<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                   FORM 10-KSB

(MARK ONE)

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<CAPTION>
<S>     <C>
[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
         FISCAL YEAR ENDED DECEMBER 31, 2001

                                       or

[  ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

         FOR THE TRANSITION PERIOD FROM ______________________________ TO _________________________
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                         (COMMISSION FILE NO.) 000-30401


                               U.S. REALTEL, INC.
        ----------------------------------------------------------------
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

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<S>                                                                          <C>
                     DELAWARE                                                 36-4166222
         -----------------------------------                                  -----------
         (State or other jurisdiction                                      (I.R.S. Employer
        of incorporation or organization)                                 Identification No.)

15 PIEDMONT CENTER, SUITE 100, ATLANTA, GEORGIA                                 30305
-----------------------------------------------                           -----------------
   (Address of principal executive offices)                                  (Zip Code)
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                                 (404) 869-2500
     ----------------------------------------------------------------------
                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                    SECURITIES REGISTERED UNDER SECTION 12(b)
                     OF THE SECURITIES EXCHANGE ACT OF 1934:

                                      NONE

                    SECURITIES REGISTERED UNDER SECTION 12(g)
                     OF THE SECURITIES EXCHANGE ACT OF 1934:

                         COMMON STOCK, $0.001 PAR VALUE

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
[X] No [ ]


<PAGE>


Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
[ ]

State issuer's revenues for its most recent fiscal year:  $282,000.

The aggregate market value of the registrant's Common Stock held by
non-affiliates as of April 5, 2002 was $2,906,256, computed by reference to the
closing sale price of the Common Stock of $1.01 per share on such date. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

As of April 15, 2002, there were 6,467,808 shares of the registrant's Common
Stock outstanding.

Transitional Small Business Disclosure Format:     Yes [  ]  No [X]

                       DOCUMENTS INCORPORATED BY REFERENCE

    Certain sections of the registrant's definitive proxy statement to be filed
with the Commission pursuant to Regulation 14A for its 2002 Annual Meeting of
Stockholders are incorporated by reference into Part III of this Form 10-KSB to
the extent stated herein.


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<PAGE>


                               U.S. REALTEL, INC.

                   FISCAL YEAR 2001 FORM 10-KSB ANNUAL REPORT

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

                                TABLE OF CONTENTS

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PART I
<S>               <C>                                                                                              <C>
Item 1.            Description of Business.......................................................................   4
Item 2.            Description of Property.......................................................................   15
Item 3.            Legal Proceedings.............................................................................   15
Item 4.            Submission of Matters to a Vote of Security Holders...........................................   16

PART II

Item 5.            Market for Common Equity and Related Stockholder Matters......................................   16
Item 6.            Management's Discussion and Analysis of Financial Condition and Results of
                     Operations..................................................................................   16
Item 7.            Financial Statements..........................................................................   25
Item 8.            Changes In and Disagreements With Accountants on Accounting and Financial
                     Disclosure..................................................................................   52

PART III

Item 9.            Directors, Executive Officers, Promoters and Control Persons; Compliance with
                     Section 16(a) of the Exchange Act...........................................................   53
Item 10.           Executive Compensation........................................................................   53
Item 11.           Security Ownership of Certain Beneficial Owners and Management................................   53
Item 12.           Certain Relationships and Related Transactions................................................   53
Item 13.           Exhibits List and Reports on Form 8-K.........................................................   53

                   Signatures....................................................................................   54
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                                       3
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                                     PART I

SPECIAL CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     This report on Form 10-KSB contains forward-looking statements regarding
future events or our future financial and operational performance. Such
forward-looking statements include all statements, estimates, projections, or
predictions about future events such as statements regarding markets for our
services; trends in revenues, gross profits and estimated expense levels;
liquidity and anticipated cash needs and availability. Forward-looking
statements often include words such as "anticipate," "believe," "plan,"
"intend," "estimate," "expect," "is intended to," "seek" and other similar
expressions. Reliance should not be placed on forward-looking statements because
they involve known and unknown risks and uncertainties which may cause the
actual results, performance or achievement of the Company to differ materially
from anticipated future results, performance or achievements expressed or
implied by such statements. While the forward-looking statements included in
this report reflect our current expectations and beliefs, we do not undertake to
publicly update or revise these statements, even if experience or future changes
make it clear that any projected results expressed in this report, annual or
quarterly reports to shareholders, press releases or company statements will not
be realized. In addition, the inclusion of any statement in this report does not
constitute an admission by us that the events or circumstances described in such
statement are material. Furthermore, we wish to caution and advise readers that
these statements are based on assumptions that may not materialize and may
involve risks and uncertainties, many of which are beyond our control, that
could cause actual events or performance to differ materially from those
contained or implied in these forward-looking statements. These risks and
uncertainties include the business and economic risks described in Item 6,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Risk Factors That May Affect Future Results."

ITEM 1.  DESCRIPTION OF BUSINESS

INTRODUCTION

     We operate in one business segment - the provision of telecommunications
services. We have operated in this segment since our acquisition of Cypress
Communications, Inc. ("Cypress Communications") in February 2002. During 2001
and through the first quarter of 2002, our business also included operations in
the telecommunications rights segment, all of which operations were being
conducted, outside of the U.S., in Argentina and Brazil. In March 2002, the
Company's Board of Directors decided to discontinue our telecommunications
rights operations in Latin America. See "Description of Business -
Discontinuance of Telecommunications Rights Business."

TELECOMMUNICATIONS SERVICES

OVERVIEW

     Through Cypress Communications, we provide comprehensive data, voice and
video communications services to small and medium-sized businesses located in
commercial office buildings in select major metropolitan markets within the
United States. We offer our retail customers fully-integrated, customized
communications services, including high speed, fiber-optic Internet access,
e-mail services, web hosting services, remote access connectivity, local and
long distance voice services, feature-rich digital telephone systems, digital
satellite business television, security/monitoring services, and other advanced
data and voice communications services. We deliver these services over
state-of-the-art broadband networks inside large and medium-sized office
buildings. We believe that such businesses generally are under-served by
incumbent providers. Accordingly, we target large, multi-tenanted office
buildings in central business districts and suburban office parks, buildings
where small and medium-sized businesses are typically located. Properties that
house many tenants with heavy demand for telecom services are the most desirable
properties and generate the highest revenue. As part of our telecommunications
services business, we historically have designed, installed, owned and operated
the in-building infrastructure over which we provide telecommunications services
to our retail customers, including the actual physical connection between our
customers and external network facilities. Currently, our retail operations are
limited to seven markets, including Atlanta, Boston, Chicago, Dallas, Houston,
Seattle, and Southern California (Los Angeles and Orange County).

                                       4
<PAGE>

     We offer reliable, feature-rich, integrated communications services at
competitive prices. In all of our retail markets, except Seattle, we bundle
voice and data services to provide "one-stop shopping" communications solutions
to building tenants. In 58 buildings, we also provide video services as part of
our comprehensive communications package. Because we currently own and operate
our in-building networks, we are typically able to deploy services to a new
customer within a few days of receiving an order. In addition, we are often able
to provide same day service for existing customers requesting new services or
features, such as increased bandwidth or additional lines.

Our current telecommunications services include:

     Data Services. We utilize state-of-the-art in-building fiber optic networks
to deliver high-speed Internet access directly to our customers in substantially
all of our in-service buildings. Our Internet service provides full Internet
protocol routing, symmetric upstream and downstream bandwidth, and plug-and-play
installation. Our customers do not need to purchase or maintain any hardware to
use this service. Moreover, because our service is capable of delivering up to
10/100 Mbps Ethernet connectivity, we are poised to meet our customer's growing
bandwidth needs. The key features of our Internet services are:

     o   Dedicated connectivity: Our service is always on, providing
         instantaneous connections and the capability to receive or transmit
         information continuously.

     o   Flexibility: We can usually increase a customer's bandwidth speed
         within minutes of receiving a request.

     o   Diversity: We incorporate logically and physically diverse Internet
         circuits in our colocation facilities in each city to protect customer
         Internet connections from disruption.

     o   Reliability: Each of our colocation facilities is supported by backup
         battery power. Moreover, we monitor all of our equipment, circuits and
         connections from our network operations center in Atlanta, Georgia.
         Should an outage occur in our network, we are notified immediately.

In addition to our standard fiber-optic Internet access service, we offer other
enhanced data services, including:

     o   E-mail, featuring IPSwitch's mail server version 6.0. Our service
         permits customers to use any e-mail client, including Microsoft
         Outlook, Outlook Express and Netscape Mail; access e-mail remotely
         using any web browser; set instant reply messages; and forward messages
         to supported pagers or voice e-mail systems.

     o   Webconferencing, which permits our customers to upload visuals,
         including Microsoft PowerPoint presentations, engage in online
         collaboration with a remote audience, record and replay audio-visual
         presentations, and combine superior audio conferencing technology with
         the reach and visual impact of the Internet.

     o   Web site hosting, featuring Compaq Proliant Servers and Microsoft
         Windows NT Advanced and Apache servers.

     o   Domain Name Registration.

     o   Firewall Security Services.  We offer a dedicated, cost-efficient
         firewall product to protect customer data and equipment.

     o   Monitoring Services. We provide 24-hour monitoring of web servers,
         e-mail servers, and customer local area networks. We monitor customer
         systems every 60 seconds, 24 hours a day. If we encounter problems, we
         notify our customers via e-mail, pager or both.

     o   NNTP Internet News Feed.  We carry a network news feed that contains
         over 30,000 news groups.

                                       5
<PAGE>

     o   DSL Services. We offer Digital Subscriber Line ("DSL") service in
         certain buildings in Seattle in which we have not constructed a fiber
         riser.

     Voice Services. Substantially all of our voice services customers rent
their telephones from us. This ensures a compatible interface with our
state-of-the-art in-building communications equipment and provides customers
with a number of key benefits, including access to an advanced, multi-function
digital telephone system; significant reductions in up-front capital costs; and
reduced risk of technological obsolescence. Our voice offerings include both
traditional telephone services, such as local and long distance services, as
well as value-added services, such as integrated voicemail, audio conferencing,
webconferencing, calling cards and customizable toll-free number services.
Additional enhanced features include call waiting, call forwarding, dial-back
and caller identification.

     Video and Other Services. In 58 buildings, we offer our customers a
comprehensive package of business television services consisting of news,
business, sports and network programming. We deliver these services directly to
our customers over our in-building networks using a combination of direct
broadcast satellite programming and off-air local channels. Our customers can
elect to receive more or less programming depending on their needs.

     We continue to investigate, test and add, where appropriate, complementary
communications products and services to maintain our "one-stop shopping"
strategy.

EMPLOYEES

     As of March 31, 2002, we employed 103 full-time employees including 102
full-time employees in the United States and 1 full-time employee in Argentina.
Of these employees, 98 employees are employees of Cypress Communications.
Despite recent reductions in staffing at Cypress Communications and the
discontinuance of our Latin American operations, we believe our employee
relationships are good.

COMPETITION

     We face significant competition. Both existing competitors and the numerous
companies that may seek to enter one or more of our niche businesses may expose
us to severe price competition for our services and for building access rights.
Many of our competitors have significantly greater financial resources and may
also be able to respond more quickly to technological developments and changes
in customers' needs.

     In the telecommunications services segment we face competition from:

o    In-Building Communications Providers. Because our license agreements are
     generally non-exclusive, substantially all of our landlord clients are free
     to grant access, sales and marketing rights to one or more of our
     competitors. It is not yet clear whether it will be profitable for two or
     more companies to operate in-building networks within the same property.

o    Metro Areas Network ("MAN") Providers. MAN providers, such as Cogent,
     FiberNet, MFN, Level 3 Communications, Inc., Telseon, WorldCom, XO
     Commmunications, Inc. and Yipes Communications, Inc., construct, manage
     and operate metro-area optical networks, traditionally for the purpose of
     providing voice and/or data transport between and among carrier colocation
     facilities. Because MAN providers own and control optical networks in our
     retail and wholesale markets, they may begin providing competitive
     alternatives to our retail services if they gain access to our licensed
     buildings. To the extent that MAN providers gain access to our licensed
     buildings, we may face additional competition with respect to our retail
     operations.

o    Local Telephone Companies. Incumbent local telephone companies ("ILECs")
     have several competitive strengths, including established brand names and
     reputations, and sufficient capital resources to rapidly deploy or expand
     communications equipment and networks. Many competitive local telephone
     companies ("CLECs"), that also possess competitive advantages, market
     retail services and selectively construct in-building facilities within our
     licensed buildings. ILEC dominance, together with the


                                       6
<PAGE>

     proliferation of CLECs, diminishes our opportunity to provide competitive
     local exchange services and may necessitate additional reductions in, or
     shrink potential margins from, our voice operations generally.

o    Long Distance Companies.  Many of the leading long distance companies,
     such as AT&T, Worldcom and Sprint, could begin to build their own
     in-building voice and data networks. Other national long distance carriers,
     such as Level 3 Communications, Inc., Qwest and Williams Communications,
     are building and managing high speed, fiber-based, national voice and data
     networks, and such companies may extend their networks by installing
     in-building facilities and equipment. Additionally, the regional bell
     operating companies are now permitted to provide long distance services in
     territories where they are not the dominant provider of local services.
     These companies may also provide long distance services in the territories
     where they are the dominant provider of local services if they satisfy a
     regulatory checklist established by the Federal Communications Commission.
     As regional Bell operating companies ("RBOC") are permitted to provide
     long distance services in territories where we operate, we could face
     greater price competition.

o    Fixed Wireless Services Providers. Fixed wireless service providers, such
     as Worldcom, XO Communications, Inc. and Sprint, provide high speed
     communication services to customers using microwave or other facilities or
     satellite earth stations on building rooftops.

o    Internet Service Providers. Internet service providers, such as Earthlink,
     Genuity, Prodigy, Sprint and the Uunet subsidiary of Worldcom, provide
     traditional and high-speed internet access to residential and business
     customers, generally using existing communications infrastructure.

o    Digital Subscriber Line Companies. Digital subscriber line companies and/or
     their internet service provider customers, such as Covad, Network Access
     Solutions, AT&T, and various RBOC affiliates, provide high capacity
     internet access using digital subscriber line technology, which enables
     data traffic to be transmitted over standard copper telephone lines at much
     higher speeds than these lines would normally allow.

o    Cable-based Service Providers. Cable-based service providers use cable
     television distribution systems to provide high capacity Internet access
     and video services.

SALES AND MARKETING

         We market our telecommunications services on a retail basis directly to
the tenants in our licensed buildings. Our typical license agreement enables us
to display and disseminate our marketing materials in the leasing office and
other locations within a building. Our agreements also require building owners,
management and leasing representatives to advise tenants of the availability of
our services and notify us as new tenants enter the building. In addition to
these rights, we use landlord, property manager, and tenant testimonials and
references as marketing tools. We currently provide data and/or voice
communications service to many of the landlords and property managers within our
licensed buildings, due in part to the requirement under many of our license
agreements that we provide free basic internet access to such parties.

         Our sales approach is highly consultative. In our initial sales
meetings, we work closely with prospective customers to assess their particular
communications needs. We then present potential customers with customized
proposals which are often less expensive, more comprehensive, and easier to
administer than their current communications solutions.

REAL ESTATE SELECTION AND MARKETING

     Overall, as of December 31, 2002, we had license agreements giving us the
right to operate our networks in more than 900 buildings, representing more than
250 million rentable square feet of office space in the United States. As of
March 21, 2002, we halted efforts to sign additional licenses in order to
preserve existing capital and dedicate our resources to retail and wholesale
operations in our constructed buildings. We may resume business development
activities and license negotiations in the future, after we achieve positive
cash flow and/or acquire additional financing to fund network construction. Our
decision to cease construction or


                                       7
<PAGE>

operations in some markets may cause us to lose some of our license rights;
however, we believe that if we do lose such rights, any such loss will not have
a material adverse effect on our business.

     Under the terms of our license agreements, we pay property owners a
fixed rental fee and/or a percentage of the revenue we receive from providing
communications services to the tenants in a building. Generally, our license
agreements are non-exclusive, which means that our landlords may permit
competitors to install additional in-building networks in our licensed
buildings. Several of our competitors already possess rights to install networks
in many of our licensed buildings. We anticipate that additional competitors
will gain access to our licensed buildings as a function of their expansion and
certain actual and proposed modifications to federal, state and local
regulations governing building access. See "Description of Business -
Regulation."

SUPPLIERS

     We connect our in-building networks to local, long distance and Internet
service providers in order to serve our customers. In most of our markets, we
connect our networks to, and lease facilities from, the local telephone company
and/or certain CLECs. Typically, we are able to secure connections for local
calling services within 30 days of requesting such service, although additional
delays of up to 60 days are not uncommon.

     We purchase long-distance transmission capacity from several long-distance
carriers, such as Qwest and Worldcom. Under some of these agreements, we may be
required to undertake minimum revenue and/or volume commitments that may be
material. Typically, we are able to secure connections for long-distance service
within 30 days from requesting such service.

     To provide Internet services to our customers, we purchase intralata data
transmission connectivity between our licensed buildings and local points of
presence from local exchange carriers. We obtain our local points of presence
from colocation service providers, such as C3 Communications, Equinix, IX2,
Semaphore and Switch & Data. We use broadband service providers, such as
Worldcom, Level 3 Communications, Inc. and Sprint, to procure connectivity
between our colocation facilities and the Internet backbone. Typically, we are
able to secure connections for data transmission capacity within 30 to 60 days
of requesting such service.

     Our in-building networks contain equipment such as data switches and
routers, voice switches, and other communications and video equipment that we
purchase from Nortel Networks, Cisco Systems and other manufacturers. As of
March 30, 2002, we do not have minimum purchase commitments with any of our
manufacturers. There are alternative vendors available to us for all the types
of equipment that we purchase.

REGULATION

     Overview. Our telecommunications services are subject to regulation at the
federal, state and local levels. The regulations that govern communications
infrastructure, transport and sale are expansive and, often, subject to multiple
interpretations. Many regulations do not specifically address our precise
operations and services. On the other hand, many regulations that apply to our
operations are susceptible to change or cancellation as a result of ongoing
administrative proceedings, litigation and new legislation. The outcome of these
various proceedings, as well as any other regulatory initiatives, cannot be
predicted. Future regulatory changes may have a material positive or adverse
affect on our business and operations.

     In the jurisdictions in which we operate our voice business, voice
communications services may be provided as a shared tenant services ("STS")
provider and/or CLEC. If the state where the services are offered requires local
voice providers to obtain certificates of public convenience or certificates of
necessity as a CLEC, we provide services via Cypress Communications Operating
Company, Inc. ("Cypress Operating Company"), a wholly-owned subsidiary that
holds all of our CLEC certifications. In jurisdictions that permit voice
communications service providers to operate as a STS provider, we may provide
services as either a CLEC or STS provider.

     Cypress Operating Company is certified to provide local exchange service as
a CLEC in Colorado, New York, New Jersey, Pennsylvania, Missouri, Kansas and
Texas. We have pending or provisional applications for CLEC authority in
Illinois, Washington,


                                       8
<PAGE>

California, Georgia and Massachusetts. As a CLEC, Cypress Operating Company has
the authority to resell other carriers' local voice services. Depending on state
regulations, Cypress Operating Company may also construct its own facilities or
purchase network elements from ILECs in order to provide telecommunications
services. To provide local voice services as a CLEC, Cypress Operating Company
obtains interconnection services from ILEC under the ILEC's existing tariff or
by separate interconnection agreement. At this time, Cypress Operating Company
does not have interconnection agreements with any ILECs. Tariff rates, terms and
conditions are available to Cypress Operating Company only to the extent that
Cypress Operating Company is certified as a CLEC in the state where
interconnection is established.

     CLECs are typically subject to a higher degree of state regulation than STS
providers. Most states require that CLECs receive approval from the state's
public service commission. CLECs are generally required to file tariffs setting
forth the terms, conditions and prices for voice services. In addition, under
federal law, including the Telecommunications Act of 1996, CLECs are subject to
additional obligations, including requirements to interconnect with other
carriers, to provide other carriers access to their networks, and to make the
terms of their agreements available to other carriers on a non-discriminatory
basis.

     We are authorized to provide voice services as a STS provider in Texas and
Florida. In the balance of our existing markets, STS providers are not required
to obtain specific operational authority from the state public utility
commission. We choose our operational status based on a market-by-market
analysis, which considers regulatory risk, costs of compliance, available
service providers, service methodologies, and carrier relations.

     In the states where we provide service as a STS provider, various terms and
conditions govern our operations, including:

         o Requirements that our services be provisioned by the ILEC.

         o Restrictions on how we interconnect facilities within buildings.

         o Limits or caps on the rates that we can charge for local voice
           services.

         o Requirements that our customers be permitted to terminate their
           service contracts without cause or penalty.

         o Requirements that we maintain a switching system, or private
           branch exchange, in each building or set of contiguous buildings
           that we serve.

         o Requirements that the local telephone company be permitted to provide
           service to any tenant in our licensed buildings.

         o In California, we cannot charge customers a higher rate for local
           voice services than we pay the local telephone company for the
           same services.

         o In Illinois, we must permit local telephone companies, upon
           payment of a fee, to use the communication equipment in our
           buildings.

         o In some states, we must register as a shared tenant service
           provider, file applications and periodic reports, and, in certain
           instances, pay immaterial fees.

         o In each state, we must pay universal service fees, i.e., payments
           to subsidize the ILEC's provision of telephone service to certain
           rural and other hard-to-reach areas.

     A jurisdiction's STS regulations or guidelines may not specifically address
our operations. While we believe that we qualify as a STS provider in all of the
jurisdictions in which we currently provide local voice services, a regulator
may successfully challenge our position and require that we instead qualify as a
CLEC. Additionally, jurisdictions may modify their regulations to reduce or
eliminate their STS provider classification or exemption, thereby requiring us
to comply with the applicable CLEC regulations.



                                       9
<PAGE>
     Long Distance Voice Services. While the law on this issue is unclear, we
believe that we are not required to file tariffs with, or seek authorization
from, the Federal Communications Commission ("FCC") in order to provide
interstate and international long distance services, provided that we adhere to
certain basic rules and regulations regarding such services that are promulgated
by the FCC. In some states, we must obtain authorization to provide intrastate
long distance voice services. Cypress Operating Company is currently certified
to provide intrastate long distance services in Florida, Illinois, Indiana,
Kansas, Maryland, Michigan, Missouri, New Jersey, New York, Ohio, Pennsylvania
and Texas. We have pending applications to provide intrastate long distance
services in California, Georgia, Massachusetts and Washington.

     Data Services. Our Internet and data services generally are not subject to
federal, state or local regulation. Congress and some state legislatures have
considered imposing taxes and other burdens on Internet service providers and
regulating content provided over the Internet. In addition, we may be affected
by certain statutes, regulations and court cases that assess liability against
Internet service providers and other on-line service providers for providing
information or content across their services or equipment that violates
copyright, indecency, obscenity and other laws, or is defamatory, fraudulent or
tortious in nature. Future regulation may have a negative impact on our ability
to offer Internet services at competitive and profitable rates.

     Video and Other Services. Our video services are regulated to a far lesser
extent that the video services of traditional cable operators, which receive
franchises from the municipalities they serve and typically construct facilities
across public rights of way. For example, our video programming rates are not
regulated and we are not subject to "must carry" obligations, which require
cable license franchisees to provide certain programming to customers. We are
subject to some technical requirements with regard to our provision of video
services, such as requirements that our facilities not cause harmful
interference with certain other communications systems.

     Recent rulings of the FCC may impact our video services. For example, the
FCC has ruled that owners of multiple unit premises generally should not forbid
their tenants from installing some communication devices, such as satellite
dishes, on the tenant's balconies and other areas controlled by the tenant.

     We do not have any cellular or similar types of licenses. To the extent
that we provide cellular or paging services, we rent or sell pagers and wireless
phones and resell the services of third party wireless providers. Consequently,
while we do pay some regulatory fees, we generally are not subject to federal
regulation with respect to these services.

     Forced Access. Federal and state legislature and public utility commissions
regularly consider proposals to require commercial landlords to grant access to
competitive communications service providers. In fact, some states, such as
Massachusetts and Texas, already have mandatory access laws. These laws
generally prohibit property owners from granting exclusive access to one or more
buildings or restricting provider access to such building(s). The FCC has
adopted a rule that, when it becomes effective, will prohibit common carriers
from entering into future agreements with owners of commercial office buildings
that would restrict the right of the building owner to grant other common
carriers access to tenants in the building. The FCC is also considering broader
rules that, among other things, would require building owners to grant access to
all competitive service providers on a nondiscriminatory basis. We do not know
whether, or in what form, these proposals will be adopted. If the FCC or any
states in which we operate require facilitate competitive access to buildings we
serve. Such laws may, however, enable us to obtain access to buildings in which
we otherwise may have been denied access.

     911 and Enhanced 911. The FCC requires certain communications providers to
establish 911 service, i.e., three digit dialing access to public safety call
centers for emergency services. Enhanced 911 or E911 service permits the public
safety call center to identify a caller's telephone number and calling location
for the dispatch of emergency personnel. 911 and E911 services are regulated at
the federal, state and local level. Some states have enacted, or are likely to
enact, legislation that will impose a penalty or surcharge on service providers
whose telecommunications equipment does not meet or exceed the E911 requirements
for the applicable jurisdiction. We currently offer, or are preparing to offer,
911 or E911 services in locations where the service is technically feasible;
however, our ability to provide emergency service may be impeded by failed
systems, systems that were not properly configured, systems that were not
updated to reflect changes in technology or public networks, and certain other
technical problems. We may incur penalties, surcharges, damages or other
liabilities where, and to the extent that, we cannot provide 911 or E911
service.



                                       10
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INTELLECTUAL PROPERTY

     We regard certain aspects of our products, services and technology as
proprietary; however, because we are not currently prosecuting any patent,
trademark or copyright applications before the United States' Patent and
Trademark or Copyright Offices, it may be possible for third parties to copy or
use some of our intellectual property without authorization. Notwithstanding the
foregoing, we regularly execute confidentiality, non-disclosure and
non-competition agreements with our carriers, vendors, employees and
representatives, in addition to other precautions, to protect our intellectual
property.

HISTORY

     We were organized in January 1997 under the name AGILE, LLC, and we
incorporated in the State of Illinois under the name U.S. RealTel, Inc. in
August 1997. In November 1997, we merged with and into Admiral Two Capital
Corporation, and the surviving company's name was changed to U.S. RealTel, Inc.
On May 8, 2000, we reincorporated into the State of Delaware. We established
operations in Buenos Aires, Argentina in December 1998 and in Sao Paolo, Brazil
in February 2000. We conducted our Latin American operations in Argentina
through RealTel de Argentina, S.A., a majority owned Argentine corporation, and
in Brazil through RealTel do Brasil, S.A., a majority owned Brazilian
corporation.

     In December 2000, we completed the sale of what were then substantially all
of our North American assets and operations ("old North American operations"),
including our proprietary database of site information, to Apex Site Management,
Inc., a subsidiary of SpectraSite Holdings, Inc. In connection with the sale, we
agreed not to compete for two years with SpectraSite in the United States,
Canada, Mexico and Western Europe in the provision of wholesale riser
operations. Prior to the sale of our old North American operations in December
2000, we created a proprietary database containing geographic and other
pertinent site information to aid telecommunications service providers in
selecting properties. Among other things, this database contained site
information relating to our former properties in North America. As part of the
sale of our old North American operations, we sold this database to Apex and
Apex granted us a license to use the database for our operations. We maintain
information about each property in the database, including location, ownership,
property type, building specifics and telecommunications usage, which we can
configure in multiple forms in order to create targeted marketing material,
maintain inventory control and facilitate reporting and forecasting. The
database contains telecom market information to assist marketing personnel in
forecasting their customers' deployment needs.

     For the year ended December 31, 2000, approximately 93% of our revenues
were from our old North American operations and approximately 7% were from our
operations in Argentina. For the year ended December 31, 2001, the majority of
our revenues were from our telecommunication rights business, all of which were
derived from our operations in Argentina. We never generated any revenues from
our operations in Brazil. Subsequent to year-end, we elected to discontinue our
Latin American operations, which are now held for disposition.

     Subsequent to year-end, we acquired Cypress Communications through a tender
offer and short form merger. The purchase price was $3.50 per share, in cash,
for a total purchase price of approximately $15.7 million. As a result of the
acquisition, the Company, at the subsidiary level, acquired 100% of Cypress
Communications' assets including cash and telecommunications infrastructure.
Also, we assumed all of the liabilities of Cypress Communications, which include
operating lease commitments, primarily related to former office space, and
license agreements with property owners and/or operators of several office
buildings. The transaction will be accounted for by the purchase method of
accounting. During the upcoming year, Cypress Communications will be considered
the predecessor entity, and therefore, future reporting will include prior year
financial statements for Cypress Communications as well as U.S. RealTel, Inc.

     Cypress Communications was formed as a limited liability company under the
laws of Georgia on August 16, 1995, under the name Cypress Communications, L.L.C
and, in July 15, 1997, completed a reorganization in which the operations of the
predecessor company were merged into Cypress Communications, Inc. (Cypress
Communications), a Delaware corporation. In December 1998, Cypress
Communications acquired certain of the assets and business of MTS
Communications, a provider of building-centric communications services in Los
Angeles, California. On February 15, 2000, Cypress Communications completed its
initial public offering in which they sold an aggregate of 11.5 million shares
of common stock at a per share price of $17.00, for an aggregate offering price
of approximately $195.5 million. In April 2000, Cypress Communications acquired
all of the outstanding common stock of SiteConnect, Inc., a Seattle-based
in-building communications service provider, in exchange for an aggregate of
635,654 shares of common stock. In September 2000, Cypress Communications and a
joint venture partner formed Cypress Canada Communications Inc. to provide
in-building communications services in Canada. In January 2001, the parties
agreed to redeem the joint venture partner's interest in the subsidiary, having
decided to cease retail operations in Canada, except for potential wholesale
operations relating to Cypress Canada's existing networks in four buildings in
Toronto, Canada.

TELECOMMUNICATIONS RIGHTS

     OVERVIEW.

     In our telecommunications rights operations, we provided site access and
usage rights, which we call "telecommunications rights," to telecommunications
companies in Latin American. In our former telecommunications rights business,
we sought telecommunications rights outside of the United States from property
owners under master lease agreements and subleased those rights to
telecommunications service providers. Under master leases, we received the
rights to install communications infrastructure in a property and/or to provide
communications services to the property's tenants. In exchange, we paid the
property owner a percentage of the revenues that we received from subleasing the
telecommunications rights to telecommunications companies. We conducted these
operations only in Argentina and Brazil. Such operations utilized a database
containing site information about the location, size, type and ownership of our
properties. As of March 1, 2002, we had executed subleases with seven
telecommunications companies covering 56 properties in Argentina, with respect
to which telecommunications facilities have been installed and were operational
on 40 properties. We had not entered into any subleases in Brazil. In our former
telecommunications rights business, we


                                       11
<PAGE>

sought telecommunications rights outside of the United States from property
owners under master lease agreements and subleased those rights to
telecommunications service providers. Through our subleases, we offered or
sought to offer the following services:

     o   Occupant Services. Telecommunications service providers could deploy
         equipment in a building in order to offer telephony, internet, video
         and data services to the building's tenants; and

     o   Antenna Site Leasing Services. Telecommunications service providers
         could place wireless communications antennas and equipment on rooftops
         and vacant land.

     o   Tower Construction Management and Leasing. Telecommunications service
         providers could locate their antennas and equipment which we would
         construct, manage and lease.

Substantially all of our subleases were for occupant services.

TELECOM RIGHTS BUSINESS STRATEGY

     Our business strategy in telecommunications rights was to provide important
services for telecommunications service providers, property owners and tenants
in the following ways:

o    For Telecommunications Service Providers: We sought to expedite access to a
     database, or grid, of properties from which providers could choose those
     properties that best suited their siting and service needs. A
     telecommunications service provider could sign a single master sublease
     with us under which we would provide access rights to multiple properties.
     By aggregating telecommunications access into a single contract we sought
     to eliminate the time-consuming process of negotiating and executing leases
     between one owner and one telecommunications company at a time.
     Alternatively, a telecommunications service provider could sign a number of
     similar site-specific subleases, each of which provided access to a
     particular property.

o    For Property Owners: We sought to manage the processes of negotiating with
     multiple telecommunications service providers - a process that property
     owners typically have neither the expertise nor the resources to handle
     effectively. Each property owner would sign one master lease with us that
     leased to us the telecommunications access rights to the owner's
     properties. As part of our services, we monitored the review by the
     telecommunications service providers of the regulatory, legal, engineering,
     logistical and construction processes that are required before
     telecommunications services can be delivered. Additional telecommunications
     services resulted in enhanced tenant capture rates for property owners.
     Rent for occupant services and antenna installation represented an
     opportunity to property owners for a previously unrealized source of
     income.

o    For Building Tenants: We sought to deliver a competitive telecommunications
     environment that offered greater choice of telecommunications service
     providers, competitive pricing and state-of-the art technology through our
     non-exclusive master subleases to multiple telecommunications services
     providers.

TELECOM RIGHTS OPERATING METHODOLOGY

     The platform for our site leasing services was a master lease program
through which property owners agreed to allow us to sublease their
telecommunication rights. Our leases did not require payment of a fixed minimum
rent.

     Master Lease. Our standard master lease granted us the right, on either an
exclusive or a non-exclusive basis, to sublet portions of the applicable
landlord's properties to one or more subtenants for the purpose of such
subtenants' placing and maintaining communications transmitting and/or receiving
equipment on or in a property. The standard lease term in Argentina was ten
years with additional consecutive five-year option terms. In Brazil, the
standard lease was to be seven years with additional consecutive seven-year
option terms. Under the terms of our standard lease, if a particular landlord's
property did not have a telecommunications system placed on the property during
the initial term of the lease, the landlord had the right upon notice to us to
terminate our rights with


                                       12
<PAGE>

respect to the inactive property. The landlord was entitled to receive a
designated percentage of the rent we received from the telecommunications
service providers that utilized portions of the landlord's property pursuant to
their subleases with us.

     We subleased these telecommunication rights to telecommunications service
providers through master subleases or site-specific subleases. We marketed these
telecommunication rights to telecommunications service providers.
Telecommunications service providers could execute our master subleases on a
non-exclusive and non-site-specific basis. Alternatively, they could execute one
or more non-exclusive, site-specific subleases, each of which provides access to
a particular property. Our subleases complemented our form master lease, but we
negotiated specific terms with both the property owners and the
telecommunications service providers.

     Subleases. Our standard sublease was a non-exclusive agreement which set
forth the terms and conditions pursuant to which a telecommunications company
could sublet rights to install telecommunications systems on a landlord's
property. The standard term in Argentina was ten years and could be extended
with respect to a particular property up to the term of the underlying master
lease. The specific terms covering a particular telecommunications system, which
was to be installed on a landlord's property (such as rent and the length of
term with respect to such facility) were set forth in the site-specific sublease
or an addendum to the master sublease. The rights granted under the sublease
were non-exclusive and the subtenant could terminate an addendum or
site-specific sublease at any time without change if it could not obtain
governmental approval to install a telecommunications system or if government
approval was withdrawn.

     In our telecommunications rights operations we employed our licensed
database to provide site information to telecommunications service providers in
a variety of formats in order to facilitate their selection process. Once a
telecommunications service provider entered into a master sublease, it could
select these sites by the submission of a simple request form, which could be
converted into an addendum to its master sublease to allow for expedited
deployment.

     We sought to negotiate any unique terms between the property owners and the
telecommunications service providers and coordinate the site-specific
documentation. Each telecommunications service provider was responsible for
retaining engineering consultants to review the proposed plans and track the
receipt, review and approval of all prerequisites to construction, including
plans and specifications, engineering, zoning and building permits, regulatory
approval, as well as any special conditions imposed by a property owner or
required by a telecommunications service provider. We also would track rental
and construction commencement dates so that payments and reports could be
submitted to the property owner.

SERVICES

     Occupant Services. Our occupant services business focused on providing
telecommunications service providers with access to multi-tenanted office and
residential buildings. Small and medium-sized businesses are often target
customers for telecommunications service providers seeking to provide broadband
services. Telecommunications service providers that entered into subleases
related to our occupant services business included leading competitive local
exchange carriers, Internet service providers, and "Shared Tenant Service"
providers. Substantially all of our subleases were for occupant services.

     Antenna Site Leasing Services. Our antenna site leasing services operations
in Latin America provided site access to wireless communication companies and
broadcasters. Antenna site leasing customers typically pay a fixed, monthly rent
based upon the size, type of installation and location of the site. The demand
for antenna sites is driven by the build-out of new wireless networks and
expansion of existing networks to address the increased use of wireless
communications for telephony, data transmission, and Internet access. As part of
the antenna site leasing services we provided to property owners, we would
review permits, construction drawings, installation plans, and regulatory
compliance. We believed that we had attractive properties for antenna siting,
including office buildings, retail centers, hotels and vacant properties in
high-traffic areas.

     Tower Construction, Management and Leasing. We believed that the increasing
deregulation and privatization of the telecommunications industry in Latin
America was driving increased demand for new communications towers on which
telecommunications service providers desired to locate their antennas and
related equipment. We planned to capitalize on this growing opportunity by
expanding our operations to include the construction, management and leasing of
new towers.



                                       13
<PAGE>

COMPETITION

     In the telecommunications rights segment, we faced competition from:

         o    Building Owners. Instead of contracting with us, owners of
              buildings, malls and retail centers in Argentina and Brazil could
              elect to either provide our services themselves or to partner with
              other entities to do so. To the extent these owners elected to
              manage the process of leasing or licensing access or placement
              directly to telecommunications service providers, we faced
              difficulty in expanding the properties in our portfolio.

         o    Occupant Services And Antenna Site Leasing Competitors. Our
              competition for occupant services and antenna site leasing in
              Argentina and Brazil included small to medium "site-acquisition"
              companies that did not specialize in our core business.

TELECOM RIGHTS SALES AND MARKETING

     Our sales and marketing operations for telecommunications rights were
comprised of two groups: the site development group and the services group.

     o Site Development Group: Our site development group sought to obtain
       master leases from property owners. As of March 30, 2002, we had no
       employees in this group, as we reduced our operations as part of the
       disposition process of our Latin American operations.

     o Services Group: Our services group marketed our portfolio of properties
       to telecommunications service providers. As of March 30, 2002, we had no
       employees in this group, as we reduced our operations as part of the
       disposition process of our Latin American operations.

     We sought to support the efforts of our site development group and our
telecom rights services group with trade show marketing and other marketing
support. We also provided our personnel with ongoing in-house training on the
opportunities to be offered to property owners and telecommunications service
providers.

     We entered into an exclusive alliance agreement with the Argentina Building
Managers Association, an organization whose members manage the majority of all
multi-tenant office and residential buildings in Argentina, including many
premier commercial office properties in the commercial business district of
Buenos Aires. Pursuant to the alliance agreement, the Argentina Building
Managers Association agreed to refer to us all properties managed by its
membership and associates, and in consideration thereof, we agreed to promote,
on a preferential basis, the utilization of properties managed by members of the
Argentina Building Managers Association. We agreed to provide technical
assistance regarding telecommunications technologies, services and
infrastructure and to monitor all infrastructure and new service installations
in the properties, as well as insurance coverages from the telecommunications
companies installing facilities on the properties.

     We also entered into an alliance agreement with YPF S.A.("YPF"), an
Argentine oil and gas company engaged in the exploration, development and
production of oil and natural gas, as well as the refining, marketing,
transportation and distribution of oil and a wide range of petroleum products.
YPF has its own service station network, comprised of owned stations and
stations owned and/or operated by third parties. Pursuant to the alliance
agreement, YPF agreed to refer to us all third-party service stations. In
consideration thereof, we agreed to enter into master leases with all YPF and
third-party service stations that so choose.

     Our decision to cease telecommunications rights operations in Latin America
is expected to result in the termination of these agreements and the loss of our
other existing access rights in Argentina and Brazil; however, we believe such
loss will be offset by the benefits associated with reduced expenditures for
such operations and the ability to redeploy of our assets in our
telecommunications services business. See "Description of Business -
Discontinued Operations."



                                       14
<PAGE>

DISCONTINUANCE OF TELECOMMUNICATIONS RIGHTS BUSINESS

     All of our Latin American operations are now held for disposition or in the
process of liquidation. Ongoing operating costs associated with our efforts to
develop our current markets in Argentina and Brazil, an unstable and declining
economy in our principal market, Argentina, and the lack of revenues from our
second market, Brazil, had been negatively affecting our cash position.
Discontinuing our operations in Latin America will help us to preserve existing
capital and allow us to dedicate our resources to our telecommunications
services business in the U.S. While we expect to incur various costs in
connection with the disposition or termination of such operations, which will
include legal and other professional fees, we do not believe such costs will be
material. We believe such costs will be offset by the benefits associated with
reduced expenditures for such operations and the ability to redeploy of our
assets in our telecommunications services business. Discontinuation of our Latin
American operations will also eliminate the risks associated with international
operations, which included substantial foreign currency exchange risk, which
risk resulted in currency translations losses in 2001 and anticipated currently
translation losses for the first quarter of 2002.

ITEM 2.  DESCRIPTION OF PROPERTY


<TABLE>
<CAPTION>
                                                     GENERAL                  SQUARE       ANNUAL         LEASE
LOCATION                     CITY                    CHARACTER                FEET         RENT           EXPIRATION
--------                     ----                    ---------                ----         ----           ----------

<S>                         <C>                     <C>                      <C>          <C>            <C>
Piedmont Center             Atlanta, Georgia        Principal Executive      31,053       $1,117,000      2005-2007
                                                     Office;  Cypress
                                                     Communications
                                                     Headquarters

1555 Oakbrook                Norcross, Georgia       Network Operations      36,503         $358,000      January 2007
                                                     Center
1501 Fourth Ave.             Seattle, Washington     General Office           3,390         $100,000      December 2005
One River Way                Houston, Texas          General Office           5,188         $137,000      August 2005
1900 Avenue of the Stars     Los Angeles,            General Office           7,065         $236,000      July 2007
                             California

18500 Von Karman             Irvine, California      General Office           1,834           $4,000      April 2003
4851 LBJ Freeway             Dallas, Texas           General Office           7,742         $234,000      September 2005
Landmark Condominium         Boston, Massachusetts   General Office           7,292         $362,000      June 2005

One Financial Plaza*         Fort Lauderdale,        Executive Office         2,584          $24,000      Month-to-Month
Suite 1101                   Florida

Av. Leandro*                 Buenos Aires,           Local Office             3,200           $6,200      Month-to-Month
N. Alem 1002                 Argentina
9th floor
</TABLE>


*Indicates property disposed of in 2002 or held for disposition.

     We lease space in 18 additional commercial properties in the United States
for general office purposes, network facilities and storage, in each instance
under leases that do not contain material financial obligations.

     In March 2002, we decided to relocate our executive offices from Fort
Lauderdale, Florida to Atlanta, Georgia following our acquisition of Cypress
Communications. We are terminating or expect to terminate month-to-month leases
in Fort Lauderdale and Buenos Aires Argentina. We also are currently exploring
opportunities to terminate, assign or sublease certain of our other lease
obligations in conjunction with ongoing reductions in workforce and retail
operations, and as part of our continuing effort to cut costs, refine core
business practices, streamline operations, increase productivity, and achieve
positive cash flow. We may incur material one-time expenses associated with
these activities, including lease termination fees, sublease or assignment fees,
brokerage commissions, and tenant improvement costs.

ITEM 3.  LEGAL PROCEEDINGS

     None.



                                       15
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted during the fourth quarter of fiscal 2001 to vote
of security holders.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock is quoted on the Nasdaq OTC Bulletin Board ("OTCBB") under
the symbol "USRT." The following table sets forth, for the periods indicated,
the high and low bid quotations for the common stock, as reflected on the OTCBB.
The following quotations represent inter-dealer prices without adjustment for
retail markups, markdowns or commissions and may not necessarily represent
actual transactions.

<TABLE>
<CAPTION>
PERIOD                                                          HIGH                     LOW
------                                                          ----                     ----

<S>                                                             <C>                      <C>
2001
   Fourth Quarter.........................................    $ 2.00                   $ 0.45
   Third Quarter..........................................      2.50                     1.25
   Second Quarter.........................................      1.63                     1.50
   First Quarter..........................................      2.13                     1.50

2000
   Fourth Quarter.........................................    $ 4.00                  $  1.75
   Third Quarter..........................................      8.00                     3.00
   Second Quarter.........................................     12.25                     5.45
   First Quarter..........................................     15.00                     7.00
</TABLE>


     As of April 8, 2002, there were 121 holders of record of our common stock.

     On April 1, 2002, our board of directors announced its approval of the use
of up to $500,000 for the repurchase of our common stock on an ongoing basis,
depending on market and business conditions. Such purchases would be made on the
open market.

     To date, we have not declared or paid any dividends on our common stock.
The payment of dividends, if any, is within the discretion of our board of
directors and will depend upon our earnings, capital requirements and financial
condition and other relevant factors. We do not intend to declare any dividends
in the foreseeable future, but instead intend to retain future earnings, if any,
for use in our business operations.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
        OF OPERATIONS

     The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements, which involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain risk
factors, including those set forth under "risk factors that may affect future
results," below and elsewhere in this report. The following discussion also
should be read in conjunction with the information set forth in our consolidated
financial statements and notes thereto included in "Item 7. Financial
Statements" of this Annual Report on Form 10-KSB.

OVERVIEW



                                       16
<PAGE>

     We are in the development stage and, except for the net gain of
approximately $15.5 million on the sale of our old North American operations (as
described below) in December 2000, have experienced recurring losses since
inception (January 15, 1997). Net loss for the fiscal year ended December 31,
2001 was approximately $8.2 million compared with net income of approximately
$2.7 million for the fiscal year ended December 31, 2000. We have had cumulative
net losses of approximately $19.8 million since inception. As of December 31,
2001, we had working capital of approximately $1.7 million.

     From December 2000 through March 2002, we provided, and sought to provide,
site access and usage rights, which we refer to as telecommunications rights, to
telecommunications companies. We only operated in two countries, Argentina and
Brazil. We operated in Argentina through RealTel de Argentina, S.A., a majority
owned Argentine corporation, and in Brazil through RealTel do Brasil, S.A., a
majority owned Brazilian corporation. We obtained telecommunications rights from
property owners under long-term, "master lease" agreements. Under our master
leases, we received the rights to install communications infrastructure in a
property and/or to provide communications services to the property's tenants. In
exchange, we paid the property owner a percentage of the revenues that we
received from subleasing the telecommunications rights to telecommunications
companies.

     As more fully discussed in Notes 2 and 4 to the consolidated financial
statements, on December 8, 2000, we completed the sale of substantially all of
our then North American assets and operations, including our proprietary
database of site information (the "old North American operations"), to Apex Site
Management, Inc. For the year ended December 31, 2001, 90% of our revenues were
from our Latin American operations.

     As discussed in Note 16 to the consolidated financial statements, in
February 2002, the Company completed the acquisition of Cypress Communications
through a tender offer and short form merger. At the closing of the tender
offer, the Company acquired approximately ninety-four percent (94%) of the
outstanding common stock of Cypress Communications. The acquisition of the
remaining shares was completed immediately after the closing of the tender
through the short form merger of Merger Sub with and into Cypress Communications
(the "Merger") with Cypress Communications surviving as a wholly owned
subsidiary of the Company.

     Since our inception, we have focused our efforts on raising capital,
recruiting and training personnel, adding properties to our property database
and marketing these sites. In late 2000 and throughout 2001 we have focused on
repositioning the Company, selling our old North American operations and seeking
to develop our international telecommunications rights businesses. Most recently
we have focused on the acquisition of Cypress Communications (Note 16), and
after March 2002, on discontinuing our operations in Latin America (Note 16) and
refocusing on property specific telecommunications services. To date, we have
received immaterial net revenues from our telecommunications rights operations.
Accordingly, we are considered to be in the development stage and our
consolidated financial statements represent those of a development stage
enterprise. No assurance can be given as to when, or if, we will be able to
attain profitable operations.

     We have incurred significant operating losses and experienced negative cash
flows from operations since inception. Our ability to continue as a going
concern is contingent upon our ability to obtain additional financing or
positive cash flow from operations. Moreover, we expect to continue to incur
development costs as part of our efforts to achieve profitability. These costs
could increase as we pursue new sources of revenues.

CRITICAL ACCOUNTING POLICIES

     The SEC recently issued disclosure guidance for "critical accounting
policies." The SEC defines "critical accounting policies" as those that require
application of management's most difficult, subjective or complex judgments,
often as a result of the need to make estimates about the effect of matters that
are inherently uncertain and may change in subsequent periods.

     The following is not intended to be a comprehensive list of all of our
accounting policies. Our significant accounting policies are more fully
described in Note 1 to the Consolidated Financial Statements. In many cases, the
accounting treatment of a particular transaction is specifically dictated by
accounting principles generally accepted in the United States of America, with
no need for management's judgment in their application. There are also areas in
which management's judgment in selecting an available alternative would not
produce a materially different result.

     We have identified the following as accounting policies critical to us:

REVENUE RECOGNITION

     Monthly rent for leases containing fixed rental increases during their term
is recognized on a straight-line basis over the term of the leases. For all
other leases, rents are recognized over the term of the leases as earned.

     One-time initial license and review fees received, and related direct costs
incurred, at lease inception are deferred and recognized on a straight-line
basis over the lease terms.

     Contingent rentals, such as rentals based on sales levels of sublessees,
are recognized when earned, as targeted levels are achieved.

     Deferred income represents rental payments received in advance and the
deferral of one-time fees, net of costs.

STOCK-BASED COMPENSATION

     The Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
became effective in 1997. SFAS No. 123 encourages companies to recognize expense
for stock options and other stock-based employee compensation plans based on
their fair value at the date of grant. As permitted by SFAS No. 123, the Company
has and will retain its prior accounting policy under APB Opinion Number 25,
"Accounting for Stock Issued to Employees," and, accordingly, compensation
expense for stock options is measured as the excess, if any, of the fair value
of the Company's stock at the date of grant over the exercise price.

LONG-LIVED ASSETS

     The Company periodically reviews the carrying value of its properties and
long-lived assets in relation to historical results, current business conditions
and trends to identify potential situations in which the carrying value of
assets may not be recoverable. If such reviews indicate that the carrying value
of such assets may not be recoverable, the Company would estimate the
undiscounted sum of the expected future cash flows of such assets, to determine
if such sum is less than the carrying value of such assets to ascertain if a
permanent impairment exists. If a permanent impairment exists, the Company would
determine the fair value by using quoted market prices, if available, for such
assets, or if quoted market prices are not available, the Company would discount
the expected future cash flows of such assets and would adjust the carrying
value of the asset to fair value.

MANAGEMENT ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect that reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.

     We have a history of losses, which have generated sizeable net operating
loss carry forwards for both state and Federal tax purposes. We are required
under accounting principles generally accepted in the United States of America
to record a valuation allowance offsetting our deferred tax assets associated
with these net operating loss carry forwards if we are not able to demonstrate
that it is more likely than not that we will generate sufficient taxable income
in future years to allow us to utilize some or all of the net operating loss
carryforwards. Our history of losses precludes us, at this time, from
recognizing any of our tax loss carryforwards. If we are able to demonstrate
through subsequent profitable operations that it is more likely than not that we
will have taxable income, we would then reverse the valuation allowance and
reflect the full value of our deferred tax asset at that time.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

     REVENUES. Revenues decreased to approximately $282,000 for the year ended
December 31, 2001 from approximately $1,720,000 for the year ended December 31,
2000. The decrease in revenues resulted from the sale of our Old North American
operations. For the year ended December 31, 2001, revenues of our Argentine
operations represented the majority of our consolidated revenues. Revenues for
Argentina increased to approximately $253,000 for the year ended December 31,
2001 from approximately $125,000 for the year ended December 31, 2000. The
increase in revenues resulted from an increment on sites leased or contracted
during the year. Our Brazilian operations have had no revenues to date.

     REVENUES-NET. Revenues-net (after direct costs) also decreased to
approximately $117,000 for the year ended December 31, 2001 from approximately
$266,000 for the year ended December 31, 2000. Margins increased to
approximately 41.5% in 2001 from approximately 15.5% in 2000, reflecting the
higher margins on our Argentine operations. Revenues-net for Argentina increased
to approximately $143,000 for the year ended December 31, 2001 from a loss of
approximately $6,000 for the year ended December 31, 2000. The increase in
revenues-net resulted from higher margins applied to contracts signed during
2001.



                                       17
<PAGE>
     OPERATING EXPENSES. Operating expenses decreased to approximately
$6,397,000 for the year ended December 31, 2001 from approximately $9,342,000
for the year ended December 31, 2000. In 2001, salaries and benefits decreased
to approximately $2,265,000 from approximately $4,808,000 in 2000. In 2001, we
reduced our employee headcount as a result of the sale of our old North American
operations. Selling, general and administrative expenses decreased in 2001 to
approximately $1,434,000 from approximately $3,413,000 in 2000, as a result of
the sale of our Old North American operations. The impairment of intangible
assets was $750,000 for the write-off of the goodwill and the non-compete
agreement in Argentina (Note 6). Professional and investment banking fees were
approximately $1,948,000 in 2001 compared to approximately $1,121,000 in 2000,
primarily reflecting an increase due to the initial legal expenses related to
our expansion in Latin America and additional consulting fees related to support
services related to our operations in Argentina.

     INTEREST EXPENSE AND FINANCING COSTS. For the year ended December 31, 2001,
interest expense and financing costs decreased to approximately $2,000 from
approximately $1,728,000 for the year ended December 31, 2000. The decrease was
attributable to the repayment of $4.4 million of debt outstanding after the sale
of our old North American operations.

     OTHER INCOME AND EXPENSE. Interest income increased to approximately
$262,000 during the year ended December 31, 2001 from approximately $98,000 for
the year ended December 31, 2000 as a result of the short term investment of
cash surplus resulting from the sale of our old North American operations. The
year ended December 31, 2001 included a loss in currency exchange adjustments of
approximately $2,145,000 due to fluctuations on the Brazilian currency (Real)
and the Argentinean peso.  Foreign currency adjustments were insignificant for
the year ended December 31, 2000. The net loss on the disposal of assets of
approximately $79,000 includes the closing of our offices in Fort Lauderdale,
Argentina and Brazil upon the acquisition of Cypress Communications and the
closing of our operations in Latin American (Note 16). The net loss on the
disposal of assets of approximately $107,000 in 2000 included the closing of our
former Chicago corporate office upon the sale of our old North American
operations.  For the year ended December 31, 2000, other income includes the
net gain of approximately $15,533,000 on the sale of our old North American
operations.

     INCOME TAXES. For the year ended December 31, 2001, no income tax benefit
of our losses was recognized because of the uncertainty in realizing the benefit
of our net operating losses. We recorded a net provision for income taxes in the
amount of approximately $200,000 for the year ended December 31, 2000 for taxes
related to the net gain of approximately $15.5 million on the sale of our old
North American operations in December 2000.

     EXTRAORDINARY ITEM - LOSS ON EXTINGUISHMENT OF DEBT. The loss on
extinguishment of debt for the year ended December 31, 2000 totaling
approximately $455,000 ($.07 per basic and diluted common share) represents the
difference between the principal amount of the convertible debenture that was
repaid in December 2000 and the net carrying amount at the time of repayment.

     CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES. As more fully
discussed in Notes 8(b) and 9(e) to the consolidated financial statements, our
results of operations includes a charge of approximately $226,000 ($.04 per
basic and diluted common share) for the year ended December 31, 2000 for
adopting Financial Accounting Standards Board Interpretation No. 44 "Accounting
for Certain Transactions Involving Stock Compensation, an interpretation of APB
Opinion No. 25" relating to the valuation of warrants issued in prior years to
our directors, and as required by Emerging Issues Task Force clarification
issued in November 2000 of EITF 98-5, "Accounting for Convertible Securities
with Beneficial Conversion Feature or Contingently Adjustable Conversion Ratios,
to Certain Convertible Instruments," we recognized the intrinsic value of a
beneficial conversion option of approximately $1,170,000 ($.18 per basic and
diluted common share).

     NET INCOME (LOSS). Our net loss for the year ended December 31, 2001 was
approximately ($8,236,000) (($1.32) per basic and diluted common share). For the
year ended December 31, 2000, our net income was approximately $2,669,000 ($0.41
per basic and diluted common share). Excluding the net gain on the sale of our
old North American operations, we would have reported a net loss for 2000 in the
amount of approximately ($12,864,000) (($1.99) per basic and diluted common
share). This proforma decrease in the net loss resulted from reduced operations
after the sale of our old North American operations, as well as, increased
efficiencies resulting


                                       18
<PAGE>

from the implementation of new policies and procedures we initiated, offset by
the increase in consulting fees we paid related to our discontinued Argentine
operations.

LIQUIDITY AND CAPITAL RESOURCES

     As of December 31, 2001, we were in the development stage, however, with
the acquisition of Cypress Communications the Company will no longer be in the
development stage. We have a substantial ongoing investment in business
development efforts and expenditures to build infrastructure under past and
present business plans to support our future business. Historically, we have
been substantially dependent on private placements of our equity securities and
debt financing to fund our cash requirements. During 2001, we used the majority
of the proceeds from the sale of our old North American operations to develop
and expand our international operations.

     In 2001, operating costs associated with our efforts to develop our markets
in Argentina and Brazil, cash usage, which included existing commitments entered
into prior to the sale of the old North American operations, and a declining
economy in Argentina, all negatively affected our cash position during the year.
Disposition of our international operations and our efforts to develop our
telecommunications services business may continue to impact the Company's cash
position and may cause a further decrease in the Company's cash position during
2002. As of December 31, 2002, we had cash and cash equivalents of approximately
$2,061,000.

     We have initiated certain actions intended to improve liquidity and
operating results. Such actions include, among other things, (i) adjusting
staffing levels in all subsidiaries, (ii) implementing cost control procedures
by centralizing disbursement approval at corporate level, (iii) reducing
operating budgets by focusing on specific initiatives which can result in an
immediate impact on the Company's revenues, and (iv) liquidating our Latin
American operations. Given the Company's current and expected operating results,
it is likely that the Company's available cash position will continue to decline
absent an increase in cash generated by operations before we expect it to
stabilize. As of March 31, 2002, we had cash and cash equivalents of
approximately $10.7 million, including cash from Cypress Communications
of $10.2 million.

     We expect that the actual amount and timing of our future needs will depend
on our efforts to develop our current market in the United States and costs
associated with discontinuing our Latin American operations. In the meantime, we
are pursuing various sources of debt and/or equity financing to fund our U.S.
operations and corporate overhead until we become profitable. No assurance can
be given that we will be able to obtain additional financing on terms acceptable
to the Company or at all. Likewise, we may be unsuccessful in expanding our
business operations or, if successful, in raising sufficient capital to fund the
operations. If we are unable to obtain adequate funds on acceptable terms, our
ability to fund our expansion, respond to competitive pressures, become
profitable or continue as a going concern would be significantly impaired.
Furthermore, if we decide to borrow funds in the future to fund our business,
the terms of those borrowings would likely contain restrictive covenants that
would limit our ability to incur additional indebtedness, pay dividends or
undertake certain other transactions. These instruments could also require us to
pledge assets as security for the borrowings. If we leverage our business by
incurring significant debt, we may be required to devote a substantial portion
of our cash flow to service that indebtedness. Accordingly, there can be no
assurance that our business plan will be consummated.

     As more fully discussed in Note 16 to the consolidated financial
statements, in February 2002, we completed a tender offer and short form merger
for the acquisition of all the outstanding shares of common stock of Cypress
Communications (Note 16). We believe that by capitalizing on Cypress
Communications' infrastructure and its customer base, while reducing Cypress
Communications' operating costs, we will be able to improve operations at
Cypress Communications to the point that such operations will generate positive
cashflow, and, therefore, provide the additional cash flow required to improve
our cash position. Additionally, the Company is pursuing other potential
acquisitions which could provide additional cash flow to the Company, as well as
various sources of debt and/or equity financing to support such acquisitions and
to fund our working capital requirements. There can be no assurance as to when,
if at all, we will be able to effect such operations and, even if affected,
whether such operations will meet our business and liquidity objectives.



                                       19
<PAGE>

     As a result of our acquisition of Cypress Communications, we assumed, at
such subsidiary level, all of the liabilities of Cypress Communications. Such
liabilities include operating lease commitments, primarily related to former
office space, and license agreements with property owners and/or operators of
several office buildings.

     Given the Company's current and expected operating results, it is likely
that the Company's available cash position will continue to decline absent an
increase in cash generated by operations before we expect it to stabilize. Our
cash flow needs for the upcoming year will be covered with our current cash
resources and the additional revenues from our newly acquired operations in the
U.S. The Company does not expect to use outside sources of funding. We believe
that cash used in operations should decline as we continue into the year 2002,
and by the end of year 2002 or the beginning of 2003 should stabilize. We
cannot, however, give any assurance as to the attainment of additional revenues
from our newly acquired operation in the U.S., whether the costs which we will
incur in disposing of our Latin American operations, will, in fact, be
immaterial, the effectiveness of an overall reduction in our cash used in
operating activities or the availability of outside funding. The consolidated
financial statements do not include any adjustments that might result from
these uncertainties and were prepared based on the assumption that the Company
will continue as a going concern and as such, reference is made to the report
issued by our Independent Certified Public Accountants, regarding issues that
raise substantial doubt about the Company's ability to continue as a going
concern.

     Net cash used in our operations was approximately $5,671,000 for the year
ended December 31, 2001 versus approximately $8,289,000 for the year ended
December 31, 2000. The decrease in net cash used for operating activities in
2001 was primarily due to the lower cash requirements from the general Latin
America operations as compared with the old North American operations net of the
additional consulting fees paid for the Argentinean initiatives.

     Cash used in investing activities was approximately $744,000 for the year
ended December 31, 2001, as compared with proceeds of approximately $15,045,000
for the year ended December 31, 2000. Cash used in 2001 was primarily for the
purchase of a 20% minority stockholder in the Argentinean subsidiary. The
Company paid $600,000 in cash and issued a note payable for $300,000 upon the
execution of the agreement. After the transaction, the Company's ownership
percentage increased to 71%. Cash provided in 2000 was primarily from the sale
of our old North American operations. Cash used in 2001 was primarily due to
our additional investment in our Latin American operations.

     Our primary sources of liquidity have been through the issuance of common
stock and convertible debentures, as well as proceeds from the sale of our old
North American operations in December 2000. Cash used in financing activities
was approximately $1,035,000 for the year ended December 31, 2001 and
approximately $1,465,000 for the year ended December 31, 2000. Cash used during
2001 was $800,000 to pay for the acquisition of treasury stock (Note 10 to the
Consolidated Financial Statements), $35,000 for the repayment of advances from
shareholders (Note 11 to the Consolidated Financial Statements), $150,000 for
the repayment of notes payable and $50,000 for the payment for the release of
warrants issued under a now discontinued customer-offering program (Note 9 to
the Consolidated Financial Statements). During 2000, we used proceeds of
$2,855,000 from the issuance of convertible debentures and from interim bridge
financing to fund our operating losses and used $4,355,000 of the proceeds of
the sale of our old North American operations to repay those obligations in
December 2000.

     We do not consider our business seasonal in nature causing any unusual
liquidity issues.

FOREIGN EXCHANGE RISK

         Exchange rates in Argentina and Brazil may be highly volatile. We never
have had any hedging contracts or other financial instruments outstanding, which
would mitigate the effect of a currency translation loss. Our operations for the
first quarter of 2002 were subject to, and are expected to be, adversely
affected by changes in the exchange rate with Argentina. Furthermore, our
ability to repatriate any assets from the liquidation of our Latin American
operations to the United States may be limited by laws or regulations enacted by
the foreign countries in which we operated.

RECENT ACCOUNTING PRONOUNCEMENTS



                                       20
<PAGE>
     In June 2001, the Financial Accounting Standards Board finalized FASB
Statement No. 141, Business Combinations (SFAS 141), and FASB Statement No. 142,
Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 requires the use of
the purchase method of accounting and prohibits the use of the
pooling-of-interests method of accounting for business combinations initiated
after June 30, 2001. SFAS 141 also requires that the Company recognize acquired
intangible assets apart from goodwill if the acquired intangible assets meet
certain criteria. SFAS 141 applies to all business combinations initiated after
June 30, 2001 and for purchase business combinations completed on or after July
1, 2001. It also requires the Company, upon adoption of SFAS 142, to reclassify
the carrying amounts of intangible assets and goodwill based on the criteria in
SFAS 141.

     SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other
intangible assets recognized at that date, regardless of when those assets were
initially recognized. SFAS 142 requires the Company to complete a transitional
goodwill impairment test six months from the date of adoption. The Company is
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142.

         The Company's previous business combinations were accounted for using
the purchase method. During December 2001, the Company decided to write-off the
carrying amount of goodwill due to the uncertainties in the Argentina economy,
which had a net carrying amount of $575,000 (see Note 6). As of December 31,
2001, the Company had other intangible assets of $175,000. Amortization expense
during the year ended December 31, 2001 was $150,000. The Company does not
expect the adoption of SFAS 142 will have a significant impact on its
consolidated results of operations, financial position or cash flows.

         In August 2001, the FASB issued SFAS 144, Accounting for Impairment or
Disposal of Long-Lived Assets. This Statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This Statement
supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of", and the accounting and
reporting provisions of APB Opinion No. 30, "Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions", for the disposal of a segment of a business
(as previously defined in that Opinion). This Statement also amends ARB No. 51,
Consolidated Financial Statements, to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. The provisions of
this Statement are effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years, with early application encouraged. The provisions of this Statement
generally are to be applied prospectively. This Statement retains the
fundamental provisions of FAS 121 for the recognition and measurement of
impairment, but amends the accounting and reporting standards for segments of
business to be disposed of. During 2002, the provisions of this Statement will
have an impact on the Company because of the disposition of the Latin America
operations. Currently, the Company is assessing but has not yet determined how
the adoption of SFAS No. 144 will impact its financial position and results of
operations.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

     An investment in our common stock involves a high degree of risk. You
should carefully consider the factors described below, in addition to those
discussed elsewhere in this report, in analyzing an investment in our common
stock. If any of the events described


                                       21
<PAGE>

below occurs, our business, financial condition and results of operations would
likely suffer, the trading price of our common stock could fall and you could
lose all or part of the money you paid for our common stock.

     In addition, the following factors could cause our actual results to differ
materially from those projected in our forward-looking statements, whether made
in this Form 10-KSB, our annual or quarterly reports to shareholders, future
press releases, SEC filings or orally, whether in presentations, responses to
questions or otherwise. See "Special Cautionary Statement Regarding
Forward-Looking Statements."



                                       22
<PAGE>


OUR SHORT OPERATING HISTORY MAKES IT DIFFICULT TO PREDICT OUR SUCCESS

     Our business was founded in January 1997, and we have a short operating
history and limited historical financial and operating data with respect to our
business. We have limited commercial operations, have recognized limited
revenues since our inception and have incurred significant operating losses and
negative cash flows from operations since inception. Moreover, our operations
in Argentina and in Brazil are now held for disposition or in the process of
being liquidated and we may incur losses or liabilities in connection with the
disposition or liquidation of such operations.

OUR BUSINESS MODEL IS UNPROVEN AND MAY NOT SUCCEED

     We have not validated our business model and strategy. We believe that the
combination of our unproven business model and the highly competitive and
fast-changing telecommunications market in which we compete makes it impossible
to predict the extent to which our business model will achieve market acceptance
or our overall success.

     To be successful, we must develop, market and implement the various
components of our business strategy at widely accepted prices that cover both
our operating expenses and our significant development costs. We may never be
able to achieve significant market acceptance, favorable operating results or
profitability or generate revenues sufficient to cover our capital and operating
costs. We will continue to make substantial expenditures before we know whether
our business plan can be successfully executed. As a result of these potential
issues, there is a risk that our business will fail. In addition, there is no
assurance that our growth strategies, including the acquisition of complementary
businesses will be successful or occur at all.

DEMAND FOR OUR SERVICES IS UNCERTAIN

     There is no assurance that there will be a demand for our services in the
marketplace or that we will be successful in raising the capital necessary for
deployment. Our inability to deploy existing and new technologies and services
could adversely affect our ability to sustain current revenue streams or to
attract new customers. Additionally, there is no assurance that our customers
will not default on their obligations to us. Our ability to be successful
depends upon continued and growing demand by small and medium-sized businesses
for integrated telecommunications services, the expansion of properties and our
ability to foster demand through our marketing of our services. Failure to
generate this demand will have a material adverse effect to our business.

WE ARE A DEVELOPMENT-STAGE COMPANY THAT HAS NOMINAL REVENUES

     Since inception, our efforts have been devoted to the development of our
principal businesses and to raising capital. We have received nominal revenues
and accordingly, through December 31, 2001, we are considered to be in the
development stage. We may not achieve or sustain positive EBITDA (earnings
before non-cash equity transactions, interest, taxes, depreciation and
amortization), operating income or net income in the future. To date, we have
incurred operating losses and negative cash flow from operating activities on
both an annual and quarterly basis. In 2001, we had operating losses of
approximately $6.3 million and negative cash flow from operating activities of
approximately $5.7 million. We expect our operating losses and negative cash
flow from operating activities to continue.

     We expect that the actual amount and timing of our future capital
requirements will depend on the demand for our services and on regulatory,
technological and competitive developments, including additional market
developments and new opportunities, in our industry. See the Report of
Independent Certified Public Accountants regarding certain uncertainties that
may affect the Company's ability to continue as a going concern.

WE MUST ATTRACT AND RETAIN KEY PERSONNEL IN ORDER TO IMPLEMENT OUR BUSINESS PLAN

     There currently is intense competition for personnel with the
qualifications we require. The loss of the services of key personnel or the
failure to attract additional personnel as required could have a material
adverse effect on our ability to grow. We believe that our future success will
depend in large part on our ability to attract and retain qualified technical
and sales personnel.



                                       23
<PAGE>


WE MAY NOT BE ABLE TO MANAGE OUR GROWTH, WHICH COULD HARM OUR BUSINESS

     If we are successful in implementing our business plan, our operations may
expand rapidly. Such rapid expansion could place a significant strain on our
management, financial and other resources. Our ability to manage future growth,
if it occurs, will depend on, among other things, our ability to: (1) control
expenses related to our business plan; (2) maintain responsive customer service;
(3) improve existing, and implement new, billing and collections, operational
support and administrative systems; and (4) expand, train and manage our
employee base, in particular qualified sales, technical and managerial
personnel. The failure to manage our growth effectively would impair our
business and operational performance. We may not be able to maintain the quality
of our operations, to control our costs, and to expand our internal management,
technical, information and accounting systems in order to support our desired
growth.

WE RELY UPON INFORMATION PROCESSING SYSTEMS PROVIDED BY OTHERS

     Sophisticated information processing systems are vital to our growth and
our ability to achieve operating efficiencies. We will rely on the property
database system that we sold to, and now license from, Apex Site Management,
Inc. to provide services, send invoices and monitor our operations. A failure of
any of these systems would have a material adverse effect on our operations and
business. In addition, there may be other systems we have not identified that
are required or in need of improvement. We may also be unable to maintain and
upgrade these systems as necessary.

THE SECTOR IN WHICH WE OPERATE IS HIGHLY COMPETITIVE, AND WE MAY NOT BE ABLE TO
COMPETE EFFECTIVELY

     The numerous companies that may seek to enter our niche may expose us to
greater price competition for our services. We expect competition to intensify
in the future. We expect significant competition from traditional and new
in-building competitors. Some of these competitors have sought to develop
exclusive relationships with building owners. To the extent these competitors
are successful, we may face difficulties in expanding our portfolio of
properties and our ability to generate revenues from subleases, and to leverage
new additions to our portfolio to introduce our services, such as occupant
services. Competition could also result in a diminution of our net revenue
margins.

ALTERNATIVE TECHNOLOGIES POSE COMPETITIVE THREATS

     The communications industry is subject to rapid and significant
technological change, such as continuing developments in digital subscriber line
technology and alternative technologies for providing high-speed data
communications. In addition to fiber-optic technology, there are other
technologies, such as DSL and wireless technology that provide more capacity and
speed than traditional copper wire transmission technology. Our success in
improving and expanding our operations and services will depend on our ability
to anticipate or adapt to new technology on a timely basis. The development of
new technologies or the significant penetration of alternative technologies into
our target market may either reduce the demand for our services, require us to
devote important capital, and human and technical resources to upgrade,
reconfigure or replace our current or future technology or some combination of
each of these, and consequently could have a material adverse effect on our
business.

RETAINED CONTROL BY OUR PRINCIPAL STOCKHOLDERS MAY CREATE CONFLICTS OF INTEREST

     The concentration of ownership of our stock may have the effect of
delaying, deferring or preventing a change in control, merger, consolidation, or
a tender offer which could involve a premium over the price of our common stock.
Currently, our executive officers, directors and greater-than-five-percent
stockholders and their affiliates, in the aggregate, beneficially own a
substantial percentage of the outstanding common stock. If all of these
stockholders were to vote together as a group, they would have the ability to
exert significant influence over our board of directors and its policies as well
as other significant corporate matters such as charter and bylaw amendments and
possible mergers or corporate control contests. For example, the written consent
of these stockholders in lieu of a meeting was sufficient to approve the sale of
our North American operations to Apex Site Management, Inc. in December 2000.



                                       24
<PAGE>


THE EXERCISE OF OUTSTANDING SECURITIES MAY HAVE A DILUTIVE EFFECT

     We have outstanding warrants and options with exercise prices ranging from
$0.01 per share to $10.00 per share. The exercise of these securities could have
a dilutive effect with respect to holders of our common stock. As of March 31,
2002, the total number of shares issuable by us under outstanding warrants and
options was approximately 5,140,143.

ITEM 7.  FINANCIAL STATEMENT


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S>                                                                                                          <C>
Report of Independent Certified Public Accountants......................................................         26

Consolidated Balance Sheet..............................................................................         27

Consolidated Statements of
Operations..............................................................................................      29-30

Consolidated Statements of Stockholders' Equity.........................................................      31-33

Consolidated Statements of Cash Flows...................................................................      34-35

Notes to Consolidated Financial Statements..............................................................      36-52
</TABLE>




                                       25
<PAGE>


                             Report of Independent
                          Certified Public Accountants

Board of Directors
U.S. RealTel, Inc.
Atlanta, Georgia

We have audited the accompanying consolidated balance sheets of U.S. RealTel,
Inc. (a Development Stage Company) as of December 31, 2001 and 2000, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the years then ended, and for the cumulative period from
inception (January 15, 1997) through December 31, 2001. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of U.S. RealTel, Inc.
at December 31, 2001 and 2000, and the results of its operations and cash flows
for the years then ended, and for the cumulative period from inception (January
15, 1997) through December 31, 2001 in conformity with accounting principles
generally accepted in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes 3 and 16 to the
consolidated financial statements, the Company has decided to discontinue its
operations in Latin America including the Argentine operations, which
represented the majority of the consolidated revenues for the year ended
December 31, 2001 and the Company continues to have cumulative losses since
inception and negative cash flows from operations. These issues raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Notes 3 and
16. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

As discussed in Note 9(e), effective January 1, 2000, the Company changed its
method for accounting for director options and as discussed in Note 8(b),
effective October 1, 2000 its method of accounting for beneficial conversion
features of convertible instruments.


                                                            /s/ BDO SEIDMAN, LLP


Miami, Florida
February 22, 2002, except for
Notes 6 and 16,
which are as of
March 20, 2002



                                       26
<PAGE>



                                                               U.S. REALTEL, INC
                                                   (A DEVELOPMENT STAGE COMPANY)

                                                     CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
====================================================================================================================================

December 31,                                                                         2001                   2000
------------                                                                      -----------            ----------

<S>                                                                               <C>                   <C>
ASSETS

CURRENT ASSETS

  Cash and cash equivalents                                                       $ 2,061,060            $9,425,071
  Accounts receivable                                                                  39,903               259,888
  Prepaid expenses                                                                    133,838               132,196
                                                                                    ---------            ----------

TOTAL CURRENT ASSETS                                                                2,234,801             9,817,155
                                                                                    ---------            ----------

PROPERTY AND EQUIPMENT (Note 5)
  Property and equipment                                                              122,923               228,015
  Less accumulated depreciation                                                       (68,343)              (48,873)
                                                                                    ---------            ----------

NET PROPERTY AND EQUIPMENT                                                             54,580               179,142

OTHER ASSETS                                                                           92,354                12,188
                                                                                    ---------            ----------
                                                                                  $ 2,381,735           $10,008,485
                                                                                    =========            ==========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable and accrued expenses (Note 7)                                  $   463,228              $862,122
  Income tax payable (Note 12)                                                             --               200,000
  Due to stockholder                                                                       --                35,000
  Current portion of note payable (Note 6)                                            100,000                    --
                                                                                    ---------            ----------

TOTAL CURRENT LIABILITIES                                                             563,228             1,097,122
                                                                                    ---------            ----------

DEFERRED INCOME                                                                        88,346               314,074
                                                                                    ---------            ----------

LONG TERM PORTION OF NOTE PAYABLE (Note 6)                                             50,000                    --
                                                                                    ---------            ----------

CONVERTIBLE NOTE PAYABLE WITH RELATED PARTY (Note 8(a))                                    --             1,500,000
                                                                                    ---------            ----------

COMMITMENTS AND CONTINGENCIES (Notes 9, 13 and 14)

STOCKHOLDERS' EQUITY (Note 9)
  Preferred stock, $.001 par value; 5,000,000 shares authorized - none
    issued                                                                                 --                    --
  Common stock, $.001 par value; 50,000,000 shares authorized;
    6,467,808 issued and outstanding shares                                             6,468                 6,468
  Additional paid-in capital                                                       19,598,760            18,148,760
  Accumulated deficit during the development stage                                (19,293,644)          (11,057,939)
  Accumulated other comprehensive income                                            2,168,577                    --
                                                                                   ----------            ----------

                                                                                    2,480,161             7,097,289
  Less:  Treasury Stock, at cost; 533,333 shares (Note 10)                           (800,000)                   --
                                                                                   ----------            ----------

TOTAL STOCKHOLDERS' EQUITY                                                          1,680,161             7,097,289
                                                                                   ----------            ----------

                                                                                  $ 2,381,735           $10,008,485
                                                                                    =========            ==========

====================================================================================================================================
</TABLE>

                                       27
<PAGE>

           SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                       28
<PAGE>


                                                               U.S. REALTEL, INC
                                                   (A DEVELOPMENT STAGE COMPANY)

                                           CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
====================================================================================================================================



                                                                         Cumulative
                                                                       Amounts from
                                                                            Date of
                                                                          Inception
                                                                       (January 15,
                                                                               1997)
                                                                            Through          Year ended            Year ended
                                                                       December 31,        December 31,          December 31,
                                                                               2001                2001                  2000
                                                                        -----------         -----------           -----------

<S>                                                                    <C>                   <C>                 <C>
Revenues (Note 14)                                                       $2,456,046            $282,118            $1,720,082

Direct Costs                                                              1,968,231             164,881             1,454,232
                                                                          ---------             -------             ---------
Revenues - net of direct costs                                              487,815             117,237               265,850
                                                                            -------             -------               -------

Operating Expenses

   Salaries and benefits (Notes 9 and 13)                                12,537,290           2,264,977             4,807,919
   General and administrative (Note 11)                                   8,477,933           1,433,591             3,413,041
   Impairment of assets (Note 6)                                            750,000             750,000                    --
   Professional and investment banking fees (Notes 9 and 10)              5,501,684           1,948,031             1,120,855
                                                                          ---------           ---------             ---------

Total operating expenses                                                 27,266,907           6,396,599             9,341,815
                                                                        -----------          ----------             ---------

Operating loss                                                          (26,779,092)         (6,279,362)           (9,075,965)
                                                                        -----------          ----------            ----------

Other Income (Expense)
  Interest income                                                           431,863             262,067                98,192
  Other income                                                               82,305               8,085                    --
  Interest expense and financing costs (Notes 8 and 9)                   (4,732,017)             (2,291)           (1,727,987)
  Exchange Loss                                                          (2,144,842)         (2,144,842)                   --
  Net loss on disposal of assets                                           (186,137)            (79,362)             (106,775)
  Net gain on sale of North American operations (Note 4)                 15,532,620                  --            15,532,620
                                                                         ----------           ---------            ----------

Total other income (expense) - net                                        8,983,792          (1,956,343)           13,796,050
                                                                         ----------          ----------            ----------

Income (loss) before income taxes, extraordinary item and
    cumulative effect of changes in accounting principles               (17,795,300)         (8,235,705)            4,720,085

Income Taxes (Note 12)                                                      200,000                  --               200,000
                                                                            -------           ---------               -------

Income (loss) before extraordinary item and cumulative
  effect of changes in accounting principles                            (17,995,300)         (8,235,705)            4,520,085

Extraordinary Item - loss on extinguishment of debt
  (Note 8(b))                                                               455,000                  --               455,000

Cumulative Effect of Changes in Accounting Principles
    (Notes 8(b) and 9(e))                                                1,396,000                  --             1,396,000
                                                                         ---------           ----------             ---------

Net Income (Loss)                                                      $(19,846,300)        $(8,235,705)           $2,669,085
                                                                        ===========        ============            ==========

Net Income (Loss) Per Common Share
    Income (loss) before extraordinary item and cumulative
        effect of changes in accounting principles                                               $(1.32)                $0.70
    Extraordinary item                                                                               --                 (0.07)
    Cumulative effect of changes in accounting principles                                            --                 (0.22)
                                                                                            -----------                 -----

</TABLE>




                                       29
<PAGE>

<TABLE>
<CAPTION>

<S>                                                                    <C>                   <C>                  <C>

Net Income (Loss) Per Common Share - Basic and Diluted                                       $     (1.32)        $      0.41
                                                                                              ==========          ==========

Weighted Average Common Shares Outstanding                                                     6,245,600           6,461,558
                                                                                              ==========          ==========

<CAPTION>

                                                                                                                  Year Ended
                                                                                                                 December 31,
                                                                                                                     2000
                                                                                                                 ------------
<S>                                                                                                              <C>
Pro Forma Assuming the Changes in Accounting Principles were
    Applied Retroactively (Notes 8(b) and 9(e))
        Income (loss) before extraordinary item                                                                   $ 4,520,085
                                                                                                                  ===========
        Income (loss) per common share - basic and diluted                                                        $      0.70
                                                                                                                  ===========
        Net income (loss)                                                                                         $ 4,065,085
                                                                                                                  ===========
        Net income (loss) per common share - basic and diluted                                                    $      0.63
                                                                                                                  ===========

====================================================================================================================================
</TABLE>


                  SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       30
<PAGE>


                                                              U.S. REALTEL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)

                      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
====================================================================================================================================


                                                                     Accumu-               Accumu-
                                                                      lated                 lated
                                                                    Deficit                 Other
                                Common Stock    Additional       During the     Compre-   Compre-      Treasury Stock
                               --------------      Paid-in         Develop-     hensive   hensive     ---------------
                               Shares   Amount     Capital       ment Stage        Loss    Income     Shares   Amount        Total
                             ---------  ------  ----------   --------------    --------   -------     ------   ------    ---------

<S>                          <C>        <C>      <C>         <C>               <C>        <C>        <C>      <C>       <C>
Balance, at January 15,
     1997                           --  $   --    $     --     $        --     $     --   $    --     $   --   $   --    $      --

Issuance of Shares of        4,204,000   4,204     722,408              --           --        --         --       --      726,612
     Common Stock

Conversion of Debt into
     Common Stock                5,000       5      24,995              --           --        --         --       --       25,000

Warrants Exercised for Cash     43,750      44     174,956              --           --        --         --       --      175,000

Warrants Issued to Placement
    Agent for Bridge                --      --      10,000              --           --        --         --       --       10,000
Financing

Warrants Issued to Holder
of  Bridge Financing                --      --      10,000              --           --        --         --       --       10,000

Net Loss                            --      --          --      (1,134,708)          --        --         --       --   (1,134,708)

Net Loss of LLC and "S"
    Corporation Prior to
    Becoming a "C"
    Corporation                     --      --    (552,656)        552,656           --        --         --       --           --
                             ---------   -----    --------      ----------     --------   -------     ------   -------    ---------

Balance, at December 31,
   1997                      4,252,750   4,253     389,703        (582,052)          --        --         --       --     (188,096)
Interest Expense Related to
   Conversion Rate of
   Convertible Debentures           --      --     627,000              --           --        --         --       --      627,000

Issuance of Shares of
    Common Stock for Cash      575,000     575   2,117,425              --           --        --         --       --    2,118,000

Conversion of Debentures
    into Common Stock          518,750     519   3,418,266              --           --        --         --       --    3,418,785

Stock Options Exercised for
    Cash                         4,000       4      19,106              --           --        --         --       --       19,110

Stock Option Compensation           --      --      69,000              --           --        --         --       --       69,000

Noncash Issuance of
    Common Stock for:
    Investment Banking
        Services                13,750      13         (13)             --           --        --         --       --           --

    Cancellation of
Investment
        Banking Agreement       83,395      83     833,917              --           --        --         --       --      834,000
    Services Rendered for
        Issuance of              7,500       8      54,992              --           --        --         --       --       55,000

Debentures
    Noncash Issuance
of Options and Warrants
for Cancellation of
        Investment Banking
        Agreement                   --      --      65,000              --           --        --         --       --       65,000
</TABLE>



                                       31
<PAGE>

<TABLE>
<CAPTION>

                                                                     Accumu-               Accumu-
                                                                       lated                 lated
                                                                     Deficit                 Other
                                Common Stock       Additional     During the      Compre-  Compre-      Treasury Stock
                               --------------         Paid-in       Develop-      hensive  hensive     ---------------
                               Shares   Amount        Capital     ment Stage         Loss   Income     Shares   Amount       Total
                             ---------  ------     ----------    -----------   ----------  -------     ------   ------       -----

<S>                          <C>        <C>       <C>           <C>           <C>          <C>       <C>        <C>        <C>
    Bridge Financing                --      --         26,000             --           --       --         --       --       26,000

    Directors Fees                  --      --         74,000             --           --       --         --       --       74,000

    Issuance and Conversion
        of Debentures into
        Common Stock                --      --        241,000             --           --       --         --       --      241,000

Net Loss                            --      --             --     (7,401,299)          --       --         --       --   (7,401,299)
                             ---------   -----     ----------    -----------   ----------  -------     ------   ------   ----------

Balance, at December 31,
    1998                     5,455,145   5,455      7,935,396     (7,983,351)          --       --         --       --      (42,500)

Issuance of Shares of
    Common Stock for Cash      963,115     963      5,782,638             --           --       --         --       --    5,783,601

Stock Options Exercised
    for Cash                    24,548      25        117,253             --           --       --         --       --      117,278

Non cash Issuance of Warrants
for:
    Investment Banking
        Services                    --      --        170,500             --           --       --         --       --      170,500

Issuance of Convertible
    Debenture                       --      --      1,170,000             --           --       --         --       --    1,170,000

Interest Expense Related to
    Conversion Rate of
    Convertible Debenture           --      --        225,000             --           --       --         --       --      225,000

Stock Option Compensation           --      --         38,888             --           --       --         --       --       38,888

Net Loss                            --      --             --     (5,743,673)          --       --         --       --   (5,743,673)
                             ---------   -----     ----------    -----------   ----------  -------     ------   ------   ----------

Balance, at December 31,
    1999                     6,442,808   6,443     15,439,675    (13,727,024)          --       --         --       --    1,719,094

Noncash Issuance of
    Options & Warrants for:

    Directors Fees                  --      --        376,000             --           --       --         --       --      376,000

    Interim Bridge                  --      --        574,000             --           --       --         --       --      574,000

    Financing Warrant
    Offering Program                --      --         50,000             --           --       --         --       --       50,000

Interest Expense Related to
    Conversion Rate of
    Convertible Debentures          --      --      1,170,000             --           --       --         --       --    1,170,000

Warrants Exercised for Cash     25,000      25            225             --           --       --         --       --          250

Stock Option Compensation           --      --        538,860             --           --       --         --       --      538,860

Net Income                          --      --             --      2,669,085           --       --         --       --    2,669,085
                             ---------   -----     ----------    -----------   ----------  -------    -------   ------   ----------

Balance, at December 31,
     2000                    6,467,808   6,468     18,148,760    (11,057,939)          --       --         --       --    7,097,289

Conversion of Debt into
     Common Stock of a
     Subsidiary  (Note 8a)          --      --      1,500,000             --           --       --         --       --    1,500,000

Warrants repurchased (Note 9)       --      --        (50,000)            --           --       --        --        --      (50,000)

Acquired 533,333 shares of          --      --             --             --           --       --    533,333 (800,000)    (800,000)
treasury stock (Note 10)

Net Loss                            --      --             --     (8,235,705)  (8,235,705)      --         --       --   (8,235,705)
</TABLE>



                                       32
<PAGE>

<TABLE>
<CAPTION>

                                                                  Accumu-                  Accumu-
                                                                    lated                    lated
                                                                  Deficit                    Other
                              Common Stock       Additional    During the      Compre-     Compre-     Treasury Stock
                           ------------------       Paid-in      Develop-      hensive     hensive   ------------------
                              Shares   Amount       Capital    ment Stage         Loss      Income    Shares     Amount        Total
                           ---------  -------   -----------  ------------  -----------  ----------   -------   --------   ----------


<S>                        <C>        <C>       <C>          <C>            <C>         <C>          <C>       <C>        <C>
Cumulative Effect on
    Exchange Rates                --       --            --           --     2,168,577   2,168,577    --        --         2,168,577
                                                                           ___________
Comprehensive Loss         _________  _______   ___________  ____________  $(6,067,128) __________   _______   ________   _________
                                                                           ===========
Balance, at December 31,
2001                       6,467,808   $6,468   $19,598,760  $(19,293,644)              $2,168,577   533,333  ($800,000)  $1,680,161
                           =========  =======   ===========  ============               ==========   =======   ========   ==========


====================================================================================================================================
</TABLE>

           SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                       33
<PAGE>



                                                              U.S. REALTEL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
====================================================================================================================================


                                                                          Cumulative
                                                                        Amounts from
                                                                             Date of
                                                                           Inception
                                                                         (January 15,
                                                                                1997)
                                                                             Through           Year ended          Year ended
                                                                         December 31,         December 31,        December 31,
                                                                                2001                 2001                2000
                                                                        -----------          -----------          -----------
 <S>                                                                      <C>                  <C>                 <C>
Cash Flows From Operating Activities
  Net income (loss)                                                      $(19,846,300)        $(8,235,705)         $2,669,085
  Adjustments to reconcile net income (loss) to net cash used
    in operating activities
    Depreciation and amortization                                             436,507             202,353             135,530
    Impairment of assets                                                      750,000             750,000                  --
    Gain on sale of North American operations                             (15,532,620)                 --         (15,532,620)
    Unrealized Exchange Loss                                                2,093,000           2,093,000                  --
    Loss on disposal of assets                                                186,137              79,362             106,775
    Amortization of deferred financing costs                                   72,500                  --                  --
    Noncash equity transactions charged to operation (Note 9)               7,704,248                  --           3,878,860
    Changes in assets and liabilities, net of dispositions
      Increase in accounts receivable                                         (44,000)            215,888            (235,621)
      Increase in prepaid expenses                                           (172,588)            (40,392)           (105,827)
      Increase in accounts payable and accrued  expenses                      500,978            (361,144)            119,901
      Increase in income tax payable                                               --            (200,000)            200,000
      Increase in deferred income                                             401,823            (174,437)            474,975
                                                                              -------            ---------            -------

Net cash used in operating activities                                     (23,450,315)         (5,671,075)         (8,288,942)
                                                                          ===========           ==========          =========

Cash Flows From Investing Activities
  Net proceeds from sale of North American operations                      15,270,434                  --          15,270,434
  Purchase of minority interest                                              (600,000)           (600,000)                 --
  Acquisition costs                                                           (81,686)            (81,686)                 --
  Capital expenditures                                                       (582,045)            (61,974)           (237,293)
  (Increase) decrease in other assets                                         (64,688)                 --              12,154
                                                                             --------             -------              ------

Net cash provided by (used in) investing activities                        13,942,015            (743,660)         15,045,295
                                                                           ==========            ========          ==========

Cash Flows From Financing Activities
  Proceeds from issuance of common stock, stock
    options and warrants exercised, net of related costs                   $8,883,636                  --                 250
  Proceeds from issuance of notes payable/debentures                        6,753,000                  --           1,500,000
  Proceeds from issuance of interim bridge financing                        1,355,000                  --           1,355,000
  Repayment of interim bridge financing                                    (1,355,000)                 --          (1,355,000)
  Repayment of notes payable                                               (3,303,000)           (150,000)         (3,000,000)
  Advances from stockholder                                                   145,000                  --              35,000
  Repayment of advances from stockholder                                     (145,000)            (35,000)                 --
  Payment for release of warrants issued under an
     offering program                                                         (50,000)            (50,000)                 --
  Payment for acquisition of treasury stock                                  (800,000)           (800,000)                 --
                                                                             --------            --------           ---------

Net cash provided by (used in) financing activities                        11,483,636          (1,035,000)         (1,464,750)
                                                                           ==========          ==========          ==========

Effect of Exchange Rates Changes in Cash                                       85,724              85,724                  --
                                                                            ---------           ---------          ----------
</TABLE>

                                       34
<PAGE>

<TABLE>
<CAPTION>
                                                                           Cumulative
                                                                         Amounts from
                                                                              Date of
                                                                            Inception
                                                                         (January 15,
                                                                                 1997)
                                                                              Through             Year ended         Year ended
                                                                         December 31,            December 31,       December 31,
                                                                                 2001                   2001               2000
                                                                        ------------            -----------         -----------

<S>                                                                      <C>                  <C>                 <C>
Net Increase (Decrease) in Cash and Cash Equivalents                        2,061,060            (7,364,011)          5,291,603
Cash and Cash Equivalents, at beginning of year                                    --             9,425,071           4,133,468
                                                                          -----------             ---------           ---------
Cash and Cash Equivalents, at end of year                                $  2,061,060           $ 2,061,060          $9,425,071
                                                                          ===========            ==========           =========
Supplemental Disclosure of Cash Flow Information
  Interest paid                                                          $    581,809           $     1,480           $ 406,272
                                                                          -----------            ----------            --------
  Taxes paid                                                             $    241,520           $   241,520           $      --
                                                                          -----------            ----------            --------
Supplemental Disclosures of Noncash Investing and Financing Activities
  Notes payable/debentures converted into common stock of a subsidiary    $ 1,500,000           $ 1,500,000           $      --
  Note issued in connection with a non compete agreement                      300,000               300,000                  --
  Notes payable/debentures converted into common stock                      2,100,000                    --                  --
  Noncash equity transactions charged to operations (Note 8)                7,704,248                    --           3,878,860
  Warrants issued for financing costs                                          20,000                    --                  --
  Warrants related to Convertible Debenture and interim
    bridge financing (Note 9(b) and (d))                                    1,744,000                    --             574,000



====================================================================================================================================
</TABLE>


          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.




                                       35
<PAGE>



                                                              U.S. REALTEL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

===============================================================================

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

         The Company's subsidiaries at December 31, 2001 are listed below:

<TABLE>
<CAPTION>
                                                                             Percent
                                          Location                             Owned                   Description
                                          --------                           -------                   -----------

<S>                                      <C>                                <C>                      <C>
RealTel de Argentina, S.A.                Argentina                           71%                      Development stage
                                                                                                       foreign subsidiary

RealTel do Brasil, S.A.                   Brazil                              89%                      Development stage
                                                                                                       foreign subsidiary

RealTel Consulting, Inc.                  Chicago, Illinois                  100%                      Inactive subsidiary
</TABLE>

    The consolidated financial statements include the accounts of the Company
and its subsidiaries that are more than 50% owned (Note 16).

    All significant intercompany transactions and balances between the companies
included in the consolidation are eliminated.

CASH AND CASH EQUIVALENTS

    Cash equivalents consist of short-term, highly liquid investments, which are
readily convertible into cash.

PROPERTY, EQUIPMENT AND DEPRECIATION

    Property and equipment are stated at cost. Depreciation is computed over the
estimated useful lives of the assets (three to seven years) by accelerated
methods for financial and income tax reporting purposes. Depreciation of
leasehold improvements is computed over the lesser of the estimated useful lives
of the assets or the term of the lease by the straight-line method for financial
and income tax reporting purposes.

REVENUE RECOGNITION

    Monthly rent for leases containing fixed rental increases during their term
is recognized on a straight-line basis over the term of the leases. For all
other leases, rents are recognized over the term of the leases as earned.

    One-time initial license and review fees received, and related direct costs
incurred, at lease inception are deferred and recognized on a straight-line
basis over the lease terms.

    Contingent rentals, such as rentals based on sales levels of subleases, are
recognized when earned, as targeted levels are achieved.

    Deferred income represents rental payments received in advance and the
deferral of one-time fees, net of costs.

STOCK-BASED COMPENSATION



                                       36
<PAGE>

    The Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
became effective in 1997. SFAS No. 123 encourages companies to recognize expense
for stock options and other stock-based employee compensation plans based on
their fair value at the date of grant. As permitted by SFAS No. 123, the Company
has and will retain its prior accounting policy under APB Opinion Number 25,
"Accounting for Stock Issued to Employees," and, accordingly, compensation
expense for stock options is measured as the excess, if any, of the fair value
of the Company's stock at the date of grant over the exercise price.

ADVERTISING COSTS

    Advertising costs, aggregating $130,000 in 2001, $191,000 in 2000 and
$481,000 from inception to December 31, 2001, are expensed as incurred.

TRANSLATION OF FOREIGN CURRENCY

    At December 31, 2001, the Company's subsidiaries were based and operating in
Argentina and Brazil. The functional currency for statutory purposes was the
Argentine Peso and Brazilian Real. The foreign financial statements have been
translated to United States Dollars ("U.S. Dollars") using a methodology
consistent with Statement of Financial Accounting Standards No. 52, Foreign
Currency Translation. Assets and liabilities were translated to U.S. Dollars at
the rate prevailing on the balance sheet date and the statements of operations
have been translated from the functional currency to U.S. Dollars using an
average exchange rate for the applicable period. Results of this translation
process are accumulated as a separate component of shareholders' equity.

    Gains and losses resulting from foreign currency transactions are included
in other income and expenses.

FAIR VALUES OF FINANCIAL INSTRUMENTS

    The Company's financial instruments consist principally of cash and cash
equivalents, accounts receivable, accounts payable, accrued liabilities, note
payable and due to stockholder. The carrying amounts of such financial
instruments as reflected in the balance sheet approximate their estimated fair
value as of December 31, 2001 and 2000. The estimated fair value is not
necessarily indicative of the amounts the Company could realize in a current
market exchange or of future earnings or cash flows.

LONG-LIVED ASSETS

    The Company periodically reviews the carrying value of its properties and
long-lived assets in relation to historical results, current business
conditions and trends to identify potential situations in which the carrying
value of assets may not be recoverable. If such reviews indicate that the
carrying value of such assets may not be recoverable, the Company would
estimate the undiscounted sum of the expected future cash flows of such assets
or analyze the fair value of the asset, to determine if such sum or fair value
is less than the carrying value of such assets to ascertain if a permanent
impairment exists. If a permanent impairment exists, the Company would
determine the fair value by using quoted market prices, if available, for such
assets, or if quoted market prices are not available, the Company would
discount the expected future cash flows of such assets and would adjust the
carrying value of the asset to fair value.

TAXES ON INCOME

    Prior to August 8, 1997, the Company was taxed as a limited liability
company and from August 8, 1997 to November 3, 1997 the Company was taxed as an
"S" corporation. Any income or losses prior to November 4, 1997 are recognized
on the individual stockholders' income tax returns. Effective November 4, 1997,
the Company began to be taxed as a "C" corporation. The net loss of $552,656
prior to November 4, 1997 was reclassified to additional paid-in capital.

    Income taxes are accounted for using the asset and liability method under
which deferred income taxes are recognized for the estimated tax consequences of
temporary differences between the financial statement carrying amounts and the
tax bases of assets and liabilities and for the benefits, if any, of tax credit
or loss carryforwards. The amounts of any future tax benefits are reduced by a
valuation allowance to the extent such benefits are uncertain as to realization.

NET INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED

    Basic earnings per share ("EPS") is calculated by dividing the income (loss)
available to common shareholders by the weighted average number of common shares
outstanding for the period, without consideration for common stock equivalents.
Diluted EPS gives effect to all dilutive potential common shares outstanding for
the period. Shares of common stock issuable upon the exercise of options
(542,388 and 487,388 shares in 2001 and 2000) and warrants (1,947,755 and
2,045,043 shares in 2001 and 2000, respectively) are antidilutive and are not
included in the computation of shares outstanding.

COMPREHENSIVE INCOME (LOSS)

    The Company has implemented SFAS No. 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes standards for reporting comprehensive income
or loss and its components in the consolidated financial statements.
Comprehensive income (loss), as defined, includes all changes in equity (net
assets) during a period from non-owner sources. To date, the Company has
reported comprehensive income from the cumulative effect on exchange rates for
the amount of $2,168,577 in 2001, $0 in 2000 and $2,168,577 from inception to
December 31, 2001. The Company had no other material transactions that are
required to be reported in comprehensive income or loss.

ESTIMATES

    The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect that reported amounts
of assets and liabilities and


                                       37
<PAGE>

disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.

RECENT ACCOUNTING PRONOUNCEMENTS

    In June 2001, the Financial Accounting Standards Board finalized FASB
Statement No. 141, Business Combinations (SFAS 141), and FASB Statement No. 142,
Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 requires the use of
the purchase method of accounting and prohibits the use of the
pooling-of-interests method of accounting for business combinations initiated
after June 30, 2001. SFAS 141 also requires that the Company recognize acquired
intangible assets apart from goodwill if the acquired intangible assets meet
certain criteria. SFAS 141 applies to all business combinations initiated after
June 30, 2001 and for purchase business combinations completed on or after July
1, 2001. It also requires the Company, upon adoption of SFAS 142, to reclassify
the carrying amounts of intangible assets and goodwill based on the criteria in
SFAS 141.

    SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other
intangible assets recognized at that date, regardless of when those assets were
initially recognized. SFAS 142 requires the Company to complete a transitional
goodwill impairment test six months from the date of adoption. The Company is
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142.

    The Company's previous business combinations were accounted for using the
purchase method. During December 2001, the company decided to write-off the
carrying amount of goodwill and other intangible asset, both related to the
Argentinean operations, after the Company decided to discontinue its
telecommunications rights operations in Latin America (Note 16). Amortization
expense during the year ended December 31, 2001 was $150,000. The Company does
not expect that the adoption of SFAS 142 will have a significant impact on its
consolidated results of operations, financial position or cash flows.

    In August 2001, the FASB issued SFAS 144, Accounting for Impairment or
Disposal of Long-Lived Assets. This Statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This Statement
supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, for the disposal of a segment of a business (as
previously defined in that Opinion). This Statement also amends ARB No. 51,
Consolidated Financial Statements, to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. The provisions of
this Statement are effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years, with early application encouraged. The provisions of this Statement
generally are to be applied prospectively. