June 2004, the Company  issued  750,000 shares for consulting  services
      rendered in  connection  with a business  acquisition,  which  shares were
      valued at $75,000.

      In June 2004,  the Company  issued  2,000,000  shares  under a  consulting
      agreement  for  services to be rendered  during  2004,  which  shares were
      valued at $200,000.

      In June 2004, the Company  issued  250,000 shares for consulting  services
      rendered in  connection  with a business  acquisition,  which  shares were
      valued at $25,000.

      In June 2004, the Company  issued  154,000 shares for consulting  services
      rendered in  connection  with a business  acquisition,  which  shares were
      valued at $15,030.

      In June 2004,  the Company  issued 175,000 shares to a vendor for services
      to be rendered during the next twelve months,  which shares were valued at
      $17,500.

      In June 2004,  the Company  issued 175,000 shares to a vendor for services
      to be rendered during the next twelve months,  which shares were valued at
      $17,500.

      In June  2004,  the  Company  issued  280,000  shares  to an  employee  as
      compensation  for services  rendered during the first half of 2004,  which
      shares were valued at $21,000.

      In June  2004,  the  Company  issued  480,000  shares  to an  employee  as
      compensation  for services  rendered during the first half of 2004,  which
      shares were valued at $36,000.


                                       10
<PAGE>

      In June  2004,  the  Company  issued  200,000  shares  to an  employee  as
      compensation  for services  rendered during the fourth quarter of 2003 and
      the first quarter of 2004, which shares were valued at $40,000.

      In July 2004, the Company  issued 80,000 shares for  consulting  services,
      which shares were valued at $5,600.

      In  September  2004,  the  Company  issued  75,000  shares for  consulting
      services, which shares were valued at $13,500.

      In September  2004,  the Company  issued  2,200,000  shares for consulting
      services, which shares were valued at $132,000.

      In September  2004,  the Company  issued  1,200,000  shares for consulting
      services, which shares were valued at $72,000.

NINE MONTHS ENDED SEPTEMBER 30, 2003

      In March 2003,  the Company  issued  2,500,000  shares as a commitment fee
      under a common  stock  purchase  agreement,  which  shares  were valued at
      $75,000.

      In July  2003,  the  Company  issued  75,000  shares  under  a  consulting
      agreement, which shares were valued at $14,250.

      In July  2003,  the  Company  issued  100,000  shares  under a  consulting
      agreement, which shares were valued at $17,000.

      In August  2003,  the Company  issued  3,000,000  shares  under an amended
      one-year consulting agreement, which shares were valued at $480,000.

      In August 2003,  the Company  issued 333,333 shares in payment of a $4,800
      account payable and $45,200 of future  services,  which shares were valued
      at $50,000.

      In  September  2003,  the  Company  issued  1,650,000  shares  to  certain
      directors,  in lieu of cash, in payment of directors'  fees,  which shares
      were valued at $141,500.

      In September  2003,  the Company  issued  75,000 shares under a consulting
      agreement, which shares were valued at $14,250.

      In September  2003,  the Company  issued 100,000 shares under a consulting
      agreement, which shares were valued at $17,000.

      In September 2003, the Company issued a total of 4,475,000 shares of stock
      to  certain  officers,  in lieu of cash  compensation,  pursuant  to their
      respective employment agreements, which shares were valued at $281,750.

      In September 2003, the Company issued  2,800,000 shares to acquire certain
      assets, which shares were valued at $532,000.

      In September  2003, the Company issued 600,000 shares in payment of a note
      payable and related accrued interest, which shares were valued at $96,000.


                                       11
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      NINE MONTHS ENDED SEPTEMBER 30, 2004
                                   (UNAUDITED)

NOTE 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

In the opinion of management, the accompanying consolidated financial statements
as of and for the three  and nine  months  ended  September  30,  2004 and 2003,
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 in the United States
have been  condensed or omitted  pursuant to such rules and  regulations.  These
unaudited financial  statements should be read in conjunction with the financial
statements  and notes thereto  included in USURF's  Annual Report on Form 10-KSB
for  the  year  ended  December  31,  2003,  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 2003
presentation.  The  results  of  operations  for  the  interim  periods  are not
necessarily indicative of the results to be obtained for the entire year.

NOTE 2. CRITICAL ACCOUNTING POLICIES

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.

STOCK-BASED COMPENSATION

Transactions in equity  instruments with non-employees for goods or services are
accounted for on the fair value method, as described in SFAS No. 123. No options
were  granted to  employees,  officers or directors  during  2003.  During 2004,
certain  directors,  officers  and  employees  were granted a total of 6,650,000
options and  17,500,000  warrants to purchase an equivalent  number of shares of
the Company's stock.

STOCK FOR SERVICES

The Company has issued stock pursuant to various consulting agreements. Deferred
consulting costs which are valued at the stock price on the date of a particular
agreement are recorded as a reduction of stockholders'  equity and are amortized
over the useful lives of the respective agreements.

REVENUE RECOGNITION

The  Company  charges  its video and data  customers  monthly  service  fees and
recognizes  the revenue in the month the  services  are provided or equipment is
sold.  The Company bills monthly for its voice  (telephone)  services in advance
and  generally  receives  payments  during the month in which the  services  are
provided.  To the extent that revenue is received,  but not earned,  the Company
records these amounts as deferred revenue.

