**UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION**
  **WASHINGTON,
        D.C. 20549**
  **FORM
        10-QSB**
  x  
        Quarterly
        Report Under Section 13 or 15(d) of the Securities Exchange Act of
        1934
  For
        the
        quarterly period ended June 30, 2005
  o  
        Transition
        Report Under Section 13 or 15(d) of the Securities Exchange Act of
        1934
  For
        the
        transition period from _________ to __________.
 
 **Commission
        File No. 001-15383**
 
 **CARDINAL
        COMMUNICATIONS, INC. (Formerly Known As Usurf America,
        Inc.)**
 (Exact
        name of small business issuer as specified in its charter)
 
 **NEVADA**
              **91-2117796**(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  EmployerIdentification
                  Number)**390
                  INTERLOCKEN CRESCENT, SUITE 900, BROOMFIELD, COLORADO
                  80021**(Address
                  of principal executive offices)Registrant’s
                  telephone number, including area code:
              **(303)
                  285-5379**
 
 Check
                  whether the issuer filed all reports required to be filed by Section
                  13 or
                  15(d) of the Exchange Act during the past 12 months (or for such
                  shorter
                  period that the registrant was required to file such reports),
                  and has
                  been subject to such filing requirements for the past 90 days [X
                  ] Yes
                  [  ] No
  As
        of
        August 15, 2005, there were 262,543,888 shares of the issuer’s outstanding
        common stock.
  Transitional
        Small Business Disclosure Format (Check One): [  ] Yes [X]
        No
  1
  **PART
        I - Financial Information**
  **Item
        1.**  **Financial
        Statements**
 
 **CARDINAL
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 (formerly
        known as Usurf America, Inc.)
 **FINANCIAL
        STATEMENTS**
 **TABLE
        OF CONTENTS**
 
 PAGEConsolidated
                    Balance Sheet as of June 30, 2005 (Unaudited)
                3Consolidated
                    Statements of Operations and Comprehensive Loss for the three
                    and six
                    months ended June 30, 2005 and 2004 (Unaudited)
                5Consolidated
                    Statements of Cash Flows for the six months ended June 30, 2005
                    and 2004
                    (Unaudited)
                6Notes
                    to Consolidated Financial Statements (Unaudited)
                13


2




CARDINAL
                  COMMUNICATIONS, INC. AND SUBSIDIARIES(formerly
                  known as Usurf America, Inc.)CONSOLIDATED
                  BALANCE SHEETJUNE
                  30, 2005 (UNAUDITED)ASSETSCash
                  and cash equivalents
              
              $
              929,807Marketable
                  securities
              
              
              48,800Accounts
                  receivable, net
              
              
              1,010,339Other
                  receivables
              
              
              358,545Unamortized
                  financing costs
              
              
              163,569Deposits
                  and prepaid expenses
              
              
              810,747Property
                  and equipment, net
              
              
              4,200,485Real
                  estate and land inventory
              
              
              43,426,177Intangibles,
                  net
              
              
              10,252,648Other
                  assets
              
              
              369,300Total
                  Assets
              
              $
              61,570,417The
                  accompanying notes are an integral part of these
                  statements.






3




CARDINAL
                  COMMUNICATIONS, INC. AND SUBSIDIARIES(formerly
                  known as Usurf America, Inc.)CONSOLIDATED
                  BALANCE SHEET (Continued)JUNE
                  30, 2005 (UNAUDITED)LIABILITIES
                  AND STOCKHOLDER'S EQUITYAccounts
                  payable
              
              
              
              
              $
              3,283,141Accrued
                  expenses and other liabilities
              
              
              
              
              
              2,048,803Deferred
                  revenue
              
              
              
              
              
              203,709Land
                  and construction loans
              
              
              
              
              
              38,187,714Related
                  party debt
              
              
              
              
              
              3,951,343Notes
                  payable, net of discount
              
              
              
              
              
              4,696,919Total
                  Liabilities
              
              
              
              
              
              52,371,629Commitments
                  and ContingenciesPreferred
                  Stock Committed
              
              
              
              
              
              2,037,750Minority
                  Interest
              
              
              
              
              
              3,976,806Stockholders'
                  equity:Preferred
                  stock; par value $0.0001; issuable in series; authorized
                  100,000,000Series
                  A Preferred stock; issued and outstanding 10,000
              
              
              
              
              
              1Series
                  B Preferred stock; issued and outstanding 100,000
              
              
              
              
              
              10Common
                  stock; par value $0.0001; authorized 800,000,000; issued and
                  outstanding260,556,939
              
              
              
              
              
              26,055Additional
                  paid-in capital
              
              
              
              
              
              68,353,852Deferred
                  consulting
              
              
              
              
              
              (65,190
              )Comprehensive
                  (loss)
              
              
              
              
              
              (551,200
              )Accumulated
                  deficit
              
              
              
              
              
              (64,579,296
              )Total
                  Stockholders' Equity
              
              
              
              
              
              3,184,232Total
                  Liabilities and Stockholders' Equity
              
              
              
              
              $
              61,570,417The
                  accompanying notes are an integral part of these
                  statements.






4




CARDINAL
                  COMMUNICATIONS, INC. AND SUBSIDIARIES(formerly
                  known as Usurf America, Inc.)CONSOLIDATED
                  STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)THREE
                  AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004(UNAUDITED)Three
                  Months Ended June 30,
              
              Six
                  Months Ended June 30,2005
              
              2004
              
              2005
              
              2004REVENUESRevenues
              
              $
              7,990,655
              
              $
              2,293,513
              
              $
              12,851,297
              
              $
              2,459,743Cost
                  of goods sold
              
              
              (5,072,076
              )
              
              (1,415,530
              )
              
              (7,457,777
              )
              
              (1,553,178
              )Gross
                  profit
              
              
              2,918,579
              
              
              877,983
              
              
              5,393,520
              
              
              906,565OPERATING
                  EXPENSESDepreciation
                  and amortization
              
              
              380,470
              
              
              304,182
              
              
              719,346
              
              
              413,619Professional
                  fees
              
              
              1,170,230
              
              
              1,627,154
              
              
              2,163,561
              
              
              2,827,591Rent
              
              
              122,427
              
              
              44,077
              
              
              186,227
              
              
              71,958Salaries
                  and commissions
              
              
              1,752,321
              
              
              381,134
              
              
              2,633,773
              
              
              563,396Selling,
                  general and administrative
              
              
              1,052,722
              
              
              1,145,900
              
              
              2,036,823
              
              
              1,591,464Total
                  operating expenses
              
              
              4,478,170
              
              
              3,502,447
              
              
              7,739,730
              
              
              5,468,028(LOSS)
                  FROM OPERATIONS
              
              
              (1,559,591
              )
              
              (2,624,464
              )
              
              (2,346,210
              )
              
              (4,561,463
              )OTHER
                  INCOME (EXPENSE)Other
                  income (expense)
              
              
              (15,826
              )
              
              (11,362
              )
              
              (29,430
              )
              
              (24,446
              )Accretion
                  of interest (expense) on convertible debt
              
              
              (186,381
              )
              
              (176,292
              )
              
              (372,761
              )
              
              (784,025
              )Gain
                  (loss) on disposition of assets
              
              
              0
              
              
              0
              
              
              (25,764
              )
              
              0Interest
                  (expense)
              
              
              (270,748
              )
              
              (60,050
              )
              
              (429,446
              )
              
              (63,069
              )Total
                  other (expense)
              
              
              (472,955
              )
              
              (247,704
              )
              
              (857,401
              )
              
              (871,540
              )(LOSS)
                  BEFORE MINORITY INTEREST
              
              
              (2,032,546
              )
              
              (2,872,168
              )
              
              (3,203,611
              )
              
              (5,433,003
              )Income
                  attributable to minority interest
              
              
              (121,452
              )
              
              0
              
              
              (210,990
              )
              
              0NET
                  (LOSS)
              
              
              (2,153,998
              )
              
              (2,872,168
              )
              
              (3,414,601
              )
              
              (5,433,003
              )OTHER
                  COMPREHENSIVE (LOSS) - unrealized holding(loss)
              
              
              (551,200
              )
              
              0
              
              
              (551,200
              )
              
              0COMPREHENSIVE
                  (LOSS)
              
              $
              (2,705,198
              )
              $
              (2,872,168
              )
              $
              (3,965,801
              )
              $
              (5,433,003
              )Net
                  (loss) per common share
              
              
              (0.0086
              )
              
              (0.0172
              )
              
              (0.0145
              )
              
              (0.0372
              )Weighted
                  average number of shares outstanding
              
              
              250,738,586
              
              
              166,577,835
              
              
              234,745,683
              
              
              146,071,465The
                  accompanying notes are an integral part of these
                  statements.






5




CARDINAL
                  COMMUNICATIONS, INC. AND SUBSIDIARIES(formerly
                  known as Usurf America, Inc.)CONSOLIDATED
                  STATEMENTS OF CASH FLOWS(Unaudited)Six
                  Months Ended June 30,2005
              
              2004CASH
                  FLOWS FROM (TO) OPERATING ACTIVITIESNet
                  (loss) before minority interest
              
              $
              (3,203,611
              )
              $
              (5,433,003
              )Adjustments
                  to reconcile net (loss) to net cash provided by(used
                  in) operating activities:Depreciation
                  and amortization
              
              
              719,346
              
              
              413,619Stock
                  issued for consulting, fees and compensation
              
              
              2,549,882
              
              
              2,906,574Accretion
                  of interest expense on convertible debt
              
              
              372,761
              
              
              784,025Non
                  cash change in Minority Interest
              
              
              30,672
              
              
              0Loss
                  on sale of assets
              
              
              25,764
              
              
              0Changes
                  in Operating Assets and Liabilities:Accounts
                  receivable
              
              
              (196,957
              )
              
              (724,276
              )Financing
                  costs
              
              
              210,809
              
              
              (580,017
              )Accounts
                  payable
              
              
              1,200,541
              
              
              210,334Accrued
                  expenses and other liabilities
              
              
              734,130
              
              
              (92,679
              )Deferred
                  revenue
              
              
              (43,341
              )
              
              (120,437
              )Other
                  assets and liabilities
              
              
              (205,976
              )
              
              (247,279
              )Real
                  estate and land inventory
              
              
              (1,202,006
              )
              
              0Net
                  cash provided by (used in) operating activities
              
              
              992,014
              
              
              (2,883,139
              )CASH
                  FLOWS FROM (TO) INVESTING ACTIVITIESPurchases
                  of property and equipment
              
              
              (660,815
              )
              
              (642,065
              )Cash
                  paid for acquisitions
              
              
              (294,765
              )
              
              (1,045,000
              )Purchases
                  of intangibles & other assets
              
              
              (64,414
              )
              
              (924,045
              )Cash
                  acquired through aqcuisition
              
              
              1,352,147
              
              
              0Proceeds
                  from sale of assets
              
              
              9,284
              
              
              0Net
                  cash provided by (used in) investing activities
              
              
              341,437
              
              
              (2,611,110
              )CASH
                  FLOWS FROM (TO) FINANCING ACTIVITIESProceeds
                  from notes payable
              
              
              7,465,569
              
              
              3,670,000Proceeds
                  from related party notes payable
              
              
              3,127
              
              
              0Payments
                  on notes payable
              
              
              (8,647,297
              )
              
              (168,300
              )Collections
                  on subscriptions receivable
              
              
              44,585
              
              
              0Issuance
                  of common stock for cash
              
              
              0
              
              
              2,200,000Net
                  cash provided by (used in) financing activities
              
              
              (1,134,016
              )
              
              5,701,700Net
                  increase in cash
              
              
              199,435
              
              
              207,451Cash
                  and cash equivalents, beginning of period
              
              
              730,372
              
              
              72,597Cash
                  and cash equivalents, end of period
              
              $
              929,807
              
              $
              280,048SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATIONCash
                  paid for interest
              
              $
              225,444
              
              $
              3,018Stock
                  issued for acquisition of assets
              
              $
              5,705,000
              
              $
              2,656,999Stock
                  issued for forgiveness of debt
              
              $
              126,125
              
              $
              -The
                  accompanying notes are an integral part of these
                  statements.






6




**SUPPLEMENTAL
        DISCLOSURE**
 **OF
        NON-CASH INVESTING AND**
 **OTHER
        CASH FLOW INFORMATION**
 
 **Six
        Months Ended June 30, 2005**
 
 In
        January 2005, we issued 1,250,000 shares under a consulting agreement, which
        shares were valued at $105,000.00.
 
 In
        January 2005, we issued 3,077,809 shares under a consulting agreement, which
        shares were valued at $249,303.00.
 
 In
        January 2005, we issued 1,423,550 shares under a consulting agreement, which
        shares were valued at $121,714.00.
 
 In
        February 2005, we issued 1,508,100 shares under a consulting agreement, which
        shares were valued at $135,729.00.
 
 In
        February 2005, we issued 2,265,000 shares under a consulting agreement, which
        shares were valued at $191,393.00.
 
 In
        March 2005, we issued 1,756,000 shares under a consulting agreement, which
        shares were valued at $156,284.00.
 
 In
        March 2005, we issued 2,376,500 shares under a consulting agreement, which
        shares were valued at $201,290.00.
 
 In
        April 2005, we issued 6,156,500 shares under a consulting agreement, which
        shares were valued at $437,112.00.
 
 In
        April 2005, we issued 950,000 shares under a consulting agreement, which
        shares
        were valued at $58,425.00.
 
 In
        May 2005, we issued 1,300,000 shares under a consulting agreement, which
        shares
        were valued at $74,750.00.
 
 In
        May 2005, we issued 6,425,000 shares under a consulting agreement, which
        shares
        were valued at $289,125.00.
 
