Form 10-QSB/A

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, 2002                                                   |
| 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                                                       | 91-2117796                             |   |
|--------|--------------------------------------------------------------|----------------------------------------|--------|
|   | (State or Other Jurisdictionof incorporation ororganization) | (I.R.S. EmployerIdentification 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 Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that Registrant as required to file such reports), and (2) has been subject to suchfiling 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 ofthe latest practicable date:

|   | Class                         | Outstanding as of 5-17-02 |   |
|--------|-------------------------------|---------------------------|--------|
|   | ___________________           | ___________________       |   |
|   | Common Stock, $.0001par value | 43,731,870                |   |

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

| INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |
|--------------------------------------------|
|                                       |
| USURF America, Inc.                        |

|   |                                                                                               | Page |
|--------|----------------------------------------------------------------------------------------------------|------|
|   |                                                                                               | ____ |
|   | Consolidated Balance Sheets as of March 31,2002 (unaudited), and December 31, 2001                 | 3    |
|   | Consolidated Statements of Operations for theThree Months Ended March 31, 2002 and 2001(unaudited) | 6    |
|   | Consolidated Statements of Cash Flows for theThree Months Ended March 31, 2002 and 2001(unaudited) | 8    |
|   | Notes to Consolidated Statements                                                                   | 11   |

| USURF AMERICA, INC. AND SUBSIDIARIES              |
|---------------------------------------------------|
| BATON ROUGE, LOUISIANA                            |
| CONSOLIDATED BALANCE SHEETS                       |
| DECEMBER 31, 2001, AND MARCH 31, 2002 (UNAUDITED) |

ASSETS

|                                 | 3/31/02

(unaudited) | 12/31/01

(audited) |
|--------------------------------------|----------------------|---------------------|
|                                 | __________           | __________          |
| CURRENT ASSETS                       |                 |                |
|  Cash and cash equivalents      | $284                 | $10                 |
|  Inventory                      | 133,500              | 134,746             |
|                                 | _____________        | _____________       |
|                                 | 133,784              | 134,756             |
|                                 | _____________        | _____________       |
| PROPERTY AND EQUIPMENT               |                 |                |
|  Cost                           | 204,387              | 203,141             |
|  Less: accumulated depreciation | (129,986)            | (125,036)           |
|                                 | _____________        | _____________       |
|                                 | 74,401               | 78,105              |
|                                 | _____________        | _____________       |
| OTHER ASSETS                         | 14,583               | 16,667              |
|                                 | _____________        | _____________       |
| TOTAL ASSETS                         | $222,768             | $229,528            |
|                                 | ===========          | ===========         |

The accompanying notes are an integral part of these statements.

LIABILITIES AND STOCKHOLDERS’ DEFICIT

|                                                                                                                                                             | 3/31/02

(unaudited) | 12/31/01

(audited) |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------|---------------------|
|                                                                                                                                                             | __________           | __________          |
| CURRENT LIABILITIES                                                                                                                                              |                 |                |
|  Disbursements in excess of cash balances                                                                                                                   | $0                   | $15,539             |
|  Accounts payable                                                                                                                                           | 1,042,150            | 1,034,619           |
|  Accrued payroll                                                                                                                                            | 272,820              | 265,978             |
|  Other current liabilities                                                                                                                                  | 59,396               | 54,996              |
|  Notes payable to stockholder                                                                                                                               | 0                    | 18,521              |
|                                                                                                                                                             | _____________        | _____________       |
|                                                                                                                                                             | 1,374,366            | 1,389,653           |
|                                                                                                                                                             | _____________        | _____________       |
| LONG-TERM LIABILITIES                                                                                                                                            | 0                    | 0                   |
|                                                                                                                                                             | _____________        | _____________       |
|                                                                                                                                                             | 1,374,366            | 1,389,653           |
| REDEEMABLE COMMON STOCK                                                                                                                                          |                 |                |
| Common stock subject to rescission, 2,138,726 sharesoutstanding at December 31, 2001, and 524,564 sharesoutstanding at March 31, 2002, $.0001 par value pershare | 220,998              | 1,192,700           |
|                                                                                                                                                             | _____________        | _____________       |
|                                                                                                                                                             | 220,998              | 1,192,700           |
|                                                                                                                                                             | _____________        | _____________       |
| STOCKHOLDERS’ DEFICIT                                                                                                                                      |                 |                |
| Common stock, $.0001 par value; Authorized:100,000,000 shares; Issued and outstanding: 23,848,108at December 31, 2001, and 28,919,306 at March 31,2002           | 2,892                | 2,385               |
| Additional paid-in capital                                                                                                                                       | 36,891,262           | 35,642,817          |
| Accumulated deficit                                                                                                                                              | (37,469,439)         | (37,000,628)        |
| Subscriptions receivable                                                                                                                                         | 166,500              | 165,750             |
| Deferred consulting                                                                                                                                              | (963,811)            | (1,163,149)         |
|                                                                                                                                                             | _____________        | _____________       |
|                                                                                                                                                             | (1,372,596)          | (2,352,825)         |
|                                                                                                                                                             | _____________        | _____________       |
| TOTAL LIABILITIES AND STOCKHOLDERS’DEFICIT                                                                                                                 | $222,768             | $229,528            |
|                                                                                                                                                             | ===========          | ===========         |

The accompanying notes are an integral part of these statements.

| USURF AMERICA, INC. AND SUBSIDIARIES       |
|--------------------------------------------|
| BATON ROUGE, LOUISIANA                     |
| CONSOLIDATED STATEMENTS OF OPERATIONS      |
| THREE MONTHS ENDED MARCH 31, 2002 AND 2001 |

|   | Three Months Ended March 31, |
|--------|------------------------------|

|                                          | 2002

(unaudited)     | 2001

(unaudited)     |
|-----------------------------------------------|-----------------------|-----------------------|
|                                          | __________            | __________            |
| REVENUES                                      |                  |                  |
| Revenues                                      | $4,626                | $384                  |
| Internet access costs, cost of goods sold     | (8,482)               | 0                     |
|                                          | __________            | __________            |
| Gross profit (loss)                           | (3,856)

_________    | 384

__________       |
| OPERATING EXPENSES                            |                  |                  |
|  Depreciation and amortization           | 7,033                 | 11,580                |
|  Professional fees                       | 270,147               | 707,288               |
|  Rent                                    | 7,681                 | 5,361                 |
|  Salaries and commissions                | 103,168               | 160,746               |
|  Advertising                             | 62,000                | 0                     |
|  Other                                   | 14,743                | 16,668                |
|                                          | __________            | __________            |
|                                          | 464,772               | 901,643               |
|                                          | __________            | __________            |
| LOSS FROM OPERATIONS                          | (468,628)

__________ | (901,259)

__________ |
| OTHER INCOME (EXPENSE)                        |                  |                  |
|  Interest expense                        | (183)                 | 0                     |
|                                          | __________            | __________            |
|                                          | (183)

__________     | 0

__________         |
| LOSS BEFORE INCOME TAX                        | (468,811)             | (901,259)             |
| INCOME TAX BENEFIT                            | 0                     | 0                     |
|                                          | __________            | __________            |
| NET LOSS                                      | $(468,811)            | $(901,259)            |
|                                          | =========             | =========             |
| Net loss per common share                     | $(0.02)               | $(0.06)               |
|                                          | =========             | =========             |
| Weighted average number of shares outstanding | 25,503,752            | 13,934,118            |
|                                          | =========             | =========             |

The accompanying notes are an integral part of these statements.