BAD DEBT

The  Company  estimates  the amount of  uncollectible  accounts  receivable  and
records an allowance for bad debt.  Uncollectible  accounts  receivable are then
charged against this allowance.


                                       12
<PAGE>

LOSS PER COMMON SHARE

The loss per common share is presented in accordance with the provisions of SFAS
No. 128,  Earnings Per Share.  Basic loss per common share has been  computed by
dividing  the net loss  available  to the  common  stockholder  by the  weighted
average number of shares of common stock outstanding for the period.  The effect
of considering all potential dilutive securities is not presented as the effects
would be anti-dilutive.

MARKETABLE SECURITIES AND SECURITIES RECEIVABLE

In  May  2004,  the  Company  sold  Children's   Technology  Group,   Inc.,  dba
MomsandDads,  to ZKID  Network  Company  (OTCBB:  ZKID).  The  terms of the sale
provided  for  ZKID to pay the  Company  $600,000  in stock  consideration  (the
"Purchase  Price').  At closing the Company  received  4,000,000  shares of ZKID
common  stock  valued at $0.15 per  share.  The terms of the  purchase  and sale
agreement  provide that if the shares issued to the Company do not have a market
value of at least  $600,000,  then ZKID  would  issue  additional  shares to the
Company for the difference. At September 30, 2004 the market value of the shares
was  $160,  000  and  therefore  the  Company  recorded  a  $440,000  securities
receivable.

NOTE 3. STOCK, OPTION AND WARRANT ISSUANCES

During the nine months ended  September 30, 2004,  the Company  issued shares of
common stock and common stock purchase warrants, as follows:

23,485,985 shares to acquire various businesses or business assets;

19,000,000 shares for cash;

21,191,364 shares in exchange for consulting and other services; and

56,488,312  warrants  (350,000  w/exercise  price of $0.20 per share;  1,000,000
w/exercise  price of $0.18 per share;  2,500,000  w/exercise  price of $0.15 per
share;  39,419,562  w/exercise  price of $0.12 per share;  1,968,750  w/exercise
price of $0.08  per  share;  7,500,000  w/exercise  price  of $0.12  per  share;
3,750,000 w/exercise price of $0.12 per share) were issued.

During the  quarter  ended  September  30, 2004 the Board of  Directors  granted
options to certain key employees and consultants totaling 6,650,000. The options
have an  exercise  price  of  $0.10  per  share  and are  exercisable  in  three
installments,  each of which become exercisable when the market price for common
share of the Company's stock reaches $0.15 per share,  $0.22 per share and $0.30
per share  respectively.  The Company used the BlackScholes  method to calculate
the fair  market  value of the options  given to  consultants  as $43,499;  this
amount was recorded as an expense.

Additionally,  the Board granted warrants for the purchase of 17,500,000  shares
of the Company's  common stock to the new Chairman.  The exercise  price for the
warrants is $0.07 per share and the warrants are exercisable in whole or in part
through September 30, 2006.

The Company uses the intrinsic  value method for  accounting  for employee stock
based compensation.  Under the intrinsic value method, the compensation cost, if
any,  is the excess of the quoted  market  price of the stock over the  exercise
price.  All of the warrants  and options were granted with an exercise  price in
excess of market at the date of grant and therefore no  compensation  expense is
recognized in the financial statements. For years ended after December 31, 2004,
the Financial  Accounting  Standards Board may require the use of the fair value
method.  Had the  Company  used the fair  value  method  for the  quarter  ended
September  30, 2004 the Company would have  recognized an additional  expense of
$149,348 for the options  granted  employees and $615,638 in additional  expense
for the  warrants.  Below is the proforma net loss and earnings per share if the
company used the fair value method.


                                       13
<PAGE>

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED SEPTEMBER 30,      NINE MONTHS ENDED SEPTEMBER 30,
                                                2004             2003                  2004             2003
                                              (UNAUDITED)     (UNAUDITED)            (UNAUDITED)     (UNAUDITED)
                                             ------------    ------------          ------------    ------------
<S>                                          <C>             <C>                   <C>             <C>
NET LOSS                                     $ (7,098,037)   $   (772,008)         $(12,448,539)   $ (1,990,795)

FAIR VALUE OF OPTIONS AND WARRANTS GRANTED       (764,986)       (764,986)
                                             ------------    ------------          ------------    ------------
PROFORMA NET LOSS                            $ (7,863,023)   $   (772,008)         $(13,213,525)   $ (1,990,795)
                                             ============    ============          ============    ============

PROFORMA NET LOSS PER COMMON SHARE           ($     0.045)   ($     0.008)         ($     0.085)   ($     0.024)
                                             ============    ============          ============    ============
</TABLE>

NOTE 4. FINANCING TRANSACTIONS

In December 2003, the Company  executed a convertible loan agreement under which
the Company  could borrow up to $700,000.  At December 31, 2003,  the balance of
the loan was $57,000. The loan(s) are due one year from funding, pay interest at
the rate of ten percent (10%) per annum and are convertible into common stock of
the  Company  at a  conversion  price  of $0.15  per  share.  Additionally,  the
agreement  called for the  issuance of two  warrants  with an exercise  price of
$0.18 and $0.26 respectively for each share converted.  During the first quarter
of 2004,  the  Company  borrowed  an  additional  $543,000  under the  agreement
bringing  the balance to  $600,000.  This amount was  converted  into  5,000,000
shares of common stock. In connection with the conversion,  the conversion price
and the  exercise  price of the warrants  were  reduced to $0.12 per share.  The
entire  proceeds  from the  convertible  promissory  note were  allocated to the
warrants and the beneficial  conversion feature based on a calculation using the
Black-Scholes  model.  As of September 30, 2004 interest  expense related to the
accretion  of the  convertible  promissory  note to its  face  value  and  price
reduction for $555,800 was recorded as the notes are convertible immediately.

In January  2004,  the Company  entered  into an  agreement  with Atlas  Capital
Services,  LLC  ("Atlas") to provide  financing  directly or  indirectly  to the
Company.  Under the terms of the agreement,  the Company will pay to Atlas a fee
equal to 10% of the  principal  amount of the  Transaction  Amount to be paid as
proceeds are received by the Company from each Transaction.

In March 2004,  Atlas  arranged  for the  Company to  complete  the closing of a
private placement totaling $3,095,000.  The placement consisted of $1,000,000 in
common  stock  at  $0.10  per  share,   $2,095,000  in  convertible   debentures
convertible into common stock at $0.10 per share,  with 125% warrant coverage at
an  exercise  price of $0.12  per  share.  The  convertible  debentures,  if not
converted,  are due  September  15, 2005 and bear  interest at six percent  (6%)
payable quarterly.  Under the terms of the private placement, the investors have
the  right to  purchase  up to an  amount  equal  to,  at the  election  of such
investors,  $3,000,000 principal amount of additional debentures. Any additional
investment will be on terms identical those set forth in the private  placement.
The entire  proceeds  from the  convertible  debentures  were  allocated  to the
warrants and the beneficial  conversion feature based on a calculation using the
Black-Scholes  model.  The  interest  expense  related to the  accretion  of the
convertible debentures to their face value totals $934,798 and will be amortized
over eighteen months, the term of the convertible note. As of September 30, 2004
interest  expense of $207,733 was amortized and recorded as additional  interest
expense.

During the second  quarter of 2004,  Atlas  arranged for the Company to complete
the closing of an additional private placements totaling $1,575,000,  consisting
of $1,575,000 in convertible  debentures  convertible into common stock at $0.08
per share,  with 75% warrant  coverage at an exercise  price of $0.12 per share.
The  convertible  debentures,  if not  converted,  are due June,  2006 and bears
interest at eight percent  (8.0%)  payable  quarterly.  Under the terms of these
private  placements,  the  investors  have the right to purchase up to an amount
equal to, at the  election of such  investors,  $1,500,000  principal  amount of
additional  debentures.  Any additional  investment  will be on terms  identical
those  set  forth  in the  private  placements.  The  entire  proceeds  from the
convertible  debentures  were  allocated  to the  warrants  and  the  beneficial
conversion  feature based on a calculation  using the  Black-Scholes  model. The
interest expense related to the accretion of the convertible debentures to their
face value totals $491,830 and will be amortized over 24 months, the term of the
convertible  note.  As of  September  30, 2004  interest  expense of $20,493 was
amortized and recorded as additional interest expense.


                                       14
<PAGE>

During the third quarter of 2004, Atlas arranged for the Company to complete the
closing of two additional  private placements  totaling $750,000,  consisting of
$750,000 in convertible  debentures  convertible  into common stock at $0.05 per
share. The convertible debentures, if not converted, are due June, 2006 and bear
interest at twelve percent (12.0%) payable  quarterly.  Under the terms of these
private  placements,  the  investors  have the right to purchase up to an amount
equal  to, at the  election  of such  investors,  $750,000  principal  amount of
additional  debentures.  Any additional  investment  will be on terms  identical
those set forth in the private  placements.  The proceeds  from the  convertible
debentures were allocated to notes payable and the beneficial conversion feature
based on intrinsic value. The debt discount related to the beneficial conversion
feature totals  $435,000 and will be amortized  over 24 months,  the term of the
convertible  notes.  As of September  30, 2004  interest  expense of $58,123 was
amortized and recorded as additional interest expense.

Additionally  in  July  2004,  the  Company  repriced  the  purchase  price  and
conversion price of the above first and second quarter transactions to $0.05 per
share. As a result,  the Company will issue an additional  17,000,000 shares for
shares  purchased  under a  securities  purchase  agreement  and certain  notes,
previously  converted,  and has reserved an additional  32,762,500  shares to be
issued upon conversion of the outstanding  convertible  debentures.  The Company
recognized $850,000 as an imputed dividend to these shareholders for this right.
This amount is  subtracted  from net loss to determine the net loss to the other
shareholders.  According to FASB Statement Number 140, "Accounting for Transfers
and Servicing of Financial Assets and  Extinguishment of Liabilities" and FASB's
EITF Issue 96-19  "Debtor's  Accounting for a  Modification  or Exchange of Debt
Instruments"  the  repricing  of the  conversion  price  results  in the  deemed
extinguishment  of the  convertible  debt and  replacement  with new convertible
debt. As a result, the Company recorded $1,568,688 as loss on debt modification.
In addition  $396,050 of debt discount and $284,487 of debt premium was recorded
in connection with the deemed new  convertible  debt according to the guidelines
suggested  in FASB's EITF Issue 00-27  regarding  the  application  of issue No.
98-5, "Accounting for Convertible Securities with Beneficial Conversion Features
or  Contingently  Adjustable  Conversion  Ratios" and will be amortized over the
remaining  life of the  debentures.  The debt discount and premium  respectively
will be amortized  over the remaining  lives months of the  debentures.  The net
interest  expense for the quarter ended September 30, 2004 for these  debentures
is $46,074.

At  September  30,  2004  total  short  term  notes  payable  under the above is
$2,095,000,  the debt discount of $225,383 is netted with the total resulting in
a balance of  $1,869,617.  The total long term notes  payable under the above is
$2,325,000,  the debt  discount of  $380,625  and debt  premium of $245,693  are
netted with the total resulting in a balance of $2,190,068 for the balance sheet
presentation.

SUBSEQUENT EVENT

Subsequent to September 30, 2004, the Company executed a Subscription  Agreement
(the "Agreement) with Monarch Pointe Fund, Ltd. and Mercator Advisory Group, LLC
(collectively referred to as "Purchasers"),  whereby the Company agreed to issue
and sell to the  Purchasers,  10,000  shares of Series A  Convertible  Preferred
Stock  ("Series A Stock") at $100.00  per share,  for a total  consideration  of
$1,000,000.  In connection with the purchase and sale of the Series A Stock, the
Purchasers  will  receive  Warrants to purchase up to an  aggregate of 7,000,000
shares of the Company's  common stock,  at an exercise price of $0.075 per share
subject  to  certain  adjustment.  The  Series A Stock is  convertible  into the
Company's  common  stock at a conversion  price  ranging from $0.05 to $0.075 as
calculated in accordance  with the Certificate of  Designation.  Generally,  the
conversion  price per share for the Series A Stock shall be equal to eighty-five
percent  (85%) of the Market Price  provided,  however,  that subject to certain
provisions,  in no event shall the conversion price be less than $0.05 per share
(the "Floor Price") or exceed $0.075 (the "Ceiling Price").


                                       15
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following  information  should be read in conjunction  with the consolidated
financial  statements,  including the notes thereto,  included elsewhere in this
Form 10-QSB, and the Management's Discussion and Analysis of Financial Condition
and Results of  Operations  included  in our 2003  Annual  Report on Form 10-KSB
filed with the Securities and Exchange Commission.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

This report contains  forward-looking  statements  within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934,  including  statements  regarding,  among other things,  (a) our growth
strategies,  (b) anticipated  trends in our industry,  (c) our future  financing
plans and (d) our  ability  to obtain  financing  and  continue  operations.  In
addition,  when  used in  this  filing,  the  words  "believes,"  "anticipates,"
"intends,"  "in  anticipation  of," and similar  words are  intended to identify
certain forward-looking  statements.  These forward-looking statements are based
on the  Company's  expectations  and  are  subject  to a  number  of  risks  and
uncertainties,  many of which are beyond the Company's  control.  Actual results
could differ  materially  from these  forward-looking  statements as a result of
changes in trends in the economy and the Company's  industry,  reductions in the
availability  of  financing  and  other  factors.  In light of these  risks  and
uncertainties,  the forward-looking  statements contained in this report may not
occur. Except to fulfill our obligation under the United States securities laws,
we do not  undertake  any  obligation  to  publicly  release  the results of any
revisions to these  forward-looking  statements  that may be made to reflect any
future events or circumstances.

OVERVIEW OF OUR BUSINESS

During 2003 and through September 30, 2004, we continued to implement and expand
our business plan beyond solely offering  wireless  Internet access service.  We
currently operate as a provider of video (cable  television) and data (Internet)
services to business and  residential  customers and since the completion of the
acquisition of Connect Paging Inc. d/b/a/ Get-A-Phone,  we also offer additional
telecommunications   services   including  local,  long  distance  and  enhanced
telephone  (voice)  services.  Our current  business  plan  involves  obtaining,
through internal growth,  as many,  voice,  video and data customers as possible
offering various  combinations of bundled packages of  communications  services.
Our growth  strategy also includes  acquisitions  of  telecommunications-related
businesses  and/or  properties  which would  provide an  immediate  or potential
customer base for our services.

SUNWEST COMMUNICATIONS, INC. AND APOLLO COMMUNICATIONS, INC.

In October 2003,  the Company signed a Letter of Intent to acquire the assets of
Apollo Communications, Inc. of Colorado Springs ("Apollo"). Apollo provides data
and  high-speed  internet  access  services  as well as local and long  distance
telephone  services.  Additionally,  in  February,  2004,  the Company  signed a
definitive  agreement  to acquire  the assets of  SunWest  Communications,  Inc.
("SunWest").  The assets included  SunWest's  network of fiber optic lines,  its
operations  facilities  and equipment  and,  subject to Colorado  Public Utility
Commission approval, its customer base.

Through  September 30, 2004 the Company  advanced a combined total of $1,830,000
to SunWest and Apollo and  recorded  this  amount as "other  long term  assets".
Through  September  30,  2004  the  Company  supported  through  its  operations
$1,443,257.71  of  customer  care and  related  expenses  of SunWest and Apollo.
During the  quarter  ended  September  30,  2004 the senior  secured  lenders of
SunWest and Apollo foreclosed on the assets of these companies. As a result, the
Company  has  written  off  the  balance  of  other  assets  of  $1,830,000  and
reclassified  the related expenses of $1,443,257.71 as write off of other assets
and   reclassification  of  related  expenses.   The  Company  has  not  made  a
determination  whether to seek legal recourse to recover  damages as a result of
the foreclosure.

GOING CONCERN

Our  auditor  stated in its report on our  financial  statements  for the period
ended  December  31, 2003 and 2002 that the Company  has  experienced  recurring
losses and operated with negative working capital and, as a result, there exists
substantial doubt about our ability to continue as a going concern. For the nine
months ended  September 30, 2004 and 2003, we incurred a net loss of $12,448,539
and $1,990,795, respectively. As of September 30, 2004, USURF had an accumulated
deficit of $56,310,384.  We are actively seeking customers for our services. The
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability  and  classification  of  recorded  assets,  or the  amounts  and
classification  of liabilities  that might be necessary in the event the Company
cannot continue in existence.  These factors raise  substantial  doubt about the
Company's ability to continue as a going concern.


                                       16
<PAGE>

CRITICAL ACCOUNTING POLICIES

Management's  Discussion  and Analysis  discusses the results of operations  and
financial condition as reflected in our consolidated financial statements, which
have been prepared in accordance with accounting  principals  generally accepted
in the United States. The preparation of financial statements in conformity with
accounting   principals   generally  accepted  in  the  United  States  requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities,  disclosure of contingent  assets and liabilities at the
date of the financial  statements and reported  amounts of revenues and expenses
during the  reporting  period.  On an ongoing  basis,  management  evaluates its
estimates  and  judgments,  including  those  related  to  accounts  receivable,
inventory  valuation,  amortization  and  recoverability  of long-lived  assets,
including goodwill, litigation accruals and revenue recognition.  These critical
accounting  policies  are  described  in more detail under item 6 in the section
entitled  "Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of  Operations"  in our Annual  Report on Form 10-KSB for the year ended
December 31,2003 filed with the Securities and Exchange  Commission.  Management
bases  its  estimates  and  judgments  on its  historical  experience  and other
relevant factors, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources.

While we believe that the  historical  experience  and other factors  considered
provide  a  meaningful  basis  for  the  accounting   policies  applied  in  the
preparation of our consolidated  financial statements,  we cannot guarantee that
our  estimates  and  assumptions  will  be  accurate.   If  such  estimates  and
assumptions  prove to be inaccurate,  we may be required to make  adjustments to
these estimates in future periods.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

REVENUES

For the nine months ended September 30, 2004 and 2003,  USURF had $5,098,714 and
$236,448,  respectively in revenue, an increase of $4,862,266.  This increase is
primarily due to the  acquisition of Connect Paging,  Inc. d/b/a  Get-A-Phone in
April 2004.  During the nine months ended September 30, 2004,  USURF's  revenues
were derived  primarily from the sale of  telecommunication  services,  internet
access   services,   telecommunications-related   hardware   and   services  and
satellite-based CATV access services. These revenues are recognized and recorded
as services are performed.

OPERATING EXPENSES

For the nine months ended September 30, 2004 and 2003,  operating  expenses were
$9,120,309 and $2,087,446,  respectively. During the nine months ended September
30, 2004,  operating expenses consisted primarily of professional and consulting
fees of  $4,283,727,  of  which  $4,249,931  was  paid in  stock,  salaries  and
commissions  of  $1,030,871,  and other general and  administrative  expenses of
$2,993,418  consisting  primarily  of bad debt related to  Get-A-Phone  accounts
receivable  ($1,516,788),  right of entry expense  ($336,278),  software expense
($127,054) and insurance expense ($122,516).

NET LOSS

For the nine months ended  September 30, 2004, we had a net loss of $12,448,539,
or $0.0799 per share.  In the comparable  period of the prior year, we had a net
loss of $1,990,795, or $0.0240 per share.


                                       17
<PAGE>

LIQUIDITY

At September 30, 2004,  USURF had a net working  capital  deficit of $1,711,155,
compared to a net working capital deficit of $757,040 at December 31 2003. A net
working capital deficit means that current liabilities  exceeded current assets.
Current  assets are generally  assets that can be converted into cash within one
year and can be used to pay current liabilities.

Currently,  we believe we have  sufficient  cash from the sale of securities and
commitments  from Atlas  Capital  financing  transactions  to  continue  current
business  operations  through  December 31,  2004.  During the nine months ended
September  30,  2004,  we  received  approximately  $1,600,000  from the sale of
securities, $543,000 in debt from Evergreen that was converted to securities and
$4,420,000 in debt from the Atlas Capital  financing  transaction.  At September
30, 2004, we had cash on hand of $260,795.

Subsequent to September 30, 2004, the Company executed a Subscription  Agreement
whereby the Company agreed to issue and sell to the Purchasers, 10,000 shares of
Series A Convertible  Preferred  Stock  ("Series A Stock") at $100.00 per share,
for a total  consideration  of $1,000,000.  In connection  with the purchase and
sale of the Series A Stock,  the Purchasers will receive Warrants to purchase up
to an  aggregate  of  7,000,000  shares of the  Company's  common  stock,  at an
exercise price of $0.075 per share subject to certain adjustment.