 In
        June 2005, we issued 275,000 shares under a consulting agreement, which shares
        were valued at $18,013.00.
 
 In
        June 2005, we issued 275,000 shares under a consulting agreement, which shares
        were valued at $18,013.00.
 
 In
        June 2005, we issued 4,166,667 shares under a consulting agreement, which
        shares
        were valued at $245,833.00.
 
 In
        June 2005, we issued 3,264,000 shares under a consulting agreement, which
        shares
        were valued at $174,624.00.
 
 In
        June 2005, we issued 2,170,000 shares under a consulting agreement, which
        shares
        were valued at $112,840.00.
 
 In
        June 2005, we issued 61,820 shares to an employee through an employee stock
        purchase plan, which shares were valued at $3,740.00.
 
 7
 In
        June 2005, we issued 39,125 shares to an employee through an employee stock
        purchase plan, which shares were valued at $2,367.00.
 
 In
        June 2005, we issued 18,520 shares to an employee through an employee stock
        purchase plan, which shares were valued at $1,120.00.
 
 In
        June 2005, we issued 46,300 shares to an employee through an employee stock
        purchase plan, which shares were valued at $2,801.00.
 
 In
        June 2005, we issued 3,705 shares to an employee through an employee stock
        purchase plan, which shares were valued at $224.00.
 
 In
        June 2005, we issued 474,830 shares to an employee through an employee stock
        purchase plan, which shares were valued at $28,727.00.
 
 In
        June 2005, we issued 37,040 shares to an employee through an employee stock
        purchase plan, which shares were valued at $2,241.00.
 
 In
        June 2005, we issued 48,415 shares to an employee through an employee stock
        purchase plan, which shares were valued at $2,929.00.
 
 In
        June 2005, we issued 89,730 shares to an employee through an employee stock
        purchase plan, which shares were valued at $5,429.00.
 
 In
        June 2005, we issued 37,040 shares to an employee through an employee stock
        purchase plan, which shares were valued at $2,241.00.
 
 In
        June 2005, we issued 91,800 shares to an employee through an employee stock
        purchase plan, which shares were valued at $4,911.00.
 
 In
        June 2005, we issued 82,600 shares to an employee through an employee stock
        purchase plan, which shares were valued at $4,419.00.
 
 In
        June 2005, we issued 111,700 shares to an employee through an employee stock
        purchase plan, which shares were valued at $5,976.00.
 
 **Six
        Months Ended June 30, 2004**
 
 In
        January 2004, the Company issued 57,550 shares under a consulting agreement,
        which shares were valued at $13,812.00.
 
 In
        January 2004, the Company issued 55,380 shares under a consulting agreement,
        which shares were valued at $13,291.00.
 
 In
        January 2004, the Company issued 28,000 shares under a consulting agreement,
        which shares were valued at $7,840.00.
 
 In
        January 2004, the Company issued 246,000 shares under a consulting agreement,
        which shares were valued at $59,040.00.
 
 In
        January 2004, the Company issued 130,000 shares under a consulting agreement,
        which shares were valued at $24,000.00.
 
 8
 In
        January 2004, the Company issued 273,000 shares under a consulting agreement,
        which shares were valued at $65,520.00.
 
 In
        January 2004, the Company issued 320,000 shares under a consulting agreement,
        which shares were valued at $76,800.00.
 
 In
        January 2004, the Company issued 300,000 shares under a consulting agreement,
        which shares were valued at $72,000.00.
 
 In
        January 2004, the Company issued 175,000 shares under a consulting agreement,
        which shares were valued at $43,750.00.
 
 In
        January 2004, the Company issued 61,000 shares under a consulting agreement,
        which shares were valued at $14,640.00.
 
 In
        January 2004, the Company issued 61,000 shares under a consulting agreement,
        which shares were valued at $14,640.00.
 
 In
        January 2004, the Company issued 612,350 shares under a consulting agreement,
        which shares were valued at $89,490.00.
 
 In
        January 2004, the Company issued 66,500 shares under a consulting agreement,
        which shares were valued at $11,280.00.
 
 In
        January 2004, the Company issued 134,000 shares to a new employee as an
        inducement to employment, which shares were valued at $36,180.00.
 
 In
        February 2004, the Company issued 49,150 shares under a consulting agreement,
        which shares were valued at $13,762.00.
 
 In
        February 2004, the Company issued 34,000 shares under a consulting agreement,
        which shares were valued at $9,520.00.
 
 In
        February 2004, the Company issued 25,000 shares under a consulting agreement,
        which shares were valued at $7,000.00.
 
 In
        February 2004, the Company issued 81,600 shares under a consulting agreement,
        which shares were valued at $22,848.00.
 
 In
        February 2004, the Company issued 73,500 shares under a consulting agreement,
        which shares were valued at $20,580.00.
 
 In
        February 2004, the Company issued 75,000 shares to an employee as compensation
        for services rendered, which shares were valued at $5,250.00.
 
 In
        February 2004, the Company issued 50,000 shares to an employee as compensation
        for services rendered, which shares were valued at $11,000.00.
 
 In
        February 2004, the Company issued 60,000 shares to an employee as compensation
        for services rendered, which shares were valued at $9,600.00.
 
 In
        February 2004, the Company issued 250,000 shares under a one-year consulting
        agreement for services rendered during 2003, which shares were valued at
        $17,500.00.
 
 In
        February 2004, the Company issued 300,000 shares under a one-year consulting
        agreement for services rendered during 2004, which shares were valued at
        $72,000.00.
 
 9
 In
        February 2004, the Company issued 600,000 shares as full payment of principal
        and accrued interest under a promissory note, which shares were valued at
        $96,000.00.
 
 In
        February 2004, the Company issued 1,514,500 shares to a new employee as an
        inducement to employment, which shares were valued at $302,900.00.
 
 In
        February 2004, the Company issued 1,514,500 shares to a new employee as an
        inducement to employment, which shares were valued at $302,900.00.
 
 In
        February 2004, the Company issued 160,000 shares to a new employee as an
        inducement to employment, which shares were valued at $32,000.00.
 
 In
        February 2004, the Company issued 120,000 shares to a new employee as an
        inducement to employment, which shares were valued at $24,000.00.
 
 In
        February 2004, the Company issued 120,000 shares to a new employee as an
        inducement to employment, which shares were valued at $24,000.00.
 
 In
        February 2004, the Company issued 200,000 shares to a new employee as an
        inducement to employment, which shares were valued at $40,000.00.
 
 In
        February 2004, the Company issued 431,818 shares to acquire certain assets,
        which shares were valued at $95,000.00.
 
 In
        February 2004, the Company issued 1,188,679 shares to acquire certain assets,
        which shares were valued at $199,698.00.
 
 In
        February 2004, the Company issued 282,031 shares to acquire certain assets,
        which shares were valued at $47,381.00.
 
 In
        February 2004, the Company issued 39,189 shares to acquire certain assets,
        which
        shares were valued at $6,584.00.
 
 In
        February 2004, the Company issued 849,786 shares to acquire certain assets,
        which shares were valued at $142,764.00.
 
 In
        February 2004, the Company issued 494,482 shares to acquire certain assets,
        which shares were valued at $83,073.00.
 
 In
        March 2004, the Company issued 50,000 shares to a vendor as payment for services
        rendered or to be rendered, which shares were valued at $3,000.00.
 
 In
        April 2004, the Company issued 1,333,334 shares to obtain exclusive licensing
        rights in certain intellectual property, which shares were valued at
        $200,000.00.
 
 In
        April 2004, the Company issued 14,250,000 shares to acquire a business, which
        shares were valued at $1,425,000.00.
 
 In
        April 2004, the Company issued 450,000 shares to an employee as compensation
        for
        services rendered, which shares were valued at $27,000.00.
 
 In
        April 2004, the Company issued 375,000 shares to an employee as compensation
        for
        services rendered, which shares were valued at $22,500.00.
 
 10
 In
        April 2004, the Company issued 250,000 shares to a former employee as
        compensation for services rendered, which shares were valued at
        $15,000.00.
 
 In
        April 2004, the Company issued 125,000 shares to an employee as compensation
        for
        services rendered, which shares were valued at $7,500.00.
 
 In
        April 2004, the Company issued 175,000 shares to an employee as compensation
        for
        services rendered, which shares were valued at $10,500.00.
 
 In
        April 2004, the Company issued 1,250,000 shares to acquire a business, which
        shares were valued at $90,000.00.
 
 In
        May 2004, the Company issued 1,000,000 shares under a consulting agreement
        for
        services to be rendered during 2004, which shares were valued at
        $120,000.00.
 
 In
        May 2004, the Company issued 1,000,000 shares to a new employee as an inducement
        to employment, which shares were valued at $100,000.00.
 
 In
        May 2004, the Company issued 1,000,000 shares to a new employee as an inducement
        to employment, which shares were valued at $100,000.00.
 
 In
        May 2004, the Company issued 1,000,000 shares to a new employee as an inducement
        to employment, which shares were valued at $100,000.00.
 
 In
        May 2004, the Company issued 400,000 shares to an employee as compensation
        for
        services rendered, which shares were valued at $40,000.00.
 
 In
        May 2004, the Company issued 50,000 shares for professional services to be
        rendered during 2004, which shares were valued at $5,000.00.
 
 In
        May 2004, the Company issued 625,000 shares for consulting services rendered
        in
        connection with a business acquisition, which shares were valued at
        $75,000.00.
 
 In
        June 2004, the Company issued 122,000 shares to a vendor as payment for services
        rendered or to be rendered, which shares were valued at $12,200.00.
 
 In
        June 2004, the Company issued 475,000 shares for consulting services rendered
        in
        connection with a financing transaction, which shares were valued at
        $47,500.00.
 
 In
        June 2004, the Company issued 250,000 shares for consulting services rendered
        in
        connection with a financing transaction, which shares were valued at
        $25,000.00.
 
 In
        June 2004, the Company issued 275,000 shares for consulting services rendered
        in
        connection with a financing transaction, which shares were valued at
        $27,500.00.
 
 In
        June 2004, the Company issued 100,000 shares to an employee as bonus
        compensation for services rendered in 2003, which shares were valued at
        $10,000.00.
 
 In
        June 2004, the Company issued 25,000 shares to an employee as bonus compensation
        for services rendered in 2003, which shares were valued at
        $2,500.00.
 
 In
        June 2004, the Company issued 15,000 shares to an employee as bonus compensation
        for services rendered in 2003, which shares were valued at
        $1,500.00.
 
 In
        June 2004, the Company issued 50,000 shares to an employee as bonus compensation
        for services rendered in 2003, which shares were valued at
        $5,000.00.
 
 11
 In
        June 2004, the Company issued 15,000 shares to an employee as bonus compensation
        for services rendered in 2003, which shares were valued at
        $1,500.00.
 
 In
        June 2004, the Company issued 15,000 shares to an employee as bonus compensation
        for services rendered in 2003, which shares were valued at
        $1,500.00.
 
 In
        June 2004, the Company issued 600,000 shares for professional services to
        be
        rendered during 2004, which shares were valued at $60,000.00.
 
 In
        June 2004, the Company issued 950,000 shares for consulting services rendered
        in
        connection with a business acquisition, which shares were valued at
        $95,000.00.
 
 In
        June 2004, the Company issued 750,000 shares for consulting services rendered
        in
        connection with a business acquisition, which shares were valued at
        $75,000.00.
 
 In
        June 2004, the Company issued 2,000,000 shares under a consulting agreement
        for
        services to be rendered during 2004, which shares were valued at
        $200,000.00.
 
 In
        June 2004, the Company issued 250,000 shares for consulting services rendered
        in
        connection with a business acquisition, which shares were valued at
        $25,000.00.
 
 In
        June 2004, the Company issued 154,000 shares for consulting services rendered
        in
        connection with a business acquisition, which shares were valued at
        $15,030.00.
 
 In
        June 2004, the Company issued 175,000 shares to a vendor for services to
        be
        rendered during the next twelve months, which shares were valued at
        $17,500.00.
 
 In
        June 2004, the Company issued 175,000 shares to a vendor for services to
        be
        rendered during the next twelve months, which shares were valued at
        $17,500.00.
 
 In
        June 2004, the Company issued 280,000 shares to an employee as compensation
        for
        services rendered during the first half of 2004, which shares were valued
        at
        $21,000.00.
 
 In
        June 2004, the Company issued 480,000 shares to an employee as compensation
        for
        services rendered during the first half of 2004, which shares were valued
        at
        $36,000.00.
 
 In
        June 2004, the Company issued 200,000 shares to an employee as compensation
        for
        services rendered during the fourth quarter of 2003 and the first quarter
        of
        2004, which shares were valued at $40,000.00.
  12
  **CARDINAL
        COMMUNICATIONS, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SIX
        MONTHS ENDED JUNE 30, 2005 AND 2004**
 **(UNAUDITED)**
 
 
 **Note
        1. Interim Consolidated Financial Statements**
 
 In
        the
        opinion of management, the accompanying consolidated financial statements
        as of
        and for the six months ended June 30, 2005 and 2004, reflect all adjustments
        (consisting only of normal recurring adjustments) necessary to present fairly
        the financial condition, results of operations and cash flows of the Company,
        including subsidiaries, and include the accounts of the Company and all of
        its
        subsidiaries.
  The
        financial statements included herein have been prepared by the Company, without
        audit, pursuant to the rules and regulations of the SEC. Certain information
        and
        footnote disclosures normally included in financial statements prepared in
        accordance with generally accepted accounting principles in the United States
        have been condensed or omitted pursuant to such rules and regulations. These
        unaudited financial statements should be read in conjunction with the financial
        statements and notes thereto included in the Company’s Annual Report on Form
        10-KSB/A for the year ended December 31, 2004 filed with the SEC on April
        6,
        2005 and the current report filed on Form 8-K/A with the SEC on August 4,
        2005.
        Certain reclassifications and adjustments may have been made to the categories
        presented in the financial statements for the comparative period of the prior
        fiscal year to conform to the 2005 presentation. The results of operations
        for
        the interim periods are not necessarily indicative of the results to be obtained
        for the entire year.
 
 **Note
        2. Critical Accounting Policies**
 
 The
        Company continues to implement and expand its business plan as a provider
        of
        enhanced telephone (voice) services, cable television (video) and Internet
        (data) services to business and residential customers. Since the completion
        of
        the acquisition of Sovereign Partners, LLC in February 2005, the Company
        also
        offers integrated construction and construction management services, as well
        as
        broadband communications design, implementation, and operations services
        to
        other large developers and municipalities seeking to deploy broadband services.
 
 **Principles
        of Consolidation**
  On
        June
        9, 2005 the Company held a Special Meeting of Shareholders at which its Articles
        of Incorporation were amended to change the name of the Company from USURF
        America, Inc. to Cardinal Communications, Inc. See Item 4. Submission of
        matters
        to a vote of security holders below
 
 The
        accompanying consolidated financial statements include all the accounts of the
        Company and all majority owned and/or controlled subsidiaries. At June 30, 2005 the
        Company has recorded minority interest of $3,976,806 representing
        third party ownership of the entities not wholly owned by the
        Company.
 
 The
        equity method of accounting is used for affiliated entities over which the
        Company has significant influence; generally this represents partnership equity of
        at
        least 20% and not more than 50%. Under the equity method of accounting, the
        Company recognizes its pro rata share of the profits and losses of these
        entities.
 
 The
        cost method of accounting is used for investments in which the Company has
        less
        than a 20% ownership interest and does not have the ability to exercise
        significant influence.
 
 Inter-company
        transactions and balances have been eliminated in the
        consolidation.
 
 13
 **Stock-Based
        Compensation**
  Transactions
        in equity instruments with non-employees for goods or services are accounted
        for
        on the fair value method, as described in SFAS No. 123. No options have been
        granted to employees, officers or directors during 2005.
  **Stock
        for Services**
  The
        Company has issued stock pursuant to various consulting agreements. Deferred
        consulting costs which are valued at the stock price on the date of a particular
        agreement or the value of services are recorded as a reduction of stockholders’
        equity and are amortized over the useful lives of the respective
        agreements .
  **Revenue
        Recognition**
  The
        Company charges video and data customers monthly service fees and recognizes
        the
        revenue in the month the services are provided or equipment is sold. The
        Company
        bills monthly for voice (telephone) services in advance and generally receives
        payments during the month in which the services are provided. To the extent
        that
        revenue is received, but not earned, the Company records these amounts as
        deferred revenue.
 
 The
        Company recognizes revenue from the sale of real estate when cash is received,
        title possession and other attributes of ownership have been transferred
        to the
        buyer and the Company is not obligated to perform significant additional
        services after sale and delivery. During construction, all direct material
        and
        labor costs and those indirect costs related to acquisition and construction
        are
        capitalized, and all customer deposits are treated as liabilities. Capitalized
        costs are charged to earnings upon revenue recognition. Costs incurred in
        connection with completed homes and selling, general and administrative costs
        are charged to expense as incurred.
 
 For
        the
        mortgage operations, the Company recognizes revenue on fees received from
        mortgage lenders when the loan is closed. The Company receives a percentage
        of
        the loan closing by a third party sponsor based on the interest rate charged
        to
        the consumer. The Company also recognizes loan origination fees from
        borrowers.
 
 The
        Company recognizes revenue from non-development construction consulting service
        activities when performed and there are no remaining service
        obligations.
 
 **Real
        Estate and Land Inventory**
 
 Finished
        inventories, consisting of single and multi family residential units and
        commercial projects, are stated at the lower of accumulated cost or net
        realizable value. Inventories under development or held for development are
        stated at accumulated cost, unless certain facts indicate such cost would
        not be
        recovered from the cash flows generated by future disposition. In this instance,
        such inventories are measured at fair value.
 
 Sold
        units are expensed on a specific identification basis. Under the specific
        identification basis, cost of sales includes the construction cost of the
        unit,
        an average lot cost by project based on land acquisition and development
        costs,
        and closing costs and commissions. Construction related overhead and salaries
        are also capitalized and allocated proportionately to projects being developed.
        Construction cost of the unit includes amounts paid through the closing date
        of
        the unit.
 
 Major
        components of inventory at June 30, 2005 were:
 Residential/Commercial
                  units under construction
              
              $
              20,602,681Land
                  under development
              
              
              22,823,496Total
                  real estate and land inventory
              
              $
              43,426,177
 
 14
 **Bad
        Debt**
 
 The
        Company estimates the amount of uncollectible accounts receivable and records
        an
        allowance for bad debt. Uncollectible accounts receivable are then charged
        against this allowance.
 
 **Goodwill**
 
 Goodwill
        was recorded at its purchase price and is not being amortized. Pursuant to
        SFAS
        142 (“Goodwill and Other Intangible Assets”) and SFAS 144 (“Accounting for the
        Impairment or Disposal of Long-Lived Assets”), the Company at December 31, 2004
        evaluated its goodwill for impairment and determined the fair value of its
        goodwill exceeded the book cost. In 2005, $6,841,073 has been recorded as
        goodwill in relation to the acquisition of Sovereign Partners LLC. See Note
        5.
        Acquisitions below.
 
 **Intangibles**
 
 Classification
        of intangible assets and accumulated amortization at June 30, 2005 were as
        follows:
 
 DescriptionContracts
              
              $
              201,604Right
                  of entry agreements
              
              
              95,000Customer
                  base
              
              
              1,955,084Goodwill
              
              
              8,661,897Totals
              
              
              10,913,585Accumulated
                  amortization
              
              
              (660,937
              )Intangibles,
                  net
              
              $
              10,252,648
 
 For
        the
        six months ended June 30, 2005, the Company recognized $443,853 of amortization
        expense.
 
 **Loss
        Per Common Share**
 
 The
        loss
        per common share is presented in accordance with the provisions of SFAS No.
        128,
        Earnings Per Share. Basic loss per common share has been computed by dividing
        the net loss available to the common stockholder by the weighted average
        number
        of shares of common stock outstanding for the period. The effect of considering
        all potential dilutive securities is not presented as the effects would be
        anti-dilutive.
 
 **Marketable
        Securities and Comprehensive Loss**
 
 In
        May
        2004, the Company sold Children's Technology Group, Inc., dba MomsandDads,
        to
        ZKID Network Company (OTCBB: ZKID). The terms of the sale provided for ZKID
        to
        pay us $600,000 in stock consideration (the "Purchase Price'). At closing
        the
        Company received 4,000,000 shares of ZKID common stock valued at $0.15 per
        share. The terms of the purchase and sale agreement provide that if the shares
        issued to us do not have a market value of at least $600,000, then ZKID would
        issue additional shares to us for the difference. At this time there is doubt
        that Zkid Network will be able to fully satisfy the terms of this agreement
        and
        therefore the Company is recording the unrealized loss as comprehensive loss.
        At
        June 30, 2005 the market value of the 4,000,000 shares was $48,800 and therefore
        the Company recorded a $551,200 comprehensive loss.
 
 **Note
        3. Stock, Option and Warrant Issuances**
 
 During
        the six months ended June 30, 2005, the Company issued shares of common stock
        and Convertible Series B Preferred stock, as follows:
 
 35,000,000
        shares of common stock to acquire various businesses or business
        assets;
 
 37,424,274
        shares of common stock in exchange for consulting, compensation and other
        services;
 
 2,357,477
        shares of common stock in exchange for debt forgiveness; and
 
 100,000
        shares of convertible Series B Preferred Stock to acquire various business
        or
        business assets. Each share of convertible Series B Preferred Stock is
        convertible into 100 shares of common stock.
 
 15
 **Note
        4. Financing Transactions**
 
 **Senior
        Secured Debt**
 
 The
        Company and Evergreen Venture Partners, LLC (“Evergreen”) entered into a
        Surrender and Exchange Agreement effective as of February 18, 2005, the Closing
        date of the acquisition of Sovereign. Under the terms of the Surrender and
        Exchange Agreement Evergreen surrendered 17,000,000 shares of common stock
        owned
        by it (the “Surrendered Shares”). Evergreen also surrendered warrants to
        purchase 15,316,667 shares of common stock (the “Surrendered Warrants”). The
        Surrendered Shares and the Surrendered Warrants have been canceled and are
        of no
        further force or effect. In consideration of the Surrendered Shares and
        Surrendered Warrants, the Company issued to Evergreen a new promissory note
        in
        the principal amount of $750,000 (the “Note”). The Note provides for the lump
        sum payment of the principal amount of the Note on July 1, 2006. However,
        should
        the trading price of the Company’s common stock be greater than $0.21 per share
        for a consecutive thirty day period, the Note shall terminate and the Company
        will have no further obligation to Evergreen under the Note.
 
 Additionally,
        in February 2005 the Company modified the terms of its 2004 private placement
        agreements with Crestview Capital Master Fund, LLC (Crestview”) and other
        affiliates of Crestview totaling $4,420,000 (the “Modification”) such that a
        maximum of 40,000,000 shares are to be issued upon conversion of the debentures
        and the warrants issued in connection with the private placements to purchase
        an
        aggregate of 31,626,372 shares of common stock were surrendered and canceled.
        If
        the Company’s common share price exceeds $0.25 per share for 30 consecutive
        days, payment of debentures totaling $2,250,000 shall be forgiven by the
        debenture holders.
 
 At
        June
        30, 2005 total notes payable under the above is $5,170,000 with debt discount
        of
        $473,081 netted against the balance resulting in a notes payable balance
        of
        $4,696,919 .
 
 During
        the six months ended June 30, 2004, the Company borrowed $543,000 under a
        convertible loan agreement bringing the balance to $600,000. This amount
        was
        subsequently converted into 5,000,000 shares of common stock and 10,000,000
        warrants (the warrants were canceled in 2005 in connection with the Surrender
        and Exchange Agreement described above). The entire proceeds from the
        convertible promissory note were allocated to the warrants and the beneficial
        conversion feature based on a calculation using the Black-Scholes model.
        During
        the six months ended June 30, 2004 interest expense of $555,800 was recorded
        relating to the accretion of the convertible promissory note to its face
        value.
 
 In
        March
        2004, the Company completed a private placement with Crestview Capital Master
        Fund, LLC and other affiliates of Crestview totaling $2,095,000 represented
        by
        convertible debentures convertible into common stock at $0.10 per share,
        with
        125% warrant coverage with an exercise price of $0.12 per share. The convertible
        debentures, if not converted, are due July 1, 2006 and bear interest at six
        percent (6%) payable quarterly. The entire proceeds from the convertible
        debentures were allocated to the warrants and the beneficial conversion feature
        based on a calculation using the Black-Scholes model. The interest expense
        related to the accretion of the convertible debentures to their face value
        totals $934,798 and is being amortized over eighteen months, the term of
        the
        convertible note. As of June 30, 2004 interest expense of $207,733 was amortized
        and recorded as additional interest expense. The $2,095,000 and related warrants
        were included in the 2005 Modification described above.
 
 During
        the second quarter of 2004, Atlas arranged for the Company to complete the
        closing of additional private placements totaling $1,575,000, consisting
        of
        $1,575,000 in convertible debentures convertible into common stock at $0.08
        per
        share, with 75% warrant coverage at an exercise price of $0.12 per share.
        The
        convertible debentures, if not converted, are due June, 2006 and bear interest
        at eight percent (8.0%) payable quarterly. Under the terms of these private
        placements, the investors have the right to purchase up to an amount equal
        to,
        at the election of such investors, $1,500,000 principal amount of additional
        debentures. Any additional investment will be on terms identical with those
        set
        forth in the private placements. The entire proceeds from the convertible
        debentures were allocated to the warrants and the beneficial conversion feature
        based on a calculation using the Black-Scholes model. The interest expense
        related to the accretion of the convertible debentures to their face value
        totals $491,830 and will be amortized over 24 months, the term of the
        convertible note. The $1,575,000 and related warrants were included in the
        2005
        Modification described above.
 
 16
 **Construction
        Lines of Credit**
 
 Through
        the Company’s subsidiary Sovereign Partners, LLC, the Company maintains secured
        revolving construction lines-of-credit with several lending institutions
        for its
        construction projects. At June 30, 2005 the aggregate borrowings under the
        lines-of-credit total $16,832,437 . Borrowings on the lines are repaid in
        connection with the sale of completed units. The lines-of-credit are secured
        by
        the project being constructed. Each construction line is personally guaranteed
        by the individual members of each development entity. Interest rates range
        from
        4.25% to 7.75%, and have maturity dates ranging from August 2005 through
        November 2006, with two exceptions with maturities in May 2011 and July 2034,
        unless extended. As of June 30, 2005, the construction lines-of-credit
        outstanding amounts range from $295,860 to $4,132,379, utilizing seven different
        lenders.
 
 **Notes
        Payable and Related Party Debt**
 
 In
        May
        2005, the Company entered into a note payable with Jantaq, Inc. (“Jantaq”)
        totaling $50,000. The note bore interest at an annualized rate of nine (9%)
        payable when the note was due July 18, 2005. In June of 2005, the Company
        increased the borrowings on the note by $75,000. The face value of the note,
        $125,000 and interest of $1,125, was satisfied in June 2005 with 2,357,477
        shares of common stock.
 