| USURF AMERICA, INC. AND SUBSIDIARIES       |
|--------------------------------------------|
| BATON ROUGE, LOUISIANA                     |
| CONSOLIDATED STATEMENTS OF CASH FLOWS      |
| THREE MONTHS ENDED MARCH 31, 2002 AND 2001 |

|   | Three Months Ended March 31, |
|--------|------------------------------|

|                                                                      | 2002

(unaudited) | 2001

(unaudited) |
|---------------------------------------------------------------------------|-------------------|-------------------|
|                                                                      | __________        | __________        |
| CASH FLOWS FROM OPERATINGACTIVITIES                                       |              |              |
| ___________________________                                               |              |              |
| Net loss                                                                  | $(468,811)        | $(901,259)        |
| Adjustments to reconcile net loss to net cashused in operating activities |              |              |
|  Depreciation and amortization                                       | 7,033             | 11,580            |
|  Consulting fees paid with stock                                     | 247,663           | 670,400           |
|  Legal fees paid with stock                                          | 6,000             | 0                 |
|  Compensation expense paid with stock                                | 24,000            | 0                 |
|  Advertising expense paid with stock                                 | 62,000            | 0                 |
|  Compensation expense                                                | 0                 | 3,300             |
| Changes in operating assets and liabilities                               |              |              |
|  Accounts receivable                                                 | 0                 | (384)             |
|  Inventory                                                           | 0                 | 0                 |
|  Accounts payable                                                    | (8,032)           | 1,786             |
|  Accrued payroll                                                     | 6,842             | 41,893            |
|  Other current liabilities                                           | 0                 | 10,000            |
|                                                                      | _____________     | _____________     |
| Net cash used in operating activities                                     | (123,305)         | (162,684)         |
|                                                                      | _____________     | _____________     |
| CASH FLOWS FROM INVESTINGACTIVITIES                                       |              |              |
| _____________________________                                             |              |              |
| Proceeds on disposal of fixed assets                                      | $0                | $0                |
| Capital expenditures                                                      | 0                 | 0                 |
|                                                                      | _____________     | _____________     |
| Net cash used in investing activities                                     | 0                 | 0                 |
|                                                                      | _____________     | _____________     |
| CASH FLOWS FROM FINANCINGACTIVITIES                                       |              |              |
| ____________________________                                              |              |              |
| Payments on notes payable                                                 | $0                | $0                |
| Disbursements in excess of cash balances                                  | 0                 | 0                 |
| Payments on notes payable - stockholder                                   | (18,521)          | 0                 |
| Payments on subscriptions receivable                                      | 70,000            | 261,000           |
| Proceeds from note payable - stockholder                                  | 0                 | 26,090            |
| Issuance of common stock for cash

Warrants exercised                     | 64,000

13,000    | 0

0              |
| Fee for stock issuances                                                   | (4,900)           | 0                 |
|                                                                      | _____________     | _____________     |
| Net cash provided by financing activities                                 | 123,579           | 287,090           |
|                                                                      | _____________     | _____________     |
| Net increase in cash and cash equivalents                                 | 274               | 124,406           |
| Cash and cash equivalents, Beginning of period                            | 10                | 1,088             |
| Cash and cash equivalents, End of period                                  | $284              | $125,494          |
|                                                                      | ===========       | ===========       |

The accompanying notes are an integral part of these statements.

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING

AND OTHER CASH FLOW INFORMATION

Three Months March 31, 2002:

- In January 2002, the Company entered into a one-year consulting agreement, by issuing120,000 shares of stock valued at $10,800.

- In February 2002, the Company issued 300,000 under a four month consulting agreement,which shares of stock were valued at $30,000.

- In March 2002, the Company entered into a one-month consulting agreement, by issuing 75,000shares of stock valued at $7,500.

- In March 2002, the Company issued 75,000 shares in payment of legal services, which shares ofstock were valued at $6,000.

Three Months March 31, 2001:

- In January 2001, the Company entered into a one-year consulting agreement, by issuing200,000 shares of stock valued at $62,000.

- In January 2001, the Company issued 800,000 shares of stock valued at $248,000, in paymentof 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 debtconversion agreement, which shares were not issued in 2000, due to an administrative error.

| USURF AMERICA, INC. AND SUBSIDIARIES       |
|--------------------------------------------|
| BATON ROUGE, LOUISIANA                     |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| THREE MONTHS ENDED MARCH 31, 2002          |
| (Unaudited)                                |

Note 1.  Nature of Business, Organization and Basis of Presentation

Basis of Presentation

USURF America, Inc. (the “Company”), formerly Internet Media Corporation, was incorporatedas Media Entertainment, Inc. in the State of Nevada on November 1, 1996.  The Companycurrently provides wireless Internet access services to a small number of customers in Del Rio,Texas, and Santa Fe, New Mexico.

Principles of Consolidation

The accompanying consolidated financial statements include all the accounts of USURF and allwholly owned subsidiaries. Inter-company transactions and balances have been eliminated in theconsolidation.  

Loss Per Common Share

Basic loss per common share has been computed by dividing the net loss by the weightedaverage number of shares of common stock outstanding throughout the period.  Calculation ofdiluted loss per common share is not presented because the effects of potential common stockissuable upon exercise of stock options and contingently issuable or redeemable shares would beanti-dilutive.

Note 2.  Interim Consolidated Financial Statements

In the opinion of management, the accompanying consolidated financial statements for the threemonths ended March 31, 2002 and 2001, reflect all adjustments (consisting only of normalrecurring adjustments) necessary to present fairly the financial condition, results of operationsand cash flows of USURF, including subsidiaries, and include the accounts of USURF and all ofits subsidiaries.  All material inter-company transactions and balances are eliminated.

The financial statements included herein have been prepared by USURF, without audit, pursuantto the rules and regulations of the SEC.  Certain information and footnote disclosures normallyincluded in financial statements prepared in accordance with U.S. generally accepted accountingprinciples have been condensed or omitted pursuant to such rules and regulations.  It is suggestedthat these unaudited financial statements be read in conjunction with the financial statements andnotes thereto included in USURF’s Annual Report on Form 10-KSB for the year endedDecember 31, 2001, as filed with the SEC.  Certain reclassifications and adjustments may havebeen made to the financial statements for the comparative period of the prior fiscal year toconform with the 2001 presentation.  The results of operations for the interim periods are notnecessarily indicative of the results to be obtained for the entire year.

Note 3.  Notes Payable to Shareholder

|   |                                                                                    | March 31, 2002 | December 31, 2001 |   |
|--------|-----------------------------------------------------------------------------------------|----------------|-------------------|--------|
|   |                                                                                    | (unaudited)    |              |   |
|   |                                                                                    | ______________ | ______________    |   |
|   | Notes payable to majoritystockholder, interest accrues at8%, due on demand andunsecured | $0             | $18,521           |   |

Note 4.  Stock and Warrant Issuances

During the three months ended March 31, 2002, the Company issued (or became obligated toissue) shares of common stock and common stock purchase warrants, as follows:

|   | - | 486,500 shares as finder’s fees.                                                                                                                                                                                                                                |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | 570,000 shares in payment of consulting fees.                                                                                                                                                                                                                         |
|   | - | 1,519,000 warrants (200,000 warrants, exercise price $.049 per share; 560,000warrants, exercise price $.10 per share; 666,000 warrants, exercise price of $.20per share; 93,000 warrants, exercise price of $.30 per share) were issued inpayment of consulting fees. |

Note 5.  Contingencies

|   | A.     | Bankruptcy                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | On September 29, 2000, three creditors of CyberHighway filed an involuntarypetition in the Idaho Federal Bankruptcy Court, styled In Re:CyberHighway,Inc..  In December 2000, CyberHighway and the petitioning creditors filed ajoint motion to dismiss this proceeding.  However, some of CyberHighway’screditors objected to the joint motion to dismiss and the motion failed.                                                                          |
|   |   | Subsequent to the involuntary bankruptcy, CyberHighway lost all of itscustomers.  Due to this loss of customer base, the Company's intangible assetsrelating to those customers became worthless and were written off in 2000.Due to this change in operating environment, goodwill was impaired and,consequently, the goodwill associated with these operations was written off inthe 2000 statement of operations.                                             |
|   | B.     | Potential Rescission Claims                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | From January 2000 through June 2001, a total of 4,906,549 shares of thecommon stock of the Company may have been issued in violation of Section 5of the Securities Act of 1933, as amended.  The aggregate value assigned tothese shares upon their issuance totaled $5,090,252.  For a period of one yearfrom issuance, the issuees of these shares have or had, as the case may be, apotential claim for rescission of their respective issuance transactions. |
|   |   | At December 31, 2001, 2,138,726 of these shares have been reflected under theredeemable stock caption on the accompanying balance sheet with an assignedvalue of $1,192,700.                                                                                                                                                                                                                                                                                     |
|   |   | At March 31, 2002, 524,564 of these shares have been reflected under theredeemable stock caption on the accompanying balance sheet with an assignedvalue of $220,998                                                                                                                                                                                                                                                                                             |
|   |   | The diminishing number of shares subject to potential rescission claims wascaused either by the expiration of the respective statute of limitations periods orby the transfer of the subject shares by the original issuees.                                                                                                                                                                                                                                     |
|   |   | The Company believes that it is unlikely that any of these potential rescissionclaims will be asserted against the Company.                                                                                                                                                                                                                                                                                                                                      |

Note 6.  Financing Transaction

On May 9, 2001, the Company signed an amended and restated common stock purchaseagreement with an unrelated company to sell up to 6,000,000 shares of common stock for up to$10,000,000.  The purchase price of the shares under this purchase agreement varies, based onmarket prices of the Company's common stock.  The purchase agreement calls for the Companyto meet certain requirements and maintain certain criteria with respect to its common stock inorder to avoid an event of default.  Upon the occurrence of the event of default, the buyer is nolonger obligated to purchase any additional shares of common stock.  The registration statementfiled with respect to this financing transaction became effective on June 29, 2001.  Thecommencement date of the purchase agreement was July 10, 2001. To date, the Company hasreceived approximately $395,000 in proceeds under the purchase agreement, approximately$55,000 of which was received by the Company during the first three months of 2002.  Thepurchase agreement remains in effect.