We anticipate that our capital needs will be met through financing  transactions
arranged by Atlas Capital.  We will also seek other sources of financing to fund
operations,  although we may not be successful  in such  efforts.  We may not be
able to secure adequate capital as we need it. Without  additional  capital,  we
would be forced to curtail or cease our operations.

CASH USED IN OPERATING ACTIVITIES

During the nine months ended  September 30, 2004, the Company's  operations used
cash of $3,190,063  compared to $663,843 used during the same period in 2003. In
each period reported, the use of cash was a direct result of the increase in net
loss.  During the nine months ended  September  30,  2004,  $990,036 of accreted
interest  expense  and  $1,568,688  loss on debt  modification  was  recorded in
relation to our notes payable with beneficial  conversion  features;  during the
same  period in 2003 we did not  incur any  accreted  interest  expense  or debt
modification expense.

CASH USED IN INVESTING ACTIVITIES

During the first three  quarters of 2004,  the Company  engaged in a significant
amount of capital  investment  activity,  primarily  through the  acquisition of
business assets from other companies. The total value of capital investments for
the period was $1,045,000 compared to only $413,149 for the same period in 2003.
During the 2004 period,  capital assets were also acquired  through the issuance
of stock valued at $2,656,998.

CASH PROVIDED BY FINANCING ACTIVITIES

During  the first  three  quarters  of 2004,  the total  value of the  Company's
financing  activities was $6,451,700  compared to a value of $1,225,733 provided
during the same period in 2003.  During the 2004 period,  $1,600,000 of cash was
provided  through the sale of stock and $4,420,000  (presented as $4,059,685 net
of unamortized discount of $360,315) was provided through debt issuance.

OFF-BALANCE SHEET FINANCING ACTIVITIES

We do not have any off-balance  sheet  arrangements that have, or are reasonably
likely to a current  or future  effect on our  financial  condition,  changes in
financial  condition,  revenue or expenses,  results of  operations,  liquidity,
capital expenditures or capital resources that are material.


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<PAGE>

FACTORS AFFECTING OUR BUSINESS AND PROSPECTS

There  are  many  factors  that  affect  our  business  and the  results  of our
operations, some of which are beyond our control. These factors include:

      o     we have a limited  operating  history  with  significant  losses and
            expect our losses to continue for the foreseeable future;

      o     the market price of our common stock is very  volatile and the value
            of your investment may be subject to sudden decreases;

      o     a low market price may severely  limit the potential  market for our
            common stock, and

      o     our stock has been de-listed from the American Stock Exchange and is
            categorized as a "penny stock."

For a  discussion  of  these  and  other  factors  affecting  our  business  and
prospects,  see "Item 1. - Description of Business--Risk  Factors  Concerning Us
and Our  Common  Stock" in our Annual  Report on Form  10-KSB for the year ended
December 31, 2003. In addition,  the following  factors may affect our business,
the results of our operations and the market price of our securities:

                OUR INDEPENDENT  CERTIFIED PUBLIC ACCOUNTANTS EXPRESSED IN THEIR
                AUDIT REPORT  RELATED TO OUR FINANCIAL  STATEMENTS  FOR THE YEAR
                ENDED DECEMBER 31, 2003,  SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO
                CONTINUE AS A GOING CONCERN

In its opinion on our financial statements for the year ended December 31, 2003,
our independent  auditor,  Hein & Associates LLP,  expressed  substantial  doubt
about our ability to continue as a going concern.  This means that, when issuing
its opinion  relating to our financial  statements for the period ended December
31, 2003, given our then-current and historical lack of capital, our independent
auditor  had  substantial  doubt  that we would be able to  continue  as a going
business concern. Please review the Independent Auditor's Report included in our
Annual Report on Form 10-KSB for the year ended December 31, 2003.

                WE ARE DEPENDENT UPON LONG-TERM FINANCING.

Our ability to implement  our  business  plan and grow is dependent on raising a
significant  amount of capital.  We have  sustained our operations in large part
from sales of our equity.  We may not be able to successfully  generate revenues
or raise additional funds sufficient to finance our continued operations. In the
long term,  failure to generate  sufficient  revenues or obtain  financing would
have a material  adverse effect on our business and would jeopardize our ability
to continue our operations.

                WE  HAVE  IN  THE  PAST  AND  MAY  IN  THE   FUTURE   ENGAGE  IN
                ACQUISITIONS,  WHICH  WILL  CAUSE US TO INCUR A VARIETY OF COSTS
                AND WHICH MAY NOT ACHIEVE ANTICIPATED RESULTS.

From time to time,  we engage  in  discussions  with  third  parties  concerning
potential acquisitions of businesses,  products,  technologies and other assets.
Acquisitions may require us to make considerable cash outlays and can entail the
need for us to issue equity securities,  incur debt and contingent  liabilities,
incur amortization  expenses related to intangible assets, and can result in the
impairment of goodwill, which could harm our profitability. Acquisitions involve
a number of additional risks, including:

      o     difficulties in and costs  associated  with the  assimilation of the
            operations,  technologies,  personnel  and  products of the acquired
            companies;

      o     assumption of known or unknown  liabilities  or other  unanticipated
            events or circumstances;

      o     risks of entering markets in which we have limited or no experience;
            and

      o     potential loss of key employees.