 Through
        the Company’s subsidiary Sovereign Partners, LLC the Company has both debt
        collateralized by real estate and other unsecured term debt. These notes
        payable
        totaled $21,355,277 at June 30, 2005. Interest rates range from 5% to 10%,
        and
        have maturity dates ranging from September 2005 through December 2011. As
        of
        June 30, 2005, the notes payable outstanding amounts range from $1,088 to
        $4,158,511, utilizing sixteen different lenders.
 
 The
        Company has related party debt of $ 3,951,343 at June 30, 2005, utilizing
        six
        different related parties. Interest rates range from 6.00% to 16.00%, and
        have
        maturity dates ranging from October 2005 through October 2007, with three
        exceptions. Two notes amortize over thirty years maturing April 2033 and
        February 2034, and one note is interest only, with no stated maturity date.
        As
        of June 30, 2005, the related party debts outstanding amounts range from
        $1,001
        to $818,733, utilizing nine different lenders.
 
 **Note
        5. ACQUISITIONS**
 
 **Sovereign
        Partners, LLC**
 
 On
        February 18, 2005, the Company closed on the acquisition with Sovereign
        Partners, LLC (Sovereign) to acquire 100% of the membership interests of
        Sovereign from the Members in exchange for the issuance of 35,000,000 shares
        of
        the Company’s common stock and 100,000 shares of the Company’s newly created
        Series B Convertible Preferred Stock. Under the terms of the acquisition
        agreement the members are to be issued an additional 125,000 shares of Series
        B
        Preferred Stock on each of January 1, 2006 and July 1, 2006. As a result
        of the
        Acquisition, Sovereign is now owned and operated as a wholly owned subsidiary
        of
        the Company. Sovereign operations include real estate development and the
        related communications infrastructure for residential, multiple dwelling
        unit
        (apartment) and planned community developments. See Sovereign Acquisition
        under
        Item 2. Managements Discussion and Analysis of Financial Condition and Results
        of Operations below.
 
 This
        transaction was accounted for using the purchase method and, accordingly,
        the
        purchase price has been allocated to net assets acquired based on their
        estimated fair values at the date of acquisition. The preliminary allocation
        resulted in goodwill totaling approximately $6,841,073. Goodwill was recorded
        at
        its purchase price and is not being amortized. Pursuant to SFAS 142 (“Goodwill
        and Other Intangible Assets”) and SFAS 144 (“Accounting for the Impairment or
        Disposal of Long-Lived Assets”) the Company evaluates its goodwill for
        impairment annually. Pro forma results of operations are presented on a Current
        Report on Form 8-K by amendment filed August 4, 2005. Financial statements
        for
        years ended 2002, 2003 and 2004 are included in the August 4, 2005 Current
        Report on Form 8-K/A.
  17
 Sovereign
                    Preliminary Purchase Price AllocationConsiderationStock
                
                $
                5,705,000Transaction
                    costs
                
                
                294,765Minority
                    Interest
                
                
                4,750,672Assumption
                    of liabilities
                
                
                43,003,203Adjusted
                    Purchase Price
                
                
                53,753,640Allocation
                    to Assets
                
                
                (46,912,567
                )Residual
                    Value of Goodwill
                
                $
                6,841,073




The
        preliminary estimate of assets represents management’s best estimate based on
        currently available information; however, such estimate may be revised within
        the one-year period following the acquisition date. The Company has engaged
        a
        third party business valuation expert to assess the fair market value of
        Sovereign and its assets.
 
 The
        following unaudited proforma condensed statements of operations assumes the
        Sovereign Partners, LLC acquisition occurred on January 1, 2005 and presents
        proforma financial information for the six months ended June 30, 2005.
 
 Proforma
        adjustments, in the opinion of management, only an adjustment to expenses
        is
        currently necessary to present fairly such unaudited proforma condensed
        statements of operations.
 January
                    1 to
                
                January
                    1 toJune
                    30
                
                February
                    18
                
                Proforma
                
                ProformaCardinal
                
                Sovereign
                
                Adjustments
                
                CombinedRevenues
                
                $
                12,851,297
                
                $
                3,240,113
                
                $
                -
                
                $
                16,091,410ExpensesCosts
                    of Goods Sold
                
                
                7,457,777
                
                
                2,639,582
                
                
                
                
                
                10,097,359Depreciation
                    and amortization
                
                
                719,346
                
                
                37,842
                
                
                
                
                
                757,188General
                    and administrative
                
                
                7,020,384
                
                
                583,500
                
                
                4,375
                
                
                7,608,259Total
                    Operating Expenses
                
                
                15,197,507
                
                
                3,260,924
                
                
                4,375
                
                
                18,462,806Operating
                    (loss)
                
                
                (2,346,210
                )
                
                (20,811
                )
                
                (4,375
                )
                
                (2,371,396
                )Other
                    (expense)
                
                
                (857,401
                )
                
                (45,957
                )
                
                
                
                
                (903,358
                )Net
                    (loss)
                
                $
                (3,203,611
                )
                $
                (66,768
                )
                $
                (4,375
                )
                $
                (3,274,754
                )Net
                    (loss) per common share
                
                
                (0.01
                )
                
                
                
                
                
                
                
                (0.01
                )Weighted
                    average shares outstanding
                
                
                234,745,683
                
                
                
                
                
                
                
                
                234,745,683
 **Note
          5. SUBSEQUENT EVENTS**
 
 Subsequent
        to quarter end, the Company entered into a $500,000 note payable agreement
        with
        a related party, Ed Buckmaster. Mr. Buckmaster is the general partner of
        AEJM
        Enterprises Limited Partnership, a shareholder of the Company. The terms
        of the
        agreement are for 12% simple interest over the life of the note and the note
        is
        due September 1, 2005.
 
 18
 Subsequent
        to quarter end, the Company secured a $10 million credit line from Jantaq,
        Inc.
        As of the date of this report, no borrowings have been made on this line
        of
        credit.
 
 Subsequent
        to quarter end, the Company retained the services of Catapult PR-IR, LLC
        to
        service the Company’s public relations program.
 
 Subsequent
        to quarter end, the Company retained the services of Pfeiffer High to service
        the Company’s investor relations program.
 
 Subsequent
        to quarter end the former CEO, Douglas O. McKinnon filed for arbitration
        in the
        state of Colorado to settle the terms of his former employment agreement.
        Mr.
        McKinnon terminated his agreement effective April 19, 2005. No action has
        yet to
        be taken with this arbitration request.
 
 Item
        2. Management’s
        Discussion and Analysis of Financial Condition and Results of
        Operations
 
 The
        following information should be read in conjunction with the consolidated
        financial statements, including the notes thereto, included elsewhere in
        this
        Form 10-QSB, and the Management's Discussion and Analysis of Financial Condition
        and Results of Operations included in our 2004 Annual Report on Form 10-KSB
        filed with the Securities and Exchange Commission.
  **Forward-Looking
        Statements and Associated Risks**
  This
        report contains forward-looking statements, including statements regarding,
        among other things, (a) our growth strategies, (b) anticipated trends in
        our
        industry, (c) our future financing plans and (d) our ability to obtain financing
        and continue operations. In addition, when used in this filing, the words
        "believes," "anticipates," "intends," "in anticipation of," and similar words
        are intended to identify certain forward-looking statements. These
        forward-looking statements are based on our expectations and are subject
        to a
        number of risks and uncertainties, many of which are beyond our control.
        Actual
        results could differ materially from these forward-looking statements as
        a
        result of changes in trends in the economy and our industry, reductions in
        the
        availability of financing and other factors. In light of these risks and
        uncertainties, the forward-looking statements contained in this report may
        not
        occur. Except to fulfill our obligation under the United States securities
        laws,
        we do not undertake any obligation to publicly release the results of any
        revisions to these forward-looking statements that may be made to reflect
        any
        future events or circumstances.
 
 **Overview
        of Our Business**
 
 During
        2004 and through June 30, 2005, we continued to implement and expand our
        business plan as a provider of enhanced telephone (voice) services, cable
        television (video) and Internet (data) services to business and residential
        customers. Since the completion of the acquisition of Sovereign Partners,
        LLC in
        February 2005, we also offer integrated construction and construction management
        services, as well as broadband communications design, implementation, and
        operations services to other large developers and municipalities seeking
        to
        deploy broadband services. Our current business plan involves obtaining,
        through
        internal growth, as many voice, video and data customers as possible offering
        various combinations of bundled packages of communications services. Our
        growth
        strategy also includes acquisitions of telecommunications-related businesses
        and/or properties that would provide an immediate or potential customer base
        for
        our services.
 
 **Sovereign
        Acquisition**
 
 On
        January 26, 2005, we entered into a Securities Purchase Agreement with Sovereign
        Partners, LLC, a Colorado limited liability company and each of the members
        of
        Sovereign (the “Acquisition”). We closed on the Acquisition Agreement on
        February 18, 2005. As a result of the Acquisition, Sovereign is now owned
        and
        operated as a wholly owned subsidiary of our Company. Sovereign operations
        include real estate development and the related communications infrastructure
        for residential, multiple dwelling units (apartment) and planned community
        developments (“developments”). As part of these new developments, all
        communications infrastructure (voice, video, data, fiber to the home, etc)
        will
        be engineered jointly by Cardinal and Sovereign. The communications facilities
        will be owned by Cardinal and the ongoing communications services, after
        sale of
        the developments, will be provided and operated by a Cardinal subsidiary,
        resulting in residual revenue streams to Cardinal. The terms of the agreement
        are described on Registrant's Current Report on Form 8-K filed with the SEC
        on
        February 22, 2005 and amended August 4, 2005.
 
 19
 
 **Certain
        Relationships and Related Transactions**
 
 On
        December 20, 2004, Mr. Ed Garneau became a member of our Board of Directors.
        On
        February 18, 2005, we closed on the acquisition of Sovereign Partners LLC
        (described above under “Recent Developments” under Note 5 and Item 2 of this
        Quarterly Report). At the time the Acquisition was negotiated, signed and
        closed, Mr. Garneau was both an indirect shareholder and Director of our
        Company
        and the Manager of Sovereign Partners LLC. Mr. Garneau also owned direct
        and
        indirect economic interests in Sovereign at and prior to the closing of the
        Acquisition. Upon the closing of the Acquisition, Mr. Garneau assumed the
        title
        of Chief Operating Officer of our Company and entered into an Employment
        Agreement with us.
 
 Additionally,
        in connection with the acquisition of Sovereign, we assumed certain of the
        obligations of Sovereign, including certain debt owed to individuals and/or
        entities that are considered to be related parties for SEC reporting purposes.
        The following table sets forth the individual amounts totaling $ 3,951,343
        due
        as of June 30, 2005 to these individuals and entities:
 **Name
                    and Relationship**
                
                **Amount**
                
                **Interest**
                
                **Due****Rate**
                
                **Date**Byron
                    Young, Director and Shareholder
                
                $
                1,001
                
                
                0
                %
                
                NoneJeffrey
                    Fiebig, Director and Shareholder
                
                
                108,000
                
                
                16
                %
                
                Dec
                    '05AEJM
                    Enterprises, Limited Partnership, (1)
                
                
                700,000
                
                
                10
                %
                
                Oct
                    '05Thunderbird
                    Management Limited Partnership, Shareholder
                
                
                800,000
                
                
                10
                %
                
                Aug
                    '06Thunderbird
                    Management Limited Partnership, Shareholder
                
                
                702,682
                
                
                12
                %
                
                NoneBob
                    Searls, Shareholder (2)
                
                
                818,733
                
                
                6
                %
                
                May
                    '33Investors
                    and/or Partners in Sovereign Partners as group
                
                
                820,927
                
                
                4-12
                %
                
                Oct
                    '05 -May
                    '34Total
                
                $
                3,951,343
  (1)
        The
        general partner of AEJM Enterprises Limited Partnership, Ed Buckmaster is
        a
        shareholder of the Company.
 (2)
        Mr.
        Searls is also the general partner of Searls Family LLLP which is a shareholder
        of the Company.
 
 **Segment
        Information**
 
 We
        have
        two reportable segments; communications services and real estate activities.
        Communications services include individual, voice, video and data services
        as
        well as various combinations of bundled packages of these communications
        services. Real estate activities includes sales of residential single family
        units, rental from commercial properties and fees from mortgage operations.
 
 The
        accounting policies of the segments are the same as those described in the
        summary of significant accounting policies. Our business is conducted through
        separate legal entities. Each entity is managed separately as each business
        has
        a distinct customer base and requires different strategic and marketing efforts.
        The following table reflects the income statement and balance sheet information
        for each of the reporting segments:
  20
  **Real
                    Estate**
                
                **Communications**
                
                **Total**Revenue
                
                $
                7,959,991
                
                $
                4,891,306
                
                $
                12,851,297Net
                    Income (Loss)
                
                
                586,988
                
                
                (4,001,589
                )
                
                (3,414,601
                )Interest
                    (Expense)
                
                
                (162,502
                )
                
                (266,944
                )
                
                (429,446
                )Depreciation
                    and Amortization
                
                
                112,457
                
                
                606,889
                
                
                719,346Assets
                
                $
                45,426,777
                
                $
                16,694,840
                
                $
                62,121,617
 
 **Current
        Sovereign Projects**
 
 Mountain
        View at West T-Bone Ranch, Greeley, CO
  Mountain
        View at West T-Bone Ranch is a 21 acre multi-dwelling unit development located
        in southwest Greeley, Colorado with onsite amenities including a clubhouse
        with
        pool, hot tub, and fitness room. The completed project will have 216 units
        consisting of two-story flats with detached garages, along with 7-unit and
        4-unit town homes with attached garages. 80 units have been sold to date
        with an
        average sale price of $135,796.
 
 The
        Renaissance at Fox Hill, Greeley, CO
  The
        Renaissance at Fox Hill is a 13 acre multi-dwelling unit development located
        in
        Greeley, Colorado. The completed project will contain 110 dwelling units
        consisting of two story stacked flats/carriage units with direct access garages
        and 4-unit town homes with attached garages. 41 units have been sold to date
        with an average sale price of $179,667.
  Colony
        Ridge Condominiums, (Settler’s Chase) Thornton, CO
  The
        Colony Ridge Condominiums are a mix of 4 three-story stacked flats over one
        level of underground parking with elevators, and 98 town home-style residences
        on a 7.24 acre parcel in Thornton, Colorado. Colony Ridge at Settler’s Chase is
        the final phase in the master planned community of Settler’s Chase, located in
        Thornton, Colorado. 21 units have been sold to date with an average sale
        price
        of $180,219.
 
 SR
        Condominiums, Parker, CO
  The
        SR
        Condominiums are a mix of two and three story stacked flats with detached
        garages marketed as Hunter’s Chase Condominiums in Parker, Colorado. The
        completed project will include 188 dwelling units situated on a 13 acre parcel
        located at the corner of Stroh Road and Motsenbacker Road in Parker, and
        includes a clubhouse featuring an outdoor swimming pool and spa. 15 units
        have
        been sold to date with an average sale price of $152,900.
 
 Millstone
        at Clear Creek, Golden, CO
  The
        Millstone at Clear Creek consists of three four-story condominium buildings
        each
        with a ground level parking structure located on approximately 1.7 acre parcel
        in Golden, Colorado. The completed project will have 78 dwelling units and
        is
        located on 12 th street
        between Washington Street and Ford Street adjacent to Clear Creek. 23 units
        have
        been contracted for, to-date with an average sale price of
        $300,770.
 
 Pumpkin
        Ridge, Greeley, CO
  The
        Pumpkin Ridge development consists of 78 lots in the Pumpkin Ridge subdivision
        located in west Greeley, Colorado. The plan is to build single and two-story
        single family detached residences on each of the lots. 10 units have been
        sold
        to date with an average sale price of $266,100.
 
 21
 
 Settler’s
        Commercial Development, Thornton, CO
  Settler’s
        Commercial Development is the commercial/retail component of a master planned
        community. This 3.8 acre parcel is the final piece of the Settler’s Chase
        subdivision to be developed and is located in Thornton, Colorado. Leases
        with 3
        Margaritas Restaurant to anchor the site and is in negotiations with other
        tenants.
 
 Parker
        Commercial, Parker, CO
  Parker
        Commercial consists of 18.5 undeveloped commercial acres located within the
        downtown core of Parker, Colorado, and is situated between Twenty Mile Road
        and
        Dransfeldt Road. This property is currently on the market for approximately
        $3.5
        million.
 
 **Going
        Concern**
 
 Our
        auditor stated in its report on our financial statements for the period ended
        December 31, 2004 that we have experienced recurring losses and, as a result,
        there exists substantial doubt about our ability to continue as a going concern.
        For the six months ended June 30, 2005, we incurred a net loss of $3,414,601
        .
        As of June 30, 2005, Cardinal had an accumulated deficit of $64,579,296 .
        We are
        actively seeking customers for our services. The financial statements do
        not
        include any adjustments relating to the recoverability and classification
        of
        recorded assets, or the amounts and classification of liabilities that might
        be
        necessary in the event we cannot continue in existence. These factors raise
        substantial doubt about our ability to continue as a going concern.
 
 **Critical
        Accounting Policies**
 
 Management’s
        Discussion and Analysis discusses the results of operations and financial
        condition as reflected in our consolidated financial statements, which have
        been
        prepared in accordance with accounting principals generally accepted in the
        United States. The preparation of financial statements in conformity with
        accounting principals generally accepted in the United States requires
        management to make estimates and assumptions that affect the reported amounts
        of
        assets and liabilities, disclosure of contingent assets and liabilities at
        the
        date of the financial statements and reported amounts of revenues and expenses
        during the reporting period. On an ongoing basis, management evaluates its
        estimates and judgments, including those related to accounts receivable,
        inventory valuation, amortization and recoverability of long-lived assets,
        including goodwill, litigation accruals and revenue recognition. These critical
        accounting policies are described in more detail under item 6 in the section
        entitled "Management's Discussion and Analysis of Financial Condition and
        Results of Operations" in our Annual Report on Form 10-KSB/A for the year
        ended
        December 31, 2004 filed with the Securities and Exchange Commission on April
        6,
        2005 and the current report filed on Form 8-K/A with the Securities and Exchange
        Commission on August 4, 2005. Management bases its estimates and judgments
        on
        its historical experience and other relevant factors, the results of which
        form
        the basis for making judgments about the carrying values of assets and
        liabilities that are not readily apparent from other sources.
 
 While
        we
        believe that the historical experience and other factors considered provide
        a
        meaningful basis for the accounting policies applied in the preparation of
        our
        consolidated financial statements, we cannot guarantee that our estimates
        and
        assumptions will be accurate. If such estimates and assumptions prove to
        be
        inaccurate, we may be required to make adjustments to these estimates in
        future
        periods.
 
 **Results
        of Operations**
 
 **Six
        Months Ended June 30, 2005 And 2004**
 
 **Revenues**
 
 For
        the
        six months ended June 30, 2005 and 2004, Cardinal had revenue of $12,851,297
        and
        $2,459,743 , respectively, an increase of $10,391,554 . This increase is
        primarily due to the acquisitions of Sovereign Partners, LLC. In February
        2005,
        Cardinal’s revenues were derived primarily from the sale of telecommunication
        services, internet access services, telecommunications-related hardware and
        services, satellite-based CATV access services, residential units, rental
        from
        commercial properties, fees from mortgage operations and construction management
        services. These revenues are recognized and recorded as services are performed
        and properties are sold or rented.
 
 22
 **Operating
        Expenses**
 
 For
        the
        six months ended June 30, 2005 and 2004, operating expenses were $7,739,730
        and
        $5,468,028 , respectively. During the six months ended June 30, 2005, operating
        expenses consisted primarily of professional and consulting fees of $2,163,561
        ,
        of which $2,549,882 were paid in stock, salaries and commissions of
 $2,633,773
        , and other general and administrative expenses of $2,036,823 consisting
        of bad
        debt related to Get-A-Phone of $467,686 , software expense of $182,603 ,
        Long
        Distance Telephone expense of $136,186 , and numerous small
        expenses.
 
 **Net
        loss**
 
 For
        the
        six months ended June 30, 2005, we had a net loss of $3,414,601 or $0.015
        per
        share. In the comparable period of the prior year, we had a net loss of
        $5,433,003 , or $0.037 per share.
 
 **Liquidity**
 
 Currently,
        we believe we have sufficient working capital, cash on hand and cash to be
        generated from operations to continue current business operations indefinitely.
        For the six months ended June 30, 2005 we generated $992,014 cash from
        operations and at June 30, 2005 we had cash on hand of $929,807 .
 
 We
        anticipate that any additional capital needs will be met through financing
        transactions. We may also seek other sources of financing to fund operations,
        although we may not be successful in such efforts. We may not be able to
        secure
        adequate capital as we need it.
 
 **Cash
        Used in Operating Activities**
 
 During
        the six months ended June 30, 2005, our operations generated cash of $992,014
        compared to using $2,883,139 during the same period in 2004. For the six
        months
        ended June 30, 2004, the use of cash was a direct result of the lack of revenues
        compared to operating expenses. During the six months ended June 30, 2005,
        $372,761 of accreted interest expense was recorded in relation to our notes
        payable with beneficial conversion features; during the same period in 2004
        we
        incurred accreted interest expense of $784,025 .
 
 **Cash
        Used in Investing Activities**
 
 During
        the six months ended June 30, 2005, we engaged in a significant amount of
        capital investment activity, primarily through the acquisition of business
        assets from other companies including the acquisition of cash from Sovereign
        of
        $1,352,147 . The total value of capital investments for the period resulted
        in a
        cash gain for the period of $341,437 compared to using $2,611,110 for the
        same
        period in 2004.
 
 **Cash
        Provided by Financing Activities**
 
 During
        the six months ended June 30, 2005, we paid down notes payable with cash
        by
        $1,178,601 which when netted with our other financing activity resulted in
        a
        financing use of cash of $1,134,016 compared to $5,701,700 provided during
        the
        same period in 2004. Further detail of our financing activities is provided
        in
        Notes to Consolidated Financial Statements, Note 4.
  **Off-Balance
        Sheet Financing Activities**
 
 We
        do not
        have any off-balance sheet arrangements that have, or are reasonably likely
        to
        have a current or future effect on our financial condition, changes in financial
        condition, revenue or expenses, results of operations, liquidity, capital
        expenditures or capital resources that are material.
 
 23
 **Factors
        Affecting our Business and Prospects**
 
 There
        are
        many factors that affect our business and the results of our operations,
        some of
        which are beyond our control. These factors include:
 
 ·
              we
                  have a limited operating history with significant
                  losses;
 
 ·
              the
                  market price of our common stock is very volatile and the value
                  of your
                  investment may be subject to sudden
                  decreases;
 
 ·
              a
                  low market price may severely limit the potential market for our
                  common
                  stock, and
 
 ·
              our
                  stock is categorized as a "penny
                  stock."
 
 For
        a
        discussion of these and other factors affecting our business and prospects,
        see
        "Item 1. - Description of Business--Risk Factors Concerning Us and Our Common
        Stock" in our Annual Report on Form 10-KSB for the year ended December 31,
        2004.
        In addition, the following factors may affect our business, the results of
        our
        operations and the market price of our securities:
 
 OUR
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM EXPRESSED IN THEIR AUDIT REPORT
        RELATED TO OUR FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2004,
        SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
 
 In
        its
        opinion on our financial statements for the year ended December 31, 2004,
        our
        independent auditor, AJ. Robbins PC expressed substantial doubt about our
        ability to continue as a going concern because of our recurring losses and
        negative working capital.
 
 WE
        HAVE A
        HISTORY OF SIGNIFICANT LOSSES AND WE MAY NEVER ACHIEVE OR SUSTAIN PROFITABILITY.
        IF WE ARE UNABLE TO BECOME PROFITABLE, OUR OPERATIONS WILL BE ADVERSELY
        EFFECTED.
 
 We
        have
        incurred annual operating losses since our inception. As a result, at June
        30,
        2005, we had an accumulated deficit of $64,579,296 . Our gross revenues for
        the
        six months ended June 30, 2005 and 2004, were $12,851,297 and $2,459,743
        with
        losses from operations of $2,346,210 and $4,561,463 and net losses of $3,414,601
        and $5,433,003 respectively.
 
 As
        we
        pursue our business plan, we expect our operating expenses to increase
        significantly, especially in the areas of sales and marketing. As a result
        of
        these expected cost increases, we will need to generate increased revenues
        to
        become profitable. Accordingly, we cannot assure you that we will ever become
        or
        remain profitable. If our revenues fail to grow at anticipated rates or our
        operating expenses increase without a commensurate increase in our revenues,
        our
        financial condition will be adversely affected. Our inability to become
        profitable on a quarterly or annual basis would have a materially adverse
        effect
        on our business and financial condition.
 
 WE
        ARE
        DEPENDENT UPON LONG-TERM FINANCING. IF WE ARE UNABLE TO RAISE CAPITAL AS
        WE NEED
        IT, OUR OPERATIONS COULD BE JEOPARDIZED
 
 Our
        ability to implement our business plan and grow is dependent on raising a
        significant amount of capital. We have sustained our operations in large
        part
        from sales of our equity. We may not be able to successfully generate revenues
        or raise additional funds sufficient to finance our continued operations.
        In the
        long term, failure to generate sufficient revenues or obtain financing would
        have a material adverse effect on our business and would jeopardize our ability
        to continue our operations.
 
 24
 WE
        HAVE
        IN THE PAST AND MAY IN THE FUTURE ENGAGE IN ACQUISITIONS, WHICH WILL CAUSE
        US TO
        INCUR A VARIETY OF COSTS AND WHICH MAY NOT ACHIEVE ANTICIPATED OR DESIRED
        RESULTS. WE MAY NOT ACHIEVE THE RESULTS WE ANTICIPATE AND DESIRE FROM OUR
        ACQUISITION OF THE SOVEREIGN COMPANIES
 
 From
        time
        to time we engage in discussions with third parties concerning potential
        acquisitions of businesses, products, technologies and other assets.
        Acquisitions may require us to make considerable cash outlays and can entail
        the
        need for us to issue equity securities, incur debt and contingent liabilities,
        incur amortization expenses related to intangible assets, and can result
        in the
        impairment of goodwill, which could harm our profitability. Acquisitions
        involve
        a number of additional risks, including:
 
 ·
              difficulties
                  in and costs associated with the assimilation of the operations,
                  technologies, personnel and products of the acquired companies,
 
 ·
              assumption
                  of known or unknown liabilities or other unanticipated events or
                  circumstances,
 
 ·
              risks
                  of entering markets in which we have limited or no experience,
                  and
 
 ·
              potential
                  loss of key employees.
 
 Any
        of
        these risks could harm our ability to achieve profitability of acquired
        operations or to realize other anticipated benefits of an acquisition.
 
 On
        February 18, 2005 we acquired Sovereign Partners, LLC which we now own and
        operate as a subsidiary in the residential and planned community (real estate
        and communications infrastructure) development industry. In connection with
        the
        acquisition, we issued common stock and newly created Series B preferred
        stock.
        That issuance was dilutive to our shareholders. We are obligated to issue
        more
        shares of preferred stock, which is convertible to common stock on a hundred
        for
        one basis, under the terms of the acquisition agreement with Sovereign. All
        such
        issuances will be dilutive to our shareholders. In addition, the preferred
        stock
        we are issuing is senior to the rights of our common stock holders upon
        liquidation. If we are unable to assimilate Sovereign's management and
        operations, or if we incur unforeseen liabilities, or if the operations of
        Sovereign do not continue to grow or if they diminish, we will not obtain
        recognizable benefits from the acquisition and our shareholders will have
        suffered material dilution.
 
 WE
        HAVE
        SENIOR SECURED CONVERTIBLE DEBENTURES TOTALING $4,420,000 DUE IN 2006,
        COLLATERALIZED BY ALL OUR ASSETS. WE DO NOT HAVE THE FUNDS AVAILABLE TO PAY
        THESE DEBENTURES IF NOT CONVERTED INTO COMMON STOCK. IF THE DEBENTURES ARE
        NOT
        PAID OR CONVERTED, THE DEBENTURE HOLDERS COULD FORECLOSE ON OUR ASSETS.
 
 During
        2004, we entered into a series of private placements totaling $4,420,000
        in
        senior secured debentures, convertible into common stock. If not converted,
        the
        debentures are due on July 2, 2006. The debentures bear interest at rates
        from
        six percent (6%) to twelve percent (12%) and are collateralized by our assets.
        We do not currently have the funds to pay these debentures and we cannot
        assure
        you that we will have the funds to pay them on the due dates. If the debentures
        are not paid or converted, the debenture holders could foreclose on our assets.
 
 In
        March
        2005 the terms of the agreements were modified such that a maximum of 40,000,000
        shares are to be issued upon conversion of the debentures. If our common
        share
        price exceeds $0.25 per share for 30 consecutive days, payment of debentures
        totaling $2,250,000 shall be forgiven by the debenture holders.
 
 WE
        HAVE A
        NOTE PAYABLE TO EVERGREEN VENTURE PARTNERS, LLC DUE IN 2006. WE CURRENTLY
        DO NOT
        HAVE THE FUNDS AVAILABLE TO PAY THIS NOTE WHEN DUE.
 
 In
        March
        2005 we entered into an agreement with Evergreen Venture Partners, LLC to
        purchase 17,000,000 unregistered shares of our common stock for a $750,000
        note
        payable. The terms of the agreement call for payment of the note plus accrued
        interest on July 1, 2006, provided however, if our common share price exceeds
        $0.21 per share for 30 consecutive days, payment of the note shall be forgiven.
 
 25
 WE
        RELY
        ON LOCAL TELEPHONE COMPANIES AND OTHER COMPANIES TO PROVIDE CERTAIN
        TELECOMMUNICATIONS SERVICES. A DISRUPTION OF THESE SERVICES COULD HAVE AN
        ADVERSE EFFECT ON OPERATIONS.
 
 Our
        wholly owned subsidiary, Connect Paging, Inc. d/b/a Get-A-Phone is a Texas-based
        communications company operating as a local exchange carrier in areas currently
        served by SBC and Verizon Southwest. We buy certain telecommunications from
        SBC
        and Verizon and resell these to our customers. If we were not able to buy
        these
        services or if we experienced a disruption of these services, it would adversely
        affect our ability to operate in these areas.
 
 WE
        HAVE
        THE ABILITY, WITHOUT SHAREHOLDER APPROVAL, TO ISSUE PREFERRED STOCK AND
        DESIGNATE THE RIGHTS, PREFERENCES AND PRIVILEGES THAT MAY BE SENIOR TO COMMON
        STOCK.
 
 In
        November 2004, we issued 10,000 shares of Series A Convertible Preferred
        Stock
        ("Series A Stock") at $100.00 per share, for a total consideration of
        $1,000,000. The Series A Stock is convertible into our common stock at a
        conversion price ranging from $0.05 to $0.075 as calculated in accordance
        with
        the Certificate of Designation. The Series A Stock has a liquidation preference
        ahead of the common stock in the event of any dissolution or winding up of
        our
        Company and is entitled to any dividends that may be declared from time to
        time
        by the Board of Directors.
 
 In
        February 2005, we issued 35,000,000 shares of our common stock and 100,000
        shares of our newly created Series B Convertible Preferred Stock in the
        acquisition of the Sovereign Partners LLC. The Series B Preferred Stock is
        convertible into our common stock at a conversion rate of one hundred (100)
        shares of common stock for each one (1) share of Series B Preferred Stock,
        in
        accordance with the Certificate of Designation. The Series B Preferred Stock
        has
        a liquidation preference ahead of the common stock in the event of any
        dissolution or winding up of our Company and is entitled to any dividends
        that
        may be declared from time to time by our Board of Directors. We have the
        ability
        to issue an additional 2,900,000 shares of Series B Preferred Stock without
        shareholder approval.
 
 We
        have a
        total of 100,000,000 authorized shares of preferred stock. The Board of
        Directors may determine, without shareholder approval, the rights, preferences
        and privileges of the preferred stock. Depending on the rights, preferences
        and
        privileges granted when the preferred stock is issued, it may have the effect
        of
        delaying, deferring or preventing a change in control without further action
        by
        the shareholders, may discourage bids for our common stock at a premium over
        the
        market price of the common stock and may adversely affect the market price
        of
        and the voting and other rights of the holders of our common stock.
 
 WE
        CAN
        ISSUE COMMON STOCK WITHOUT SHAREHOLDER APPROVAL THAT MAY CAUSE DILUTION TO
        EXISTING SHAREHOLDERS.
 
 We
        have
        800,000,000 authorized shares of common stock that can be issued by the Board
        of
        Directors. At June 30, 2005, we had 409,685,470 shares of common stock available
        for issue. Under most circumstances the Board of Directors has the right
        to
        issue these shares. If all of these shares were issued, it would substantially
        dilute the existing shareholders.
 
 OUR
        COMMON STOCK HAS EXPERIENCED SIGNIFICANT PRICE VOLATILITY IN THE PAST AND
        WE
        EXPECT IT TO EXPERIENCE HIGH VOLATILITY IN THE FUTURE. THIS HIGH VOLATILITY
        SUBSTANTIALLY INCREASES THE RISK OF LOSS TO PERSONS OWNING OUR COMMON STOCK.
 
 The
        trading price for our common stock has been, and we expect it to continue
        to be,
        highly volatile. For example, the closing bid price of our stock has fluctuated
        between $0.03 and $0.35 per share since January 1, 2002. The price at which
        our
        common stock trades depends upon a number of factors, including our historical
        and anticipated operating results and general market and economic conditions,
        which are beyond our control. In addition, the stock market has, from time
        to
        time, experienced extreme price and volume fluctuations. These broad market
        fluctuations may lower the market price of our common stock. Moreover, during
        periods of stock market price volatility, share prices of many
        telecommunications companies have often fluctuated in a manner not necessarily
        related to their operating performance. Accordingly, our common stock may
        be
        subject to greater price volatility than the stock market as a whole.
 
 26
 FUTURE
        SALES OF COMMON STOCK MAY CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE.
 
 Future
        sales of substantial amounts of common stock pursuant to Rule 144 under the
        Securities Act of 1933 or otherwise by certain shareholders could have a
        material adverse impact on the market price for the common stock at the time.
        As
        of the date of this report, there are 122,999,022 outstanding shares of our
        common stock held by shareholders which are deemed "restricted securities"
        as
        defined by Rule 144 under the Securities Act. Under certain circumstances,
        these
        shares may be sold without registration pursuant to the provisions of Rule
        144.
        In general, under Rule 144, a person (or persons whose shares are aggregated)
        who has satisfied a one-year holding period may, under certain circumstances,
        sell within any three-month period a number of restricted securities which
        does
        not exceed the greater of one (1%) percent of the shares outstanding or the
        average weekly trading volume during the four calendar weeks preceding the
        notice of sale required by Rule 144. In addition, Rule 144 permits, under
        certain circumstances, the sale of restricted securities without any quantity
        limitations by a person who is not an affiliate of ours and has satisfied
        a
        two-year holding period. Any sales of shares by shareholders pursuant to
        Rule
        144 may cause the price of our common stock to decline.
 
 SOVEREIGN
        PARTNERS, LLC IS ROUTINELY INVOLVED IN LITIGATION MATTERS ARISING FROM ACCIDENTS
        AND WARRANTY RELATED CLAIMS; ALTHOUGH WE STRIVE TO KEEP THE LITIGATION COSTS
        AND
        PAYMENTS IF ANY, TO A MINIMUM, AND WE MAINTAIN LIABILITY INSURANCE, WE CANNOT
        BE
        ASSURED THAT LITIGATION WILL NOT HAVE AN ADVERSE IMPACT ON THE OPERATIONS
        AND
        FINANCIAL PERFORMANCE OF THE COMPANY TAKEN AS A WHOLE.
 
 Sovereign
        Partners, LLC, a wholly owned subsidiary of the Company, (Sovereign) performs
        residential and commercial construction activities directly and through
        sub-contractors. Such activities frequently give rise to warranty claims
        and
        personal injury claims against Sovereign and other job contractors. Although
        Sovereign has procedures in place to assist in the prevention of such claims,
        litigation arising from accidents and warranty issues are an inevitable part
        of
        the business. While Sovereign maintains insurance for such claims in reasonable
        amounts to protect it from losses, we cannot predict if any pending or future
        claims will have an adverse impact on our financial condition and results
        of
        operations. Also, we cannot be certain that liability insurance will continue
        to
        be available to Sovereign on terms acceptable to Sovereign, if at all. Loss
        of
        Sovereign’s liability insurance could have an adverse impact on our financial
        condition and results of operations.
 
 OUR
        COMMON STOCK IS SUBJECT TO PENNY STOCK RULES WHICH MAY BE DETRIMENTAL TO
        INVESTORS.
 
 Our
        common stock has traded at a price substantially below $5.00 per share,
        subjecting trading in the stock to certain SEC rules requiring additional
        disclosures by broker-dealers. These rules generally apply to any non-NASDAQ
        equity security that has a market price of less than $5.00 per share, subject
        to
        certain exceptions, commonly referred to as a "penny stock." Such rules require
        the delivery, prior to any penny stock transaction, of a disclosure schedule
        explaining the penny stock market and the risks associated therewith and
        impose
        various sales practice requirements on broker-dealers who sell penny stocks
        to
        persons other than established customers and institutional or wealthy investors.
        For these types of transactions, the broker-dealer must make a special
        suitability determination for the purchaser and have received the purchaser's
        written consent to the transaction prior to the sale. The broker-dealer also
        must disclose the commissions payable to the broker-dealer, current bid and
        offer quotations for the penny stock and, if the broker-dealer is the sole
        market maker, the broker-dealer must disclose this fact and the broker-dealer's
        presumed control over the market. Such information must be provided to the
        customer orally or in writing before or with the written confirmation of
        trade
        sent to the customer. Monthly statements must be sent disclosing recent price
        information for the penny stock held in the account and information on the
        limited market in penny stocks. The additional burdens imposed upon
        broker-dealers by such requirements could discourage broker-dealers from
        effecting transactions in our common stock. These disclosure requirements
        may
        have the effect of reducing the level of trading activity in the secondary
        market for a stock that becomes subject to the penny stock rules.
 
 WE
        OPERATE IN A HIGHLY COMPETITIVE MARKET, AND WE MAY NOT BE ABLE TO COMPETE
        EFFECTIVELY AGAINST ESTABLISHED COMPETITORS WITH GREATER FINANCIAL RESOURCES
        AND
        MORE DIVERSE STRATEGIC PLANS.
 
 We
        face
        competition from many communications providers with significantly greater
        financial, technical and marketing resources, longer operating histories,
        well-established brand names, larger customer bases and diverse strategic
        plans
        and technologies. Intense competition has led to declining prices and margins
        for many communications services. We expect this trend to continue as
        competition intensifies in the future. We expect significant competition
        from
        traditional and new communications companies, including local, long distance,
        cable modem, Internet, digital subscriber line, fixed and mobile wireless
        and
        satellite data service providers, some of which are described in more detail
        below. If these potential competitors successfully focus on our market, we
        may
        face intense competition which could harm our business. In addition, we may
        also
        face severe price competition for building access rights, which could result
        in
        higher sales and marketing expenses and lower profit margins.
 
 27
 REGULATION
        OF THE INTERNET.
 
 Due
        to
        the increasing popularity and use of the Internet by broad segments of the
        population, it is possible that laws and regulations may be adopted with
        respect
        to the Internet pertaining to content of Web sites, privacy, pricing, encryption
        standards, consumer protection, electronic commerce, taxation, and copyright
        infringement and other intellectual property issues. No one is able to predict
        the effect, if any, that any future regulatory changes or developments may
        have
        on the demand for our Internet access or other Internet-related services.
        Changes in the regulatory environment relating to the Internet access industry,
        including the enactment of laws or promulgation of regulations that directly
        or
        indirectly affect the costs of telecommunications access or that increase
        the
        likelihood or scope of competition from national or regional telephone
        companies, could materially and adversely affect our business, operating
        results
        and financial condition.
  **Item
        3.** **Controls
        and procedures**
 
 As
        of the
        period covered by this report, we carried out an evaluation, under the
        supervision and with the participation of our Chief Executive Officer and
        Principal Financial Officer of the effectiveness of the design and operation
        of
        our disclosure controls and procedures. Our disclosure controls and procedures
        are designed to ensure that information required to be disclosed in our reports
        filed under the Securities Act of 1934 is recorded, processed, summarized,
        and
        reported within the time periods specified in the SEC's rules and forms.
        Based
        on this evaluation, our Chief Executive Officer and Principal Financial Officer
        have concluded that our controls and procedures are effective in timely alerting
        them to material financial information required to be disclosed and included
        in
        our periodic SEC filings. There has been no change in our internal control
        over
        financial reporting that occurred during the period covered by this report
        that
        has materially affected, or is reasonably likely to materially affect, our
        internal control over financial reporting. Our internal control over financial
        reporting is designed to provide reasonable assurance regarding the reliability
        of our financial reporting and preparation of financial statements for external
        reporting purposes in accordance with generally accepted accounting
        principles.
 