Note 7.  Stock Ownership Plan

In March 2002, the Company adopted a 2002 Stock Ownership Plan for employees andconsultants, reserving 3,000,000 shares of its common stock for issuance thereunder.

In March 2002, the Company entered into a consulting and marketing license agreement with athird party, under which agreement the Company granted the consultant options, under its 2002Stock Ownership Plan, to purchase up to $600,000 of its common stock, up to $50,000 permonth for ten years, the per share exercise price being based on future market prices, with a38.75% discount to the market price on the date of exercise.  In March and April 2002, theconsultant exercised options to purchase $98,000 of Company common stock.  2,000,000 sharesof common stock were issued pursuant to this option exercise.

Note 8. Subsequent Events

Significant Equity Purchase

In April 2002, the Company entered into a securities purchase agreement with a third party,whereby the Company is to issue 3,125,000 units of its securities, each unit consisting of oneshare of common stock, one common stock purchase warrant to purchase one share at an exerciseprice of $.15 per share and one common stock purchase warrant to purchase one share at anexercise price of $.30 per share, for cash in the amount of $250,000 payable in two equalincrements at the initial closing (held April 15, 2002) and June 14, 2002.  Also pursuant to thisagreement, the Company hired a new president and chief executive officer, who became adirector of the Company, and, as a signing bonus, issued him 3,000,000 shares of common stock;the current president became Chairman of the Board, reduced the term of his remaining term ofemployment from approximately four years to six months, waived the payment of all accrued andunpaid salary and waived the repayment of all loans made by him to the Company, inconsideration of 2,000,000 shares of common stock being issued to him; two of the Company’svice presidents reduced the terms of their remaining terms of employment from approximatelyfour years to six months and one year to six months, respectively, and waived the payment of allaccrued and unpaid salary, in consideration of 2,000,000 shares of common stock being issued toeach of them; and the other vice president of the Company terminated his employment with theCompany.

| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results ofOperations. |
|---------|---------------------------------------------------------------------------------------------|

Background

We have 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) televisionindustries.  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 wirelesscable frequencies, we believe our frequencies possess future value.  However, these frequencieswill not be of value to us, unless and until the FCC approves two-way communications on them.

Effective July 1, 1999, we assigned all of our television-related assets to New Wave MediaCorp., in exchange for a 15% ownership interest in New Wave common stock.  This businesssegment was discontinued as of that date and, since then, has not, and will not, generate anyrevenues.  Our board of directors has declared a dividend with respect to all of the New Waveshares.  These shares will be distributed to our shareholders, upon New Wave’s completion of aSecurities Act registration of the distribution transaction.  This registration proceeding has notbeen commenced by New Wave, due to a lack of funds necessary to pay related professionalexpenses.  New Wave has advised us that it is making its best efforts to obtain capital for thispurpose, but cannot provide an exact time by which this will occur.

Current Overview

Our management has committed all available current and future capital and other resources to thecommercial exploitation of our Quick-Cell wireless Internet access products.  It is these productsupon which our future is based.

Our new president has expanded the scope of our original Quick-Cell business plan, which calledfor the construction of Quick-Cell systems in small and medium-sized cities.  In addition to ouroriginal plan, we are now attempting to develop working partnerships with companies who needto create or extend broadband Internet connectivity for their customers, employees and partners.The companies with which we seek to do business operate in the following market segments,among others: hospitality, education, aviation, multiple dwelling unit, planned communitydevelopment, independent local exchange, utility and municipality.

On April 15, 2002, we consummated a securities purchase agreement with Evergreen VenturePartners, LLC.  Under this agreement, we are to issue a total of 3,125,000 units of our securitiesfor cash in the amount of $250,000, payable in two equal increments: on April 15, 2002, andJune 14, 2002.  Each unit sold to Evergreen consists of one share of our common stock, onecommon stock purchase warrant to purchase one share at an exercise price of $.15 per share andone common stock purchase warrant to purchase one share at an exercise price of $.30 per share.Also pursuant to this agreement, we hired a new president and chief executive officer, DouglasO. McKinnon, who also became a director, and who received, as a signing bonus, 3,000,000shares of our common stock; David M. Lofin, our former president, became our Chairman of theBoard, reduced the term of his remaining term of employment from approximately 4 years to sixmonths, waived the payment of all accrued and unpaid salary and waived the repayment of allloans made by him to us, in consideration of 2,000,000 shares of our common stock; two of ourvice presidents reduced the terms of their remaining terms of employment from approximately 4years to six months and one year to six months, respectively, and waived the payment of allaccrued and unpaid salary, in consideration of 2,000,000 shares of our common stock; and ourother vice president terminated his employment with us.  Also, under this agreement, upon thefinal closing scheduled for June 14, 2002, Evergreen will name two persons to become directorsof USURF America.

As a result of the transactions with these four officers arising out of the Evergreen agreement, wewill incur a charge against our earnings during the second quarter of 2002 of approximately$600,000. 

In May 2001, we entered into an amended and restated common stock purchase agreement withFusion Capital Fund II, LLC, which 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.The shares of our common stock being issued under this agreement are the subject of an effectiveregistration statement.  To date, we have received only $395,000 under our agreement withFusion Capital.  Fusion Capital has not purchased the maximum shares possible under thisagreement.  This lack of significant funding has impeded our ability to expand our Quick-Cellbusiness operations.  We will remain in this position unless and until (1) our stock price increasessignificantly or (2) we secure funding from a source other than Fusion Capital, of which there isno assurance.  Please see the discussion under the heading “Management’s Plans Relating toFuture Liquidity”, for a more thorough explanation of the impact this agreement could have onour business.  Should we obtain more substantial funding, we would be able to begin to pursueour wireless Internet business plan.  In October 2001, we began company-owned Quick-Celloperations in Del Rio, Texas, and have agreements with two resellers there.  We haveapproximately 50 customers in Del Rio, and consumer response has been excellent.  However,our customer growth will continue to be slowed by a lack of capital.  We have also completedengineering efforts in four other South Texas towns.  We will not begin marketing our Quick-Cell service in these towns, until we stabilize our working capital situation.

As the level of funding under the Fusion Capital agreement has been lower than we had earlieranticipated, $55,000 during the first three months of 2002, from November 2001 through March31, 2002, we obtained additional funds through sales of our securities, as follows:

|   | - | $57,500 (2001) from the sale of 575,000 shares of our common stock and atotal of 1,150,000 warrants;                                              |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | $30,000 (2002) from the exercise of outstanding warrants - 200,000 shares at$.15 per share;                                                       |
|   | - | $13,000 (2002) from the exercise of outstanding warrants - 162,500 shares at$.08 per share; and                                                   |
|   | - | $49,000 (2002) from the exercise of options - 1,000,000 shares at $.049 pershare (a 38.75% discount to the market price on the date of exercise). |

These funds were used for operating expenses and not for the expansion of our wireless Internetaccess business.

Subsequent to March 31, 2002, in April 2002, we obtained funds through sales of our securities,as follows:

|   | - | $49,000 from the exercise of options - 1,000,000 shares at $.049 per share (a38.75% discount to the market price on the date of exercise).  These funds wereapplied exclusively to operating expenses.                                                                                 |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | $125,000 from the sale of 1,562,500 shares and a total of 3,125,000 warrants,pursuant to the Evergreen transaction.  A portion of these funds are to be usedfor operating expenses, while the balance is to be utilized in our efforts toexpand our wireless Internet access business. |

Pursuant to the Evergreen agreement, we are to receive an additional $125,000, in June 2002,which funds we expect will enable us to pursue our business plan more aggressively.  However,we cannot assure you that we will ever earn a profit.

We will need further capital, as we continue to expand our wireless Internet access business.

CyberHighway Bankruptcy

In September 2000, an involuntary bankruptcy petition was filed against CyberHighway in theIdaho Federal Bankruptcy Court, styled In Re: CyberHighway, Inc., Case No. 00-02454, byProPeople Staffing, CTC Telecom, Inc. and Hawkins-Smith.  A joint motion to dismiss thebankruptcy proceeding was unsuccessful because some of CyberHighway’s creditors believe thatCyberHighway’s as-yet unasserted damage claims against the original petitioning creditors andtheir law firm and a claim against Dialup USA, Inc. represent CyberHighway’s most valuableassets.  These as-yet unasserted claims include claims for bad faith filing of the originalbankruptcy petition as to the original petitioning creditors and their law firm, as well as a claimfor tortious interference with beneficial business relationships as to Dialup USA, Inc.  Thesecreditors desire that these claims be adjudicated in the bankruptcy court.  It is likely that, at sometime in the future, a final order of bankruptcy will be entered with respect to CyberHighway.  Noprediction of the timing of such an order can be made, although we believe that such an orderwould come only after the final adjudication of the claims described above.

The January 1999 acquisition of CyberHighway fundamentally altered our company.  Our annualrevenues went from nearly zero to about $2.5 million.  However, the involuntary bankruptcyproceeding caused the demise of CyberHighway’s business.  CyberHighway’s company-owneddial-up customer base went from approximately 8,500 to none.  The filing of the involuntarybankruptcy and CyberHighway’s switch-over to the network of Dialup USA were the primarycauses of CyberHighway’s customer base demise.  We will not apply any available future capitalto the revitalization of our dial-up Internet access business.

Results of Operations

General.  By the end of February 2001, CyberHighway had lost all of its dial-up Internet accesscustomers and we do not foresee the revitalization of CyberHighway’s business.  You should notpurchase our common stock expecting that CyberHighway’s business will assist in making usprofitable.

During the first quarter of 2001, we derived no revenue from CyberHighway’s business.  For thefirst three months of 2001 and 2002, our small amounts of revenues were dervied from ourQuick-Cell wireless Internet access operations.  We currently lack the capital necessary to pursueour complete Quick-Cell business plan, and we may never possess enough capital with which toexploit fully our Quick-Cell products.  In this circumstance, it is likely that we would never earna profit.

Before the demise of CyberHighway, our revenues were derived primarily from monthlycustomer payments for dial-up access and from per-customer royalty payments from ourCyberHighway affiliate-ISPs.

Beginning in March 2000, we began initial Quick-Cell wireless Internet access operations inSanta Fe, New Mexico.  Throughout 2000, our customers in Santa Fe were in their one-year“free-use” period.  During most of 2001, we did not charge our Santa Fe customers for service,due to our commencing an upgrade to the system.  We were forced to suspend the upgrade of thesystem and have only a few customers remaining.  We have yet to derive significant revenuefrom our Santa Fe market.  In the last quarter of 2001, we began to derive revenues from the firstcustomers in Del Rio, Texas.  We have lacked capital with which to expand either of thesemarkets.

In September 2001, we began Quick-Cell operations in Del Rio, Texas.  We have approximately50 customers online, but our growth there has been slowed significantly due to our lack ofcapital.  We cannot predict the number of customers we will secure in any specific time frame,due to our lack of capital.  In Del Rio, we have chosen to make sustained slow progress incustomer acquisition, rather than to have begun full-scale marketing activities only to suspendthem soon after their start due to our lack of capital.  Should we begin to derive greater amountsof funds under the Fusion Capital agreement or from another source, of which there is noassurance, we plan to construct additional Quick-Cell systems throughout the remainder of 2002.

In the middle of 2000, we began marketing our Quick-Cell systems to local exchange telephonecompanies, independent telephone companies, digital subscriber line resellers and Internetservice providers.  We sold three Quick-Cell systems in a short time.  Due to a lack of capital,however, this marketing effort was suspended before we investigated the nature of the otherinquiring companies.  No paying customers use these systems, due to circumstances involvingthese companies that are beyond our control.  During the first three months of 2001 and 2002, wederived no significant revenues from customer modem sales to these Quick-Cell purchasers, andwe do not expect to do so during 2002.

In cities in which we construct company-owned Quick-Cell systems, we intend to employtelephone marketing as the initial means for acquiring customers and, later, mass media.  We willemploy a sales force that will focus primarily on potential business customers.  This focus onbusiness customers is based on our management’s informal study of Internet usage by businessesversus home users that revealed businesses’ higher demand for high-speed Internet access.  Ourmanagement’s decision may prove to have been incorrect, which would significantly impair ourability 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 tosucceed without additional capital.

In cities where a Quick-Cell reseller operates, we will not have final approval of the reseller’smarketing strategies.  Our resellers will be permitted to market our Quick-Cell service in anycommercially reasonable manner. We cannot, therefore, assure you that any of our resellers willever achieve high enough sales levels that would permit us to earn a profit.

We have entered into a Quick-Cell reseller agreement with Wireless WebConnect!, Inc.  Due toissues within WebConnect that were out of our control, to date, we have not derived any benefitfrom this agreement.  However, after recent discussions with WebConnect, it is possible that wewill begin to implement our agreement during 2002, as it appears that WebConnect’s internalissues have been resolved to a point that it is now in a position to participate as a Quick-Cellreseller.  It is possible that the terms of our agreement with WebConnect might be amended inthe future, but we cannot predict if and when an amendment would be executed.

Our revenues for the first three months of 2001 and 2002 were significantly below those of 2000,since we no longer derive revenues from the operations of CyberHighway and we have lackedcapital with which to implement a full-scale implementation of our Quick-Cell business plan.  In2002, we will produce significant revenues only if we are able to be successful in placing Quick-Cell service customers online, of which there is no assurance, due to the uncertainty surroundingour level of capitalization to be derived under the Fusion Capital agreement or any other sources.

We have taken steps towards the preparation of tax returns for all years since our inception,though none has been filed.  Because we have never earned a profit, there is no tax liability thatwould arise from this circumstance.

Potential Rescission Claims.  At March 31, 2002, 524,564 shares of our common stock with anaggregate assigned value of $220,998 may have been issued in violation of Section 5 of theSecurities Act.  It is possible that each of the issuees of these shares has a potential claim forrescission of their respective issuance transactions. We do not possess capital with which to payany such claims, if asserted, and, if such claims are asserted, it is possible that our then-availablecapital would become impaired and our future operating results would likely suffer. 

Three Months Ended March 31, 2002, versus Three Months Ended March 31, 2001.  During bothperiods, our small amounts of revenues were derived from our wireless Internet access business.Without additional capital, our revenues will remain at these levels.

Our operating results for the first quarters of 2002 and 2001 are summarized in the followingtable:

|   |                                     | First Quarter 2002(unaudited) | First Quarter 2001(unaudited) |
|--------|------------------------------------------|-------------------------------|-------------------------------|
|   |                                     | ________________              | ________________              |
|   | Revenues                                 | $4,626                        | $384                          |
|   | Internet Access Costs, Cost of GoodsSold | 8,482                         | 0                             |
|   | Gross Profit (Loss)                      | (3,856)                       | 384                           |
|   | Operating Expenses                       | 464,772                       | 901,643                       |
|   | Loss from Operations                     | (468,628)                     | (901,259)                     |
|   | Net Loss                                 | (468,811)                     | (901,259)                     |

Our net loss of $468,811 (unaudited) for the first quarter of 2002 was significantly less than ournet loss for the 2001 period of $901,259 (unaudited).  Certain line items in our statements ofoperations changed materially from the 2001 period to the 2002 period, which contributed to thereduction in our net loss for the current period, as follows:

|   | - | Professional fees decreased from $707,288 in the 2001 period to $270,147 inthe 2002 period.  This decrease is a result of our not having requiredprofessional services during the 2002 period at the levels required during the2001 period.  Also, during the 2002, we did not have a charge against ourearnings similar to the $248,000 amount that occurred during the 2001 period,the result of the issuance of 800,000 shares as a commitment fee under acommon stock purchase agreement.  Should we continue to lack cash reserves,it is likely that, during the remainder of 2002, we would issue shares of ourcommon stock in payment of certain professional fees. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | During the 2001 period, we incurred no advertising expense.  However, duringthe 2002 period, we incurred advertising expenses of $62,000.  All of ouradvertising expenses during the current period are attributable to the exercise ofoptions to acquire shares of our common stock by a consultant at a 31.75%discount to the market price on the date of exercise.                                                                                                                                                                                                                                                                                                      |
|   | - | Salaries and commissions decreased from $160,746 in the 2001 period to$103,168 in the 2002 period.  This decrease in salaries and commissions isattributable to our reductions in personnel during the last quarter of 2001 andthe first quarter of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                  |

As a result of the Evergreen transaction, we will incur a one-time charge against our earnings forthe second quarter of 2002 in the approximate amount of $600,000, due to the following stockissuances:

|   | - | 3,000,000 shares issued to our new president and chief executive officer as asigning bonus under his employment agreement.                                                                                                                            |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | 2,000,000 shares to our former president (current Chairman of the Board) inconsideration of his agreeing to reduce the term of his employment agreement,waive the payment of accrued salary and waive the repayment of unpaid loansmade by him to us. |
|   | - | 2,000,000 shares to one of our vice presidents in consideration of his agreeingto reduce the term of his employment agreement and waive the payment ofaccrued salary.                                                                                 |
|   | - | 2,000,000 shares to our vice president of corporate development inconsideration of his agreeing to reduce the term of his employment agreementand waive the payment of accrued salary.                                                                |

We expect that our results of operations for the second quarter of 2002 will be similar to those ofthe first quarter of 2002.

Due to our severe lack of capital during the 2001 and 2002 periods, we issued shares of our stockto consultants in payment of their services.  The fair value of the shares issued to consultants isincluded in our statements of operations under the “Professional Fees” line item.  Issuing sharesof our common stock was the only means by which we could obtain the consultants’ services.The value of the consulting services received by us under each agreement has been expensed inequal monthly amounts over their respective terms:

|   | - | during the first three months of 2001, we issued 320,000 shares of our commonstock under two consulting agreements; these shares were valued for financialaccounting purposes at $99,200, in the aggregate.  This amount was expensedin equal monthly amounts during 2001.                                                                                               |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | during the first three months of 2002, we issued 570,000 shares of our commonstock under consulting agreements; these shares were valued for financialaccounting purposes at $61,500, in the aggregate.  This amount is beingexpensed in equal monthly amounts over periods ranging from four months toone year.  All of this total amount will be expensed during 2002. |

Subsequent to March 31, 2002, we have issued shares to consultants, professional serviceproviders and to certain of our officers, the value of most of which will be charged against ourearnings, beginning in the second quarter of 2002.  Specifically, we have issued: 1,625,000shares to consultants, valued at approximately $165,000, all of which will be charged against ourearnings during 2002; 500,000 shares to professional service providers, valued at approximately$40,000, all of which will be charged against our earnings in the second quarter of 2002; and9,000,000 shares to certain of our officers pursuant to the Evergreen transaction, valued atapproximately $930,000, approximately $600,000 of which value will be charged against ourearnings in the second quarter of 2002.

Liquidity and Capital Resources

General.  Since our inception, we have had a significant working capital deficit.  Currently, weare substantially illiquid, although we do possess enough cash to continue our current level ofbusiness activities, through the result of recent securities sales.  As the level of funding under theFusion Capital agreement has been lower than we had earlier anticipated, $55,000 during the firstthree months of 2002, during the last two months of 2001 and the first three months of 2002, weobtained additional funds through sales of our common stock, as follows:

|   | - | $57,500 (2001) from the sale of 575,000 shares of our common stock and atotal of 1,150,000 warrants;                                              |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | $30,000 (2002) from the exercise of outstanding warrants - 200,000 shares at$.15 per share;                                                       |
|   | - | $13,000 (2002) from the exercise of outstanding warrants - 162,500 shares at$.08 per share; and                                                   |
|   | - | $49,000 (2002) from the exercise of options - 1,000,000 shares at $.049 pershare (a 38.75% discount to the market price on the date of exercise). |

These funds were used for operating expenses and not for the expansion of our wireless Internetaccess business.

Subsequent to March 31, 2002, in April 2002, we obtained funds through sales of our securities,as follows:

|   | - | $49,000 from the exercise of options - 1,000,000 shares at $.049 per share (a38.75% discount to the market price on the date of exercise).  These funds wereapplied exclusively to operating expenses.                                                                                 |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | $125,000 from the sale of 1,562,500 shares and a total of 3,125,000 warrants,pursuant to the Evergreen transaction.  A portion of these funds are to be usedfor operating expenses, while the balance is to be utilized in our efforts toexpand our wireless Internet access business. |

Pursuant to the Evergreen agreement, we are to receive an additional $125,000, in June 2002,which funds we expect will enable us to pursue our business plan more aggressively.  However,we cannot assure you that we will ever earn a profit.

We will need further capital, as we continue to expand our wireless Internet access business.  It ispossible that we will not be able to secure adequate capital as we need it.  Also, withoutadditional 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, wewill require additional capital of approximately $300,000.  To accomplish our goals of expandingour Quick-Cell business, we will require at least $1.2 million.  If we are unable to obtain thisneeded capital, we could be forced to cease our operations.

Currently we do not possess enough capital to accomplish our goals for our Quick-Cell wirelessInternet access business, including the construction of Quick-Cell systems.  When we refer to theconstruction 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 andconfiguration - 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:$2,000 per month; and                            |
|   | - | Initial inventory of customer modems - approximate cost: $70,000.                                                             |

However, in Del Rio, due to our lack of large sums of capital, we were able to re-design ourQuick-Cell system to achieve significant cost savings and built the first portion of that system,which included two server cells - the original plan having called for one server cell - forapproximately $18,000, and we have added a third server cell to this system, in response toconsumer demand.  However, we continue to lack capital with which to market our Quick-Cellservice aggressively.  Rather, in Del Rio, we have chosen to make sustained slow progress incustomer acquisition, rather than to have begun full-scale marketing activities only to suspendthem soon after their start due to our lack of capital.  Should we begin to derive greater amountsof funds under the Fusion Capital agreement, of which there is no assurance, we plan to constructadditional Quick-Cell systems throughout 2002.

If and when we begin to obtain the maximum amount of funds available pursuant to the FusionCapital agreement, we expect, then, to have enough money to pay for the construction of theinitial Quick-Cell cell site in at least three markets per month.  We cannot assure you that we willbe able to construct Quick-Cell cell sites at that rate or that we will ever possess adequate capitalwith which to engage in this level of activities.

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 withenough capital to construct the initial Quick-Cell cell site and commence marketing activities inapproximately 30 markets.  With the Quick-Cell construction permitted by this amount ofcapital, we will be able to determine whether our Quick-Cell wireless Internet access business isa viable business, as presently offered.  However, the funds expected under the Fusion Capitalagreement will not be adequate for us to pursue our complete Quick-Cell business plan, and wecannot assure you that we will be able to obtain capital when needed.  Our inability to obtainfurther capital when needed would lessen our chance of earning a profit, as we would becomeilliquid.

Proceeds from the Fusion Capital Agreement.  Beginning in July 2001, we began to receive thefirst funds of up to $10 million under our agreement with Fusion Capital.  Since then, we havereceived only $395,000 in payment of a total of 3,100,000 shares under this agreement.  FusionCapital has not purchased the maximum funding amount possible under this agreement.  Thislack of significant funding has impeded our ability to expand our Quick-Cell business operations.We will remain in this position unless and until (1) our stock price increases significantly or (2)we secure funding from a source other than Fusion Capital, of which there is no assurance.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 |   |
|   |                                | ==========  |   |

You should note, however, that we may not realize $10 million under the Fusion Capitalagreement, due to the current low market price of our common stock.  In addition, under theFusion Capital agreement, we must maintain compliance with certain criteria in order to avoid anevent of default.  Currently, we are in compliance with these criteria and expect to remain incompliance for the foreseeable future. 

Should all of our outstanding warrants, including all of the warrants to be issued in connectionwith the Fusion Capital agreement, be exercised, we would receive cash proceeds ofapproximately $3,278,376.  Upon the final closing under the Evergreen agreement, we will issuewarrants that could yield $703,125 if exercised.  Funds received from the exercise of warrantswould be used to purchase Quick-Cell equipment, to construct Quick-Cell systems, to market ourQuick-Cell wireless Internet access service and for working capital.  Please see the discussionunder “Use of Proceeds”.

You should note that we may never receive any of the funds discussed above.  Our failure toobtain capital from these sources could cause us to cease our operations.

Potential Rescission Claims.  Because we lack the capital to pay any potential claims forrescission that may be asserted by some of our shareholders, any such claim made against uscould negatively impact our ability to continue in business.  At March 31, 2002, 524,564 of theseshares, with an aggregate value of $220,998, remain subject to potential claims for rescission.We do not possess capital with which to pay any such claims, if asserted, and, if such claims areasserted, it is possible that we would be forced to cease operations, as our then-available capitalcould become severely impaired.

March 31, 2002.  Historically, we have had a significant working capital deficit.  At March 31,2002, our working capital deficit was $1,240,582 (unaudited) which is only slightly lower thanour $1,254,897 deficit at December 31, 2001.  Our receipt of funds through sales of our securitiesduring the first three months of 2002 permitted us to maintain a constant working capital deficitthroughout the quarter.  Approximately 85% of our accounts payable are accounts payable ofCyberHighway and are subject to the pending Chapter 7 bankruptcy proceeding ofCyberHighway.  Without additional capital, our working capital deficit can be expected tobecome larger each quarter.

The following table sets forth our current assets and current liabilities at March 31, 2002, andDecember 31, 2001:

|   |               |                                    | March 31, 2002  | December 31,2001 |
|--------|--------------------|-----------------------------------------|-----------------|------------------|
|   |               |                                    | _______________ | _______________  |
|   |               |                                    | (unaudited)     | (audited)        |
|   | Current Assets     | Cash                                    | $284            | $10              |
|   |               | Inventory                               | 133,500         | 134,756          |
|   |               |                                    |            |             |
|   | CurrentLiabilities | Disbursements in Excess ofCash Balances | $0              | $15,539          |
|   |               | Accounts Payable                        | 1,042,150       | 1,034,619        |
|   |               | Accrued Payroll                         | 272,820         | 265,978          |
|   |               | Other Current Liabilities               | 59,396          | 54,996           |
|   |               | Notes Payable to Stockholder            | 0               | 18,521           |

Our accrued payroll at March 31, 2002, as well as at December 31, 2001, is attributable toaccrued salary of three of our officers.  In connection with the Evergreen transaction describedabove, these officers waived payment of all of their accrued salaries, which will be reflected onour June 30, 2002, balance sheet.

We reduced our note payable to stockholder during the first quarter of 2002 by $18,521, andowed this shareholder no amount at March 31, 2002.  We do not expect that we will againborrow funds from this shareholder.

As the level of funding under the Fusion Capital agreement has been lower than we had earlieranticipated, $55,000 during the first three months of 2002, from November 2001 through March31, 2002, we obtained a total of $149,500 in cash from sales of our securities, as follows:

|   | - | $57,500 (2001) from the sale of 575,000 shares of our common stock and atotal of 1,150,000 warrants;                                              |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | $30,000 (2002) from the exercise of outstanding warrants - 200,000 shares at$.15 per share;                                                       |
|   | - | $13,000 (2002) from the exercise of outstanding warrants - 162,500 shares at$.08 per share; and                                                   |
|   | - | $49,000 (2002) from the exercise of options - 1,000,000 shares at $.049 pershare (a 38.75% discount to the market price on the date of exercise). |

The funds received were applied primarily to operating expenses.

Subsequent to March 31, 2002, in April 2002, we obtained funds through sales of our securities,as follows:

|   | - | $49,000 from the exercise of options - 1,000,000 shares at $.049 per share (a38.75% discount to the market price on the date of exercise).  These funds wereapplied exclusively to operating expenses.                                                                                 |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | $125,000 from the sale of 1,562,500 shares and a total of 3,125,000 warrants,pursuant to the Evergreen transaction.  A portion of these funds are to be usedfor operating expenses, while the balance is to be utilized in our efforts toexpand our wireless Internet access business. |

Pursuant to the Evergreen agreement, we are to receive an additional $125,000, in June 2002,which funds we expect will enable us to pursue our business plan more aggressively.  However,we cannot assure you that we will ever earn a profit.

Without obtaining at least $1,200,000 in new capital, we will continue to have a significantworking capital deficit and will not be able to operate from a position of liquidity.  This willimpair our ability to pursue our Quick-Cell business plan and, thus, our ability ever to earn aprofit.

If we are unable to obtain significant additional capital, it is possible that we would be forced tocease operations.

Cash Flows from Operating Activities.  During the first quarter of 2002, our operations used$123,305 (unaudited) in cash compared to cash used of $162,684 (unaudited) during the firstquarter of 2001.  In both periods, the use of cash in operations was a direct result of the lack ofrevenues compared to our operating expenses, particularly salaries and commissions.

Cash Flows from Investing Activities.  During the first quarters of 2001 and 2002, our investingactivities neither provided nor used cash.  Because we lack working capital, we cannot predictour cash flows from investing activities for the remainder of 2002.

Cash Flows from Financing Activities.  For the first quarter of 2002, our financing activitiesprovided $123,579 (unaudited) in cash.  Our payments on notes payable to stockholder of$18,521 and $4,900 in finder’s fees were offset by payments received on subscriptions receivableof $70,000, $64,000 in cash from sales of our common stock and $13,000 in cash obtained by theexercise of certain warrants.  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.  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 additionalcapital of approximately $300,000.  Our recent securities purchase agreement with Evergreenwill provide a significant portion of this capital requirement.  To accomplish our goals ofexpanding our Quick-Cell business, we will require at least $1.2 million.

Our best opportunity for obtaining needed funds is pursuant to the Fusion Capital agreement.However, to date, we have received only $395,000 under our agreement with Fusion Capital.Fusion Capital has not purchased the maximum shares possible under this agreement.

Since we only plan to sell up to 6,000,000 shares to Fusion Capital under the Fusion Capitalagreement, the selling price of our stock sold to Fusion Capital will need to average $1.67 pershare for us to receive the maximum proceeds of $10 million under that agreement.  Assuming aselling price of $.08 per share, the closing sale price of the common stock on May 16, 2002, andthe purchase by Fusion Capital of the full amount of shares purchasable under the Fusion Capitalagreement, total proceeds to us would only be approximately $600,000, unless we choose toissue more than 6,000,000 shares, which we have the right to do.

Should we obtain at least $1.2 million under the Fusion Capital agreement, we believe that wewill be able to have accomplished our primary objectives:

|   | - | entering into several working partnerships with companies who need to createor extend broadband Internet connectivity for their customers, employees andpartners; |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | placing at least 10,000 customers on our Quick-Cell systems during the nextyear; and                                                                              |
|   | - | proving the commercial viability of our Quick-Cell wireless Internet accessservice.                                                                               |

We cannot assure you that we will accomplish these objectives.

Currently, we have no other sources for funding on the scale contemplated by the Fusion Capitaltransaction.

If we do not obtain the necessary funding, we would be forced to cease operations.

Capital Expenditures

During the first three months of 2002, we made no capital expenditures and we currently have nocapital with which to make any significant capital expenditures.  Should we obtain significantfunding, of which there is no assurance, we would be able to make major expenditures on Quick-Cell-related equipment.  However, without additional capital, we will make no capitalexpenditures.

CERTAIN STATEMENTS CONTAINED IN THIS “MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” ARE“FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF THE PRIVATESECURITIES 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 RESULTSTO DIFFER MATERIALLY FROM FUTURE RESULTS EXPRESSED OR IMPLIED BYSUCH FORWARD-LOOKING STATEMENTS.  THE MOST SIGNIFICANT OF SUCHRISKS, UNCERTAINTIES AND OTHER FACTORS IS OUR ABILITY TO OBTAINCAPITAL IN AMOUNTS NECESSARY FOR US TO ACCOMPLISH OUR PLAN FOR THEEXPLOITATION OF OUR QUICK-CELL WIRELESS INTERNET ACCESS PRODUCTS, ASWELL 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 inthe Idaho Federal Bankruptcy Court, styled In Re: CyberHighway, Inc., Case No. 00-02454.  Thepetitioning creditors were ProPeople Staffing, CTC Telecom, Inc. and Hawkins-Smith.  InDecember 2000, CyberHighway and the petitioning creditors filed a joint motion to dismiss thisproceeding.  The joint motion to dismiss was denied because the creditors believe thatCyberHighway’s as-yet unasserted damage claims against the original petitioning creditors andtheir law firm and a claim against Dialup USA, Inc. represent CyberHighway’s most valuableassets.  These as-yet unasserted claims include claims for bad faith filing of the originalbankruptcy petition as to the original petitioning creditors and their law firm, as well as claim fortortious interference with beneficial business relationships as to Dialup USA, Inc.  It is likelythat, at some time in the future, a final order of bankruptcy will be entered with respect toCyberHighway, no prediction of the timing of such an order can be made, although we believethat 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 againstDarrell Davis, formerly one of our officers, and his wife, Deanna Davis.  We have alleged thatthe Davises have diverted dial-up customers from CyberHighway to a company controlled byhim, all while he was an employee of USURF America.  We expect that a hearing for our motionfor a permanent injunction will occur in the future.  In addition, we are seeking monetarydamages in this action.  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 DarrellD. Davis, 19th Judicial District Court, Parish of East Baton Rouge, State of Louisiana, Case No.478320.

In January 2000, we instituted arbitration proceedings against Christopher L. Wiebelt, our formervice president of finance and chief financial officer.  We have alleged that Mr. Wiebelt violatedcertain terms of his employment agreement and are seeking damages resulting from thoseviolations.  This case is styled: USURF America, Inc. versus Christopher L. Wiebelt, AmericanArbitration Association, Case No. 71-160-00087-01.  We expect this arbitration proceeding to besettled in the near future.

Possible Claim

Some time in the future, it is possible that we will enter into arbitration proceedings withCommonwealth Associates.  The dispute revolves around Commonwealth’s claim that we owe itapproximately 127,000 shares of our common stock.  We do not believe Commonwealth isentitled to any shares and will vigorously defend our position in arbitration.  We cannot predictthe outcome of this arbitration proceeding.

Potential Legal Proceeding

In addition to CyberHighway’s cause of action against Dialup USA, it is the intention of USURFAmerica to pursue damage claims against Dialup USA for tortiously interfering with thebeneficial business relationships between CyberHighway and its customers.  These claims ariseout of Dialup USA’s actions on behalf of one of our former officers, which were designed todivert customers to a company controlled by him.  Our claim against Dialup USA will be forapproximately $2 million.  We have not established a date by which we intend to commence thislegal proceeding.

Item 2.  Changes in Securities.

During the three months ended March 31, 2002, we issued securities as follows:

  1. (a)  Securities Sold.  In January 2002, 120,000 shares of Company Common Stock wereissued.

     (b)  Underwriter or Other Purchasers.  Such shares of Common Stock were issued to FusionCapital Fund II, LLC.

     (c)   Consideration.  Such shares of Common Stock were issued pursuant to a consultingagreement and were valued at $12,000.

     (d)  Exemption from Registration Claimed.  The Company relied upon the exemption fromregistration afforded by Section 4(2) of the Securities Act of 1933, as amended.

  2. (a)  Securities Sold.  In February 2002, 86,500 shares of Company Common Stock wereissued.

     (b)  Underwriter or Other Purchasers.  Such shares of Common Stock were issued to ShelterCapital Ltd.

     (c)   Consideration.  Such shares of Common Stock were issued as a finder’s fee.

     (d)  Exemption from Registration Claimed.  These securities are exempt from registrationunder the Securities Act of 1933, as amended, pursuant to the provisions of Regulation Sthereunder.

  3. (a)  Securities Sold.  In February 2002, 160,000 common stock purchase warrants of theCompany were issued.

     (b)  Underwriter or Other Purchasers.  Such warrants were issued to Shelter Capital Ltd.

     (c)   Consideration.  Such warrants were issued as a finder’s fee.

     (d)  Exemption from Registration Claimed.  These securities are exempt from registrationunder the Securities Act of 1933, as amended, pursuant to the provisions of Regulation Sthereunder.

      (e) Terms of Conversion or Exercise.  Exercise price of the warrants is $.10 per share andexercisable for a period of three years from issuance.

  4. (a)  Securities Sold.  In February 2002, 266,000 common stock purchase warrants of theCompany were issued.

     (b)  Underwriter or Other Purchasers.  Such warrants were issued to Shelter Capital Ltd.

     (c)   Consideration.  Such warrants were issued as a finder’s fee.

     (d)  Exemption from Registration Claimed.  These securities are exempt from registrationunder the Securities Act of 1933, as amended, pursuant to the provisions of Regulation Sthereunder.

      (e) Terms of Conversion or Exercise.  Exercise price of the warrants is $.20 per share andexercisable for a period of three years from issuance.

  5. (a)  Securities Sold.  In February 2002, 93,000 common stock purchase warrants of theCompany were issued.

     (b)  Underwriter or Other Purchasers.  Such warrants were issued to Shelter Capital Ltd.

     (c)   Consideration.  Such warrants were issued as a finder’s fee.

     (d)  Exemption from Registration Claimed.  These securities are exempt from registrationunder the Securities Act of 1933, as amended, pursuant to the provisions of Regulation Sthereunder.

      (e) Terms of Conversion or Exercise.  Exercise price of the warrants is $.30 per share andexercisable for a period of three years from issuance.

  6. (a)  Securities Sold.  In February 2002, 300,000 shares of Company Common Stock wereissued.

     (b)  Underwriter or Other Purchasers.  Such shares of Common Stock were issued to PeterRochow.

     (c)   Consideration.  Such shares of Common Stock were issued pursuant to a consultingagreement and were value at $30,000.

     (d)  Exemption from Registration Claimed.  These securities are exempt from registrationunder the Securities Act of 1933, as amended, pursuant to the provisions of Regulation Sthereunder.

  7. (a)  Securities Sold.  In March 2002, 400,000 shares of Company Common Stock wereissued.

     (b)  Underwriter or Other Purchasers.  Such shares of Common Stock were issued to PeterRochow.

     (c)   Consideration.  Such shares of Common Stock were issued as a finder’s fee.

     (d)  Exemption from Registration Claimed.  These securities are exempt from registrationunder the Securities Act of 1933, as amended, pursuant to the provisions of Regulation Sthereunder.

  8. (a)  Securities Sold.  In March 2002, 400,000 common stock purchase warrants of theCompany were issued.

     (b)  Underwriter or Other Purchasers.  Such warrants were issued to Peter Rochow.

     (c)   Consideration.  Such warrants were issued as a finder’s fee.

     (d)  Exemption from Registration Claimed.  These securities are exempt from registrationunder the Securities Act of 1933, as amended, pursuant to the provisions of Regulation Sthereunder.

      (e) Terms of Conversion or Exercise.  Exercise price of the warrants is $.10 per share andexercisable for a period of three years from issuance.

  9. (a)  Securities Sold.  In March 2002, 400,000 common stock purchase warrants of theCompany were issued.

     (b)  Underwriter or Other Purchasers.  Such warrants were issued to Peter Rochow.

     (c)   Consideration.  Such warrants were issued as a finder’s fee.

     (d)  Exemption from Registration Claimed.  These securities are exempt from registrationunder the Securities Act of 1933, as amended, pursuant to the provisions of Regulation Sthereunder.

      (e) Terms of Conversion or Exercise.  Exercise price of the warrants is $.20 per share andexercisable for a period of three years from issuance.

  10. (a)  Securities Sold.  In March 2002, 200,000 common stock purchase warrants of theCompany were issued.

     (b)  Underwriter or Other Purchasers.  Such warrants were issued to Shelter Capital Ltd.

     (c)   Consideration.  Such warrants were issued as a finder’s fee.

     (d)  Exemption from Registration Claimed.  These securities are exempt from registrationunder the Securities Act of 1933, as amended, pursuant to the provisions of Regulation Sthereunder.

      (e) Terms of Conversion or Exercise.  Exercise price of the warrants is $.049 per share andexercisable for a period of three years from issuance.

Subsequent to March 31, 2002, we have issued unregistered securities, as follows:

  1. (a)  Securities Sold.  In April 2002, 200,000 common stock purchase warrants of theCompany were issued.

     (b)  Underwriter or Other Purchasers.  Such warrants were issued to Shelter Capital Ltd.

     (c)   Consideration.  Such warrants were issued as a finder’s fee.

     (d)  Exemption from Registration Claimed.  These securities are exempt from registrationunder the Securities Act of 1933, as amended, pursuant to the provisions of Regulation Sthereunder.

      (e) Terms of Conversion or Exercise.  Exercise price of the warrants is $.049 per share andexercisable for a period of three years from issuance.

  2. (a)  Securities Sold.  In April 2002, 500,000 shares of Company Common Stock were issued.

     (b)  Underwriter or Other Purchasers.  Such shares of Common Stock were issued to Newlan& Newlan.

     (c)   Consideration.  Such shares of Common Stock were issued as a bonus, at a price of $.10per share.

     (d)  Exemption from Registration Claimed.  The Company relied upon the exemption fromregistration afforded by Section 4(2) of the Securities Act of 1933, as amended.

  3. (a)  Securities Sold.  In April 2002, 75,000 shares of Company Common Stock were issued.

     (b)  Underwriter or Other Purchasers.  Such shares of Common Stock were issued to PatrickF. McGrew.

     (c)   Consideration.  Such shares of Common Stock were issued as a bonus, at a price of $.10per share.

     (d)  Exemption from Registration Claimed.  The Company relied upon the exemption fromregistration afforded by Section 4(2) of the Securities Act of 1933, as amended.

  4. (a)  Securities Sold.  In April 2002, 500,000 shares of Company Common Stock were issued.

     (b)  Underwriter or Other Purchasers.  Such shares of Common Stock were issued to HeyerCapital Fund.

     (c)   Consideration.  Such shares of Common Stock were issued as a finder’s fee.

     (d)  Exemption from Registration Claimed.  These securities are exempt from registrationunder the Securities Act of 1933, as amended, pursuant to the provisions of Regulation Sthereunder.

  5. (a)  Securities Sold.  In April 2002, 200,000 shares of Company Common Stock were issued.

     (b)  Underwriter or Other Purchasers.  Such shares of Common Stock were issued toEmployer Support Services.

     (c)   Consideration.  Such shares of Common Stock were issued in payment of a trade payableand were valued at a price of $20,000.

     (d)  Exemption from Registration Claimed.  The Company relied upon the exemption fromregistration afforded by Section 4(2) of the Securities Act of 1933, as amended.

  6. (a)  Securities Sold.  In April 2002, a total of 9,000,000 shares of Company Common Stockwere issued.

     (b)  Underwriter or Other Purchasers.  Such shares of Common Stock were issued to DouglasO. McKinnon (3,000,000 shares), David M. Loflin (2,000,000 shares), Waddell D. Loflin(2,000,000 shares) and James Kaufman (2,000,000 shares).

     (c)   Consideration.  Such shares of Common Stock were issued in pursuant to the terms ofemployment-related agreements and were valued at approximately $930,000, in the aggregate.

     (d)  Exemption from Registration Claimed.  The Company relied upon the exemption fromregistration afforded by Section 4(2) of the Securities Act of 1933, as amended.

  7. (a)  Securities Sold.  In April 2002, 1,562,500 shares of Company Common Stock wereissued.

     (b)  Underwriter or Other Purchasers.  Such shares of Common Stock were issued toEvergreen Venture Partners, LLC.

     (c)   Consideration.  Such shares of Common Stock were issued pursuant to a securitiespurchase agreement, at a price of $.08 per share.

     (d)  Exemption from Registration Claimed.  The Company relied upon the exemption fromregistration afforded by Section 4(2) of the Securities Act of 1933, as amended.

  8. (a)  Securities Sold.  In April 2002, 1,562,500 common stock purchase warrants of theCompany were issued.

     (b)  Underwriter or Other Purchasers.  Such warrants were issued to Evergreen VenturePartners, LLC.

     (c)   Consideration.  Such warrants were issued for no additional consideration pursuant tosecurities purchase agreement.

     (d)  Exemption from Registration Claimed.  The Company relied upon the exemption fromregistration afforded by Section 4(2) of the Securities Act of 1933, as amended.

      (e) Terms of Conversion or Exercise.  Exercise price of the warrants is $.15 per share andexercisable for a period of three years from issuance.

  9. (a)  Securities Sold.  In April 2002, 1,562,500 common stock purchase warrants of theCompany were issued.

     (b)  Underwriter or Other Purchasers.  Such warrants were issued to Evergreen VenturePartners, LLC.

     (c)   Consideration.  Such warrants were issued for no additional consideration pursuant tosecurities purchase agreement.

     (d)  Exemption from Registration Claimed.  The Company relied upon the exemption fromregistration afforded by Section 4(2) of the Securities Act of 1933, as amended.

      (e) Terms of Conversion or Exercise.  Exercise price of the warrants is $.30 per share andexercisable for a period of three years from issuance.

  10. (a)  Securities Sold.  In April 2002, 900,000 shares of Company Common Stock wereissued.

     (b)  Underwriter or Other Purchasers.  Such shares of Common Stock were issued to Allen &Company Business Communications.

     (c)   Consideration.  Such shares of Common Stock were issued pursuant to a consultingagreement and were valued at $90,000.

     (d)  Exemption from Registration Claimed.  The Company relied upon the exemption fromregistration afforded by Section 4(2) of the Securities Act of 1933, as amended.

  11. (a)  Securities Sold.  In April 2002, 250,000 shares of Company Common Stock wereissued.

     (b)  Underwriter or Other Purchasers.  Such shares of Common Stock were issued to B.Edward Haun & Company.

     (c)   Consideration.  Such shares of Common Stock were issued pursuant to a consultingagreement and were valued at $25,000.

     (d)  Exemption from Registration Claimed.  The Company relied upon the exemption fromregistration afforded by Section 4(2) of the Securities Act of 1933, as amended.

  12. (a)  Securities Sold.  In April 2002, 250,000 shares of Company Common Stock wereissued.

     (b)  Underwriter or Other Purchasers.  Such shares of Common Stock were issued to SummitVenture Partners, LLC.

     (c)   Consideration.  Such shares of Common Stock were issued pursuant to a consultingagreement and were valued at $25,000.

     (d)  Exemption from Registration Claimed.  The Company relied upon the exemption fromregistration afforded by Section 4(2) of the Securities Act of 1933, as amended.

  13. (a)  Securities Sold.  In April 2002, 150,000 shares of Company Common Stock wereissued.

     (b)  Underwriter or Other Purchasers.  Such shares of Common Stock were issued to BarkerDesign, Inc.

     (c)   Consideration.  Such shares of Common Stock were issued pursuant to a consultingagreement and were valued at $15,000.

     (d)  Exemption from Registration Claimed.  The Company relied upon the exemption fromregistration afforded by Section 4(2) of the Securities Act of 1933, as amended.

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, 2002, we filed one Current Report onForm 8-K, as follows: |

|   | - | Date of event: February 6, 2002, wherein we reported the resignation ofone of our directors.  This Current Report on Form 8-K is incorporatedherein by this reference. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   | Subsequent to March 31, 2002, we have filed two Current Reports on Form 8-K, as follows: |
|--------|--------|------------------------------------------------------------------------------------------|

|   |   | - | Date of event: April 5, 2002, wherein we reported information pursuantto Regulation FD; and                                                            |
|--------|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | - | Date of event: April 15, 2002, wherein we reported a material securitiessale transaction and the hiring of a new president and chief executiveofficer. |

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, Registrant has dulycaused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: May 24, 2002.

|   | USURF AMERICA, INC.          |   |
|--------|------------------------------|--------|
|   | By: /s/ DAVID M. LOFLIN      |   |
|   | David M. Loflin              |   |
|   | Chairman of the Board and    |   |
|   | Principal Accounting Officer |   |