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<PAGE>

Any of these risks could harm our ability to achieve  profitability  of acquired
operations or to realize other anticipated benefits of an acquisition.

                Our leverage and debt service  obligations may adversely  affect
                our cash flow

We have  substantial  amounts of  outstanding  indebtedness,  primarily from our
secured  convertible  notes due 2005 and 2006. We may be unable to generate cash
sufficient to pay the principal of,  interest on and other amounts in respect of
our indebtedness  when due. As of September 30, 2004, the total principal amount
of our  debt  outstanding  was  approximately  $4.42  million.  Our  substantial
leverage  could have  significant  negative  consequences  on our business,  the
results of our operations and the market price of our securities including:

      o     increasing  our   vulnerability  to  general  adverse  economic  and
            industry conditions;

      o     limiting our ability to obtain additional financing;

      o     requiring the  dedication  of a substantial  portion of our expected
            cash flow from operations to service our debt,  thereby reducing the
            amount of our  expected  cash  flow  available  for other  purposes,
            including capital expenditures;

      o     limiting our flexibility in planning for, or reacting to, changes in
            our business and the industry in which we compete; and

      o     placing  us  at a  possible  competitive  disadvantage  compared  to
            less-leveraged  competitors and competitors  that have better access
            to capital resources.

                ANTI-DILUTION  RIGHTS OF SOME OF OUR  INVESTORS  MAY CAUSE US TO
                ISSUE SUCH INVESTORS ADDITIONAL SHARES OF OUR COMMON STOCK

Certain holders of our common stock have anti-dilution rights that require us to
issue such holders additional shares of our common stock if we issue or sell any
shares of our common  stock,  or other rights to subscribe to our common  stock,
below certain price thresholds. These anti-dilution adjustments could accelerate
and  increase  the  magnitude  of a decline in the trading  price for our common
stock.  Certain  warrant  holders also have the right to purchase an  increasing
amount  of shares if we issue or sell any  shares of our  common  stock or other
rights to subscribe to our common stock below certain price thresholds.

                Future  sales of common  stock may cause the price of our common
                stock to decline

Future sales of  substantial  amounts of common stock pursuant to Rule 144 under
the  Securities  Act of 1933 or otherwise by certain  shareholders  could have a
material adverse impact on the market price for the common stock at the time. As
of September 30, 2004,  there are  55,500,000  outstanding  shares of our common
stock held by shareholders which are deemed  "restricted  securities" as defined
by Rule 144 under the Securities Act. Under certain circumstances,  these shares
may be sold  without  registration  pursuant to the  provisions  of Rule 144. In
general,  under Rule 144, a person (or persons whose shares are  aggregated) who
has satisfied a one-year holding period may, under certain  circumstances,  sell
within any three-month  period a number of restricted  securities which does not
exceed the greater of one (1%) percent of the shares  outstanding or the average
weekly  trading  volume during the four calendar  weeks  preceding the notice of
sale  required  by Rule  144.  In  addition,  Rule 144  permits,  under  certain
circumstances,   the  sale  of  restricted   securities   without  any  quantity
limitations  by a person who is not an  affiliate  of ours and has  satisfied  a
two-year  holding period.  Any sales of shares by shareholders  pursuant to Rule
144 may cause the price of our common stock to decline.


                                       20
<PAGE>

In  addition,  future sales of shares of common  stock by  shareholders  and us,
including  subsequent  sales of common stock by the holders of  warrants,  could
have  an  adverse  effect  on  the  prices  of our  securities.  The  sale  of a
significant  amount of these  shares at any given time could  cause the  trading
price of our common stock to decline.

                WE OPERATE  IN A HIGHLY  COMPETITIVE  MARKET,  AND WE MAY NOT BE
                ABLE TO COMPETE EFFECTIVELY AGAINST ESTABLISHED COMPETITORS WITH
                GREATER FINANCIAL RESOURCES AND MORE DIVERSE STRATEGIC PLANS

We face  competition  from  many  communications  providers  with  significantly
greater  financial,   technical  and  marketing   resources,   longer  operating
histories,  well-established  brand  names,  larger  customer  bases and diverse
strategic  plans and  technologies.  Intense  competition  has led to  declining
prices and margins  for many  communications  services.  We expect this trend to
continue  as  competition  intensifies  in the  future.  We  expect  significant
competition from traditional and new communications companies,  including local,
long distance, cable modem, Internet,  digital subscriber line, fixed and mobile
wireless and satellite  data service  providers,  some of which are described in
more detail below.  If these  potential  competitors  successfully  focus on our
market,  we may face  intense  competition  which  could harm our  business.  In
addition,  we may also face severe price competition for building access rights,
which could  result in higher  sales and  marketing  expenses  and lower  profit
margins.

                REGULATION OF THE INTERNET COULD MATERIALLY AND ADVERSELY AFFECT
                OUR BUSINESS

Due to the  increasing  popularity  and use of the Internet by broad segments of
the  population,  it is possible that laws and  regulations  may be adopted with
respect to the Internet  pertaining to content of Web sites,  privacy,  pricing,
encryption standards,  consumer protection,  electronic commerce,  taxation, and
copyright infringement and other intellectual property issues. No one is able to
predict the effect, if any, that any future  regulatory  changes or developments
may  have on the  demand  for our  Internet  access  or  other  Internet-related
services.  Changes in the regulatory environment relating to the Internet access
industry,  including the enactment of laws or promulgation  of regulations  that
directly or  indirectly  affect the costs of  telecommunications  access or that
increase  the  likelihood  or scope of  competition  from  national  or regional
telephone  companies,  could  materially  and  adversely  affect  our  business,
operating results and financial condition.

ITEM 3. CONTROLS AND PROCEDURES

As of September 30, 2004, we carried out an  evaluation,  under the  supervision
and  with  the  participation  of our  Chief  Executive  Officer  and  Principal
Financial  Officer  of the  effectiveness  of the design  and  operation  of our
disclosure  controls and procedures.  Our disclosure controls and procedures are
designed to ensure that  information  required  to be  disclosed  in our reports
filed under the Securities Act of 1934 is recorded,  processed,  summarized, and
reported within the time periods  specified in the SEC's rules and forms.  Based
on this evaluation,  our Chief Executive Officer and Principal Financial Officer
have concluded that our controls and procedures are effective in timely alerting
them to material financial  information required to be disclosed and included in
our periodic SEC filings.  There has been no change in our internal control over
financial  reporting that occurred  during the quarter ended  September 30, 2004
that has materially affected,  or is reasonably likely to materially affect, our
internal control over financial  reporting.  Our internal control over financial
reporting is designed to provide reasonable  assurance regarding the reliability
of our financial reporting and preparation of financial  statements for external
reporting purposes in accordance with generally accepted accounting  principles.
This  quarterly  report was not filed  timely due to the  identification  by our
auditor of an  accounting  issue that  required  us to retain the  services of a
valuation  expert.  Until we obtained the expert's  analysis,  we were unable to
complete our financial statements.


                                       21
<PAGE>

                           PART II- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In July 2002, an adverse  arbitration  decision was rendered against the Company
in favor of one of our former employees,  Christopher L. Wiebelt.  The amount of
the award was approximately $100,000,  including legal expenses. This amount was
included in accounts  payable on the balance  sheet at December  31,  2003.  The
arbitration  matter was  styled:  USURF  America,  Inc.  versus  Christopher  L.
Wiebelt, American Arbitration Association, Case No. 71-160-00087-01. In February
2004,  the Company  entered into a settlement  agreement  with Mr. Weibelt under
which the Company agreed to satisfy the judgment by making an initial payment of
$30,000 and six equal monthly payments thereafter for the balance.  The judgment
was fully satisfied in August 2004.

In June 2003,  one of our  subsidiaries,  USURF  Telecom,  Inc.,  was named as a
defendant in a lawsuit filed by Qwest  Corporation.  USURF Telecom has filed its
answer,  denying any liability.  To date, there has been no activity in the case
involving USURF Telecom,  nor has the plaintiff  directed any attention to USURF
Telecom beyond the original filing of the lawsuit.  Company management  believes
that  Qwest's  allegations  are  without  merit.  This  case  is  styled:  Qwest
Corporation vs. Maxcom,  Inc. (f/k/a Mile High Telecom,  CLEC for Sale, Inc. and
Mile High Telecom,  Inc.), et. al.,  District Court,  City and County of Denver,
Colorado, Case No. 03 CV 1676.

In April 2004,  a complaint  was filed in the  District  Court,  El Paso County,
Colorado styled  Pipeline  Networks of Colorado,  LLC vs. Usurf  Communications,
Inc. and Usurf America,  Inc.; Case No.  2004cv1565.  The lawsuit arose out of a
dispute  regarding an agreement to pay Pipeline $156,300 in Shares or in cash by
April 13, 2004 as part of the original asset  purchase and extension  agreements
to purchase the assets and rights used in connection with the Internet  services
business  operated by Pipeline.  This matter was fully settled by the parties in
July of 2004. Under the settlement  agreement,  Pipeline exchanged its 1,356,960
shares of USURF  common stock for a cash  payment of  $170,000.  The  settlement
resulted  in a net  charge of  $14,000  against  the  Company's  second  quarter
earnings.

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

      During the three months ended  September 30, 2004, we issued the following
securities:

1.    (a)   Securities Issued. In September 2004, 75,000 shares of the Company's
            common stock were issued.

      (b)   Underwriter or Other Purchasers. Such shares of stock were issued to
            Ed Basquez.

      (c)   Consideration.  Such shares  were issued  pursuant to the terms of a
            consulting agreement.

      (d)   Exemption  from  Registration.  These  securities  are  exempt  from
            registration under the Securities Act of 1933, as amended,  pursuant
            to the  provisions  of Section 4(2) thereof,  as a  transaction  not
            involving  a public  offering.  This  purchaser  is a  sophisticated
            investor capable of evaluating an investment in the Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

      None.


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<PAGE>

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

      EXHIBITS.

EXHIBIT NO.     DESCRIPTION
-----------     -----------

31.1            Certification of the Chief Executive Officer re: Section 302
31.2            Certification  of the Principal  Accounting  Officer re: Section
                302
32.1            Certification  of the  Chief  Executive  Officer  and  Principal
                Accounting Officer re: Section 906


                                       23
<PAGE>

                                   SIGNATURES

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

Date:    December 10, 2004             USURF AMERICA, INC.


                                       By: /S/ Douglas O. McKinnon
                                           -------------------------------------
                                           Douglas O. McKinnon
                                           Chief Executive Officer


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