 
 **PART
        II - OTHER INFORMATION**
 
 **Item
        1.**  **Legal
        proceedings**
 
 Sovereign
        Homes, LLC, et al, (various affiliates of Sovereign Partners, LLC, a
        wholly-owned subsidiary of the Company) are defendants in a personal injury
        proceeding known as Gumaro Gomez v. Sovereign Homes, LLC, et al. pending
        in the
        Colorado Court of Appeals. The case involves claims for personal injuries
        allegedly sustained while performing work at a development site for one of
        the
        defendants’ sub-contractors. The plaintiff asserts damages between $800,000 and
        $1,500,000. The defendants deny direct liability for the injury or the damages,
        and assert that all costs are covered by adequate insurance maintained by
        Terra
        Firma (a co-employer) and its insurance company Zurich American Insurance
        Company. On June 2, 2005, the Colorado Court of Appeals ruled in favor of
        Sovereign Companies, LLC, Sovereign Homes, LLC, and Rocky Mountain Panel,
        LLC,
        and against the plaintiffs (Terra Firma and Zurich North American Insurance
        Company) in this matter. The result is that the Colorado Court of Appeals
        has
        determined that Terra Firma and Zurich are fully liable for the workers
        compensation claim of Mr. Gomez, and that Sovereign Companies, LLC, et al.,
        all
        have the benefit of existing insurance and Workers Compensation funds. The
        time
        for any appeal by Terra Firma and Zurich, has expired, and the matter is
        no
        longer appealable.
 
 28
 Sovereign
        Companies, LLC (an affiliate of Sovereign Partners, LLC, a wholly-owned
        subsidiary of the Company), is a defendant in a case entitled, Sovereign
        Bank v.
        Sovereign Companies, LLC, pending at the United States Patent and Trademark
        Office (Cancellation No. 92043948). The petitioner seeks to prevent Sovereign
        Companies, LLC from using the name “Sovereign Mortgage.” A tentative settlement
        has been reached whereby Sovereign Partners LLC would be able to continue
        using
        the name “Sovereign” in connection with certain home and realty products and
        services.
 
 SR
        Condominiums, LLC (an affiliate of Sovereign Partners, LLC, a wholly-owned
        subsidiary of the Company), has been notified that one of its sub-contractors
        and its supplier have filed mechanics liens on a project known as “Hunter’s
        Chase Condominiums” in Arapahoe County, Colorado. The sub-contractor and the
        supplier each assert that there is money owed to them by SR Condominiums
        in the
        aggregate amount of $163,000. If the status of the liens and claims are not
        resolved, the assets under the liens will be subject to foreclosure. Neither
        entity has filed a complaint against SR Condominiums. SR Condominiums intends
        to
        vigorously defend the potential claims, but cannot control the outcome or
        any
        losses that may be incurred. The Company does not believe that the outcome
        of
        this matter, even if adverse, would be material to the Company’s operations and
        financial results as a whole.
 
 Sovereign
        Companies, LLC, Mountain View, at T-Bone, LLC (“Mountain View”), and Mr. Edouard
        A. Garneau have filed a declaratory relief action against certain members
        of
        Mountain View seeking a determination of the various rights and obligations
        of
        the members. The action is titled Sovereign Companies, LLC; Mountain View
        at
        T-Bone, LLC, et al. v. Yale King, et al., pending in Larimer County District
        Court in Colorado. The declaratory relief action seeks to clarify the roles
        and
        responsibilities of certain members and the operational authority of the
        individual managers of Mountain View. Mr. Garneau is a member of the Company’s
        Board of Directors and indirectly owns and controls shares of the Company’s
        common stock and preferred stock.
 
 In
        a
        related action, Sovereign Companies, LLC (“Sovereign”) and Mr. Edouard A.
        Garneau (“Garneau”) in his capacity as Manager of Sovereign and Mountain View at
        T-Bone, LLC (“Mountain View”), have been named in a lawsuit brought by several
        individual members of Mountain View claiming unspecified damages for breach
        of
        contract by Sovereign and Garneau, and for other causes of action against
        Garneau individually, seeking unspecified damages. The suit is entitled Yale
        King, et al, v. Sovereign Companies LLC and Edouard A. Garneau, pending in
        the
        Weld County District Court in Colorado. Garneau is a member of the Company’s
        Board of Directors and indirectly owns and controls shares of the Company’s
        common stock and preferred stock. Sovereign disputes the allegations and
        intends
        to vigorously defend the action. However, the Company and the defendants
        cannot
        control the outcome and the extent of the losses, if any, that may be
        incurred.
 
 Rocky
        Mountain Panel, LLC (a dissolved wholly-owned subsidiary of Sovereign Partners,
        LLC, a wholly-owned subsidiary of the Company), is a defendant in a lawsuit
        known as Baker Commons HOA v. Nicholas Construction, Inc. pending in the
        District Court, Denver County. The framing division of Rocky Mountain Panel,
        LLC, performed as a framing subcontractor to Nicholas Construction, Inc.,
        at the
        Baker Commons development site in Denver, Colorado. The Baker Commons homeowners
        have filed a lawsuit alleging, among other things, defective construction
        against Nicholas Construction, Inc. for unspecified damages. Rocky Mountain
        Panel, LLC is represented by insurance counsel under a reservation of rights
        by
        the insurance carrier. At this time it is impossible to estimate the dollar
        amount of this potential claim. Rocky Mountain Panel, LLC and the Company
        intend
        to vigorously defend this action, however, the Company cannot control the
        outcome and the extent of the losses, if any, that may be incurred.
 
 Rocky
        Mountain Panel, LLC (a dissolved wholly-owned subsidiary of Sovereign Partners,
        LLC, a wholly-owned subsidiary of the Company) is a subcontractor to a general
        contractor named in a lawsuit known as Carlyle Park HOA v. Trimark
        Communities/D.R. Horton Inc., et al. pending in the District Court, Arapahoe
        County, Colorado. The framing division of Rocky Mountain Panel, LLC, performed
        as a framing subcontractor to Trimark Communities/D.R. Horton Inc. at the
        Carlyle Park residential project in Highlands Ranch, Colorado. Rocky Mountain
        Panel was contracted to perform “finish” framing after another framing
        subcontractor performed at the project. The Carlyle Park homeowners have
        filed a
        lawsuit against Trimark Communities/D.R. Horton Inc., alleging certain defects
        in workmanship at the project, including framing. Rocky Mountain Panel has
        been
        invited by the general contractor to participate in a global mediation among
        all
        of the companies who worked on the project. In coordination with its insurance
        carrier, who is actively investigating the matter under a reservation of
        rights,
        Rocky Mountain Panel has thus far declined to participate in the mediation
        process. At this time it is impossible to estimate the dollar amount of this
        potential claim, as Rocky Mountain Panel has not been joined in the lawsuit.
        Should Rocky Mountain Panel, LLC, become involved in the lawsuit, the Company
        intends to vigorously defend this action. However, the Company cannot control
        the outcome and the extent of the losses, if any, that may be
        incurred.
 
 29
 King
        Concrete, LLC (a dissolved wholly-owned subsidiary of Sovereign Companies,
        LLC,
        a wholly-owned subsidiary of the Company), is a defendant in a proceeding
        known
        as ABCO Development Corporation v. Systems Contractors, Inc., pending in
        the
        Superior Court for the County of Los Angeles, California. The lawsuit alleges
        defective construction claims with respect to certain concrete components
        performed by King Concrete at a project site in Lakewood, Colorado, and seeks
        unspecified damages. King Concrete disputes these allegations and is represented
        by insurance counsel in the matter under a reservation of rights. King Concrete
        and the Company intend to vigorously defend this action, however, the Company
        cannot control the outcome and the extent of the losses, if any, that may
        be
        incurred.
 
 Item
        2. Unregistered
        Sales of Equity Securities and Use of Proceeds
 
 1. (a)
        Securities Issued. In February 2005, 9,721,950 shares of the Company's common
        stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        DD
        Family Properties, LLC.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 2. (a)
        Securities Issued. In February 2005, 27,777 shares of the Company's series
        B
        convertible preferred s tock
        were
        issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        DD
        Family Properties, LLC.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 3. (a)
        Securities Issued. In February 2005, 3,332,700 shares of the Company's common
        stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Thunderbird Management Limited Partnership.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 4.
              (a)
                  Securities Issued. In February 2005, 9,522 shares of the Company's
                  series
                  B convertible preferred stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Thunderbird Management Limited Partnership.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 30
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 5. (a)
        Securities Issued. In February 2005, 3,747,800 shares of the Company's common
        stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Searls
        Family, LLLP.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 6.
              (a)
                  Securities Issued. In February 2005, 10,708 shares of the Company's
                  series
                  B convertible preferred stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Searls
        Family, LLLP.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 7. (a)
        Securities Issued. In February 2005, 3,123,400 shares of the Company's common
        stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Krantz
        Family, LLLP.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 8.
              (a)
                  Securities Issued. In February 2005, 8,924 shares of the Company's
                  series
                  B convertible preferred stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Krantz
        Family, LLLP.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
  9. (a)
        Securities Issued. In February 2005, 2,998,450 shares of the Company's common
        stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Dolphin
        Bay, LLC.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
  31
 
 10.
              (a)
                  Securities
                  Issued. In February 2005, 8,567 shares of the Company's series
                  B
                  convertible preferred stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Dolphin
        Bay, LLC.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 11. (a)
        Securities Issued. In February 2005, 993,300 shares of the Company's common
        stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        New
        Opportunities, LLC.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 12.
              (a)
                  Securities Issued. In February 2005, 2,838 shares of the Company's
                  series
                  B convertible preferred stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        New
        Opportunities, LLC.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 13. (a)
        Securities Issued. In February 2005, 7,923,650 shares of the Company's common
        stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Kenneth
        Miller.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 14.
              (a)
                  Securities Issued. In February 2005, 22,639 shares of the Company's
                  series
                  B convertible preferred stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Kenneth
        Miller.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 15. (a)
        Securities Issued. In February 2005, 470,750 shares of the Company's common
        stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Jeffery
        Schetgen.
 
 32
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 16.
              (a)
                  Securities Issued. In February 2005, 1,345 shares of the Company's
                  series
                  B convertible preferred stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Jeffery
        Schetgen.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 17. (a)
        Securities Issued. In February 2005, 875,000 shares of the Company's common
        stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Thomas
        Beck.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 18.
              (a)
                  Securities Issued. In February 2005, 2,500 shares of the Company's
                  series
                  B convertible preferred stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Thomas
        Beck.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 19. (a)
        Securities Issued. In February 2005, 875,000 shares of the Company's common
        stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Brent
        E. Couch.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 20.
              (a)
                  Securities Issued. In February 2005, 2,500 shares of the Company's
                  series
                  B convertible preferred stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Brent
        E. Couch.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 33
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 21. (a)
        Securities Issued. In February 2005, 350,000 shares of the Company's common
        stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Jeffrey
        W. Fiebig.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 22.
              (a)
                  Securities Issued. In February 2005, 1,000 shares of the Company's
                  series
                  B convertible preferred stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Jeffrey
        W. Fiebig.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 23. (a)
        Securities Issued. In February 2005, 350,000 shares of the Company's common
        stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Craig
        A. Cook.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 24.
              (a)
                  Securities Issued. In February 2005, 1,000 shares of the Company's
                  series
                  B convertible preferred stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Craig
        A. Cook.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 25. (a)
        Securities Issued. In February 2005, 119,000 shares of the Company's common
        stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Curt A.
        Bushman.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 34
 26.
              (a)
                  Securities Issued. In February 2005, 340 shares of the Company's
                  series B
                  convertible preferred stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Curt A.
        Bushman.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 27. (a)
        Securities Issued. In February 2005, 119,000 shares of the Company's common
        stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Michael
        P. Petrusich.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 28.
              (a)
                  Securities Issued. In February 2005, 340 shares of the Company's
                  Series B
                  convertible Preferred Stock were issued.
 
 (b)
        Underwriter, Purchaser or Recipient. Such shares of stock were issued to
        Michael
        P. Petrusich.
 
 (c)
        Consideration. Such shares were issued pursuant to a stock purchase agreement.
 
 (d)
        Exemption from Registration. These securities are exempt from registration
        under
        the Securities Act of 1933, as amended, pursuant to the provisions of Section
        4(2) thereof, as a transaction not involving a public offering. This purchaser
        is a sophisticated investor capable of evaluating an investment in the Company.
 
 **Item
        3.** **Defaults
        upon senior securities**
 
 None.
  **Item
        4.** **Submission
        of matters to a vote of security holders**
  **Special
        Meeting of Shareholders**
  On
        June
        9, 2005 Cardinal Communications, Inc. (the “Company”) held a Special Meeting of
        Shareholders. The
        number of issued and outstanding shares of the Common Stock of Cardinal
        Communications, Inc. as of April 21, 2005, the record date established by
        the
        Board of Directors for determining shareholder eligibility to vote at the
        meeting, was 241,538,647; the number of issued and outstanding shares of
        the
        Series A Preferred Stock of Cardinal Communications, Inc. eligible to vote
        at
        the meeting, was 10,000; and t he
        number
        of issued and outstanding shares of the Series B Preferred Stock of Cardinal
        Communications, Inc. eligible to vote at the meeting, was 100,000.
 
 Each
        of
        the common shares voting at the meeting was entitled to one vote. Each of
        the
        Series A preferred shares voting at the meeting was entitled to 2000 vote(s).
        Each of the Series B preferred shares voting at the meeting was entitled
        to 100
        vote(s). There were represented personally or by proxy at the meeting
        stockholders holding an aggregate of 197,850,353 shares
        of the Common Stock of Cardinal Communications, Inc., representing 82% percent
        of the total shares eligible to vote; 10,000 shares of the Series A Preferred
        Stock of Cardinal Communications, Inc., representing 100% percent of the
        total
        Series A shares eligible to vote; and 100,000 shares of the Series B Preferred
        Stock of Cardinal Communications, Inc., representing 100% percent of the
        total
        Series B shares eligible to vote.
 
 35
 During
        the meeting the
        following items were approved:
 
 (1)
              ELECTION
                  OF FIVE DIRECTORS.
                  Dave Weisman, Richard E. Wilson, Ed Garneau, Jeffrey Feibig and
                  Byron
                  Young elected to serve as directors of the Company until our next
                  annual
                  meeting of shareholders, or until their respective successors are
                  elected
                  and qualified. There are no other directors are on our Board of
                  Directors.
 (2)
              RATIFICATION
                  AND APPROVAL OF AUDITORS.The selection of AJ. Robbins, PC as the Company’s independent auditors for
                  the fiscal years ending December 31, 2004 and December 31, 2005
                  was
                  ratified.
 (3)
              APPROVAL
                  OF AMENDMENT TO INCREASE OUR AUTHORIZED COMMON SHARES.Our Articles of Incorporation were amended to increase the common
                  shares
                  we have authority to issue from 400,000,000 shares of common stock
                  to
                  800,000,000 shares of common stock. The amendment is filed herein
                  as
                  Exhibit 3.9.
 (4)
              APPROVAL
                  OF REVERSE COMMON STOCK SPLIT.
                  Our Board of Directors has been given the discretionary authority,
                  prior
                  to the next annual meeting of shareholders, if the Board deems
                  it in the
                  best interest of the Shareholders, to amend our Articles of Incorporation
                  to effect a reverse stock split of one of the following amounts:
                  i) one
                  share of common stock for three shares of common stock; ii) one
                  share of
                  common stock for five shares of common stock, iii) one share of
                  common
                  stock for seven shares of common stock or iv) one share of common
                  stock
                  for ten shares of common stock.
 (5)
              APPROVAL
                  OF FORWARD COMMON STOCK SPLIT. Our Board of Directors has discretionary
                  authority, prior to the next annual meeting of shareholders, if
                  the Board
                  deems it in the best interest of the Shareholders, to amend our
                  Articles
                  of Incorporation to effect a forward stock split of two common
                  shares of
                  common stock for each one share of common stock.
 (6)
              APPROVAL
                  OF THE CHANGE OF THE COMPANY’S NAME. Our Articles of Incorporation were
                  amended to change the name of the Company from USURF America, Inc.
                  to
                  Cardinal Communications, Inc. Articles of Amendment to Articles
                  of
                  Incorporation are filed herein.
 
 Votes
        of
        the common stockholders received and tabulated at the meeting were as
        follows:
 
 Proposal
        1 .  The
        number of shares cast for, against and withheld with respect to the nominees
        for
        election to the Board of Directors to serve until the Annual Meeting of
        Stockholders to be held in the year 2006 and until his successor shall be
        elected and qualified was as follows:
 FOR
                
                ABSTAIN
                
                AGAINSTDavid
                    Weisman
                
                
                191,248,919
                
                
                739,944
                
                
                5,861,490Edouard
                    Garneau
                
                
                194,059,679
                
                
                711,934
                
                
                3,078,740Richard
                    Wilson
                
                
                189,599,404
                
                
                5,581,334
                
                
                2,669,615Jeffrey
                    Feibig
                
                
                189,679,378
                
                
                5,433,934
                
                
                2,737,041Byron
                    Young
                
                
                194,478,329
                
                
                841,434
                
                
                2,530,590
  36
 For
        the
        purposes of tabulating votes, directors are elected by a plurality of votes.
        A bstentions
        and negative votes had no effect.
 
 Proposal
        2.  The
        number of shares cast for, against and withheld with respect to confirmation
        of
        A.J. Robbins, P.C., as the Company’s auditors was as follows:
 FOR
                
                ABSTAIN
                
                AGAINST195,380,974
                
                
                613,422
                
                
                1,855,957
  Proposal
        3.  The
        number of shares cast for, against and withheld with respect to approval
        of the
        increase of the Company’s authorized capital stock was as follows:
 FOR
                
                ABSTAIN
                
                AGAINST186,263,480
                
                
                398,879
                
                
                11,187,994
  Proposal
        4.  The
        number of shares cast for, against and withheld with respect to approval
        of
        authority to the Board of Directors to implement a reverse stock split was
        as
        follows:
 FOR
                
                ABSTAIN
                
                AGAINST179,060,743
                
                
                273,436
                
                
                18,516,174
  Proposal
        5.  The
        number of shares cast for, against and withheld with respect to approval
        of
        authority to the Board of Directors to implement a forward stock split was
        as
        follows:
 FOR
                
                ABSTAIN
                
                AGAINST186,957,156
                
                
                1,304,286
                
                
                9,588,911
  Proposal
        6.  The
        number of shares cast for, against and withheld with respect to approval
        of the
        change of the Company’s name was as follows:
 FOR
                
                ABSTAIN
                
                AGAINST194,232,175
                
                
                547,081
                
                
                3,071,097
  9.  Votes
        of
        the Series A Preferred Stockholders received and tabulated at the meeting
        were
        as follows:
 
 Proposal
        1 .  The
        number of shares cast for, against and withheld with respect to the nominees
        for
        election to the Board of Directors to serve until the Annual Meeting of
        Stockholders to be held in the year 2006 and until his successor shall be
        elected and qualified was as follows:
  37
 FOR
                
                ABSTAIN
                
                AGAINSTDavid
                    Weisman
                
                
                10,000Richard
                  Wilson
                
                
                10,000Edouard
                  Garneau
                
                
                10,000Jeffrey
                  Feibig
                
                
                10,000Byron
                  Young
                
                
                10,000
 
 Proposal
        2.  The
        number of shares cast for, against and withheld with respect to confirmation
        of
        A.J. Robbins, P.C., as the Company’s auditors was as follows:
 FOR
                
                ABSTAIN
                
                AGAINST10,000
  Proposal
          3.  The
          number of shares cast for, against and withheld with respect to approval
          of the
          increase of the Company’s authorized capital stock was as
          follows:
 FOR
                
                ABSTAIN
                
                AGAINST10,000
  Proposal
        4.  The
        number of shares cast for, against and withheld with respect to approval
        of
        authority to the Board of Directors to implement a reverse stock split was
        as
        follows:
 FOR
                
                ABSTAIN
                
                AGAINST10,000
  Proposal
        5.  The
        number of shares cast for, against and withheld with respect to approval
        of
        authority to the Board of Directors to implement a forward stock split was
        as
        follows:
 FOR
                  
                  ABSTAIN
                  
                  AGAINST10,000
  Proposal
          6.  The
          number of shares cast for, against and withheld with respect to approval
          of the
          change of the Company’s name was as follows:
 FOR
                
                ABSTAIN
                
                AGAINST10,000
  10.  Votes
        of
        the Series B Preferred Stockholders received and tabulated at the meeting
        were
        as follows:
 
 Proposal
        1 .  The
        number of shares cast for, against and withheld with respect to the nominees
        for
        election to the Board of Directors to serve until the Annual Meeting of
        Stockholders to be held in the year 2006 and until his successor shall be
        elected and qualified was as follows:
  38
 FOR
                
                ABSTAIN
                
                AGAINSTDavid
                    Weisman
                
                
                100,000Richard
                  Wilson
                
                
                100,000Edouard
                  Garneau
                
                
                100,000Jeffrey
                  Feibig
                
                
                100,000Byron
                  Young
                
                
                100,000
  For
        the
        purposes of tabulating votes, directors are elected by a plurality of votes.
        A bstentions
        and negative votes had no effect.
 
 Proposal
        2.  The
        number of shares cast for, against and withheld with respect to confirmation
        of
        A.J. Robbins, P.C., as the Company’s auditors was as follows:
 FOR
                
                ABSTAIN
                
                AGAINST100,000
 Proposal
        3.  The
        number of shares cast for, against and withheld with respect to approval
        of the
        increase of the Company’s authorized capital stock was as
        follows:
  FOR
              
              ABSTAIN
              
              AGAINST100,000
  Proposal
        4.  The
        number of shares cast for, against and withheld with respect to approval
        of
        authority to the Board of Directors to implement a reverse stock split was
        as
        follows:
  FOR
                
                ABSTAIN
                
                AGAINST100,000
 Proposal
        5.  The
        number of shares cast for, against and withheld with respect to approval
        of
        authority to the Board of Directors to implement a forward stock split was
        as
        follows:
  FOR
                
                ABSTAIN
                
                AGAINST100,000
 Proposal
        6.  The
        number of shares cast for, against and withheld with respect to approval
        of the
        change of the Company’s name was as follows:
  FOR
              
              ABSTAIN
              
              AGAINST100,000
  39
  **Item
        5. **Other
        Information****
  **Securities
        Purchase Agreement**
 
 On
        February 18, 2005, we acquired 100% of the membership interests of Sovereign
        from its Members in exchange for the issuance of shares of our common stock
        and
        shares of our newly created Series B Convertible Preferred Stock, $0.0001
        par
        value per share (the "Preferred Stock"). As a result of the Acquisition,
        Sovereign is now owned and operated as a wholly owned subsidiary of our Company.
        Sovereign operations include real estate development and the related
        communications infrastructure for residential, multiple dwelling unit
        (apartment) and planned community developments ("developments"). See “Sovereign
        Acquisition” included in Item 2. Management’s Discussion And Analysis Of
        Financial Condition And Results Of Operations above for a detail description
        of
        the transaction and information related to the purchase.
 
 **ByLaws
        Amendments**
  In
        connection with the Acquisition Agreement, we amended our Bylaws to provide
        that
        the provisions of Nevada Revised Statutes Sections 78.378 to 78.3793 do not
        apply to the acquisition of our capital stock by Sovereign, its Members or
        its
        affiliates in connection with the Acquisition Agreement. These sections would
        have triggered compliance with certain take over measures that our Board
        of
        Directors determined should not apply to this transaction.
 
 In
        addition, on April 20, 2005, we amended our Bylaws to provide that vacancies
        on
        the Board of Directors may be filled by a majority vote of the remaining
        Directors, and that such newly appointment Director shall serve out the term
        of
        his or her predecessor and if no such term is designated, until the next
        annual
        meeting of shareholders.
 
 **Item
        6.** **Exhibits
        and Reports on Form 8-K**
 EXHIBIT
                    NO. DESCRIPTION(1
                )
                3.1   Articles
                    of
                    Incorporation of Registrant.(6
                )
                3.2   Bylaws
                    of Registrant, as amended April 20, 2005.(3
                )
                3.5   Articles
                    of
                    Amendment to Articles of Incorporation of Registrant.(4
                )
                3.6   Articles
                    of
                    Amendment to Articles of Incorporation of Registrant.(8
                )
                3.7   Certificate
                    of
                    Designation of Series A Convertible Preferred Stock.(6
                )
                3.8   Certificate
                    of
                    Designation of Series B Convertible Preferred Stock.#
                
                3.9   Articles
                    of
                    Amendment to Articles of Incorporation of Registrant.(2
                )
                4.1   Specimen
                    Common
                    Stock Certificate.(5
                )
                4.2   Specimen
                    Series
                    A Preferred Stock Certificate.(5
                )
                4.3   Specimen
                    Series
                    B Preferred Stock Certificate.(7
                )
                4.4   Proxy Statement
                    Pursuant to Section 14(a) of the Securities Act of 1934.
 
 40
  EXHIBIT NO.
                DESCRIPTION(6)
                
                21.1
                Subsidiaries
                    of Registrant.#
                
                31.1
                Certification
                    pursuant to rules 13A-14 and 15D-14 of the Securities Exchange
                    Act of 1934
                    of President and CEO.#
                
                31.2
                Certification
                    pursuant to rules 13A-14 and 15D-14 of the Securities Exchange
                    Act of 1934
                    of Principal Accounting Officer.#
                
                32.1
                CERTIFICATION
                    PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION
                    906 OF
                    THE SARBANES-OXLEY ACT OF 2002 of CEO and Principal Accounting
                    Officer.
  (1)
        Incorporated by reference from Registrant's Registration Statement on Form
        S-1,
        Commission File No. 333-26385.
 
 (2)
        Incorporated by reference from Registrant's Registration Statement on Form
        S-1,
        Commission File No. 333-96027.
 
 (3)
        Incorporated by reference from Registrant's Current Report on Form 8-K filed
        with the SEC on July 29, 1998.
 
 (4)
        Incorporated by reference from Registrant's Current Report on Form 8-K filed
        with the SEC on July 13, 1999.
 
 (5)
        Incorporated by reference from Registrant’s Annual Report on Form 10-KSB filed
        with the SEC on March 31, 2005 and amended on April 6, 2005.
 
 (6)
        Incorporated by reference from Registrant’s Report on Form 10-QSB filed with the
        SEC on June 3, 2005.
 
 (7)
        Incorporated by reference from Registrant’s Proxy Statement Pursuant to Section
        14(a) of the Securities Act of 1934 filed with the SEC on May 4, 2005.
 
 **#
        Filed Herewith**
 
 41
 
 **SIGNATURES**
  In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned thereunto duly
        authorized.
  Date:August
                  18, 2005
              **CARDINAL
                  COMMUNICATIONS, INC.**By:*/s/  
                  David A. Weisman*David
                  A. WeismanChief
                  Executive Officer
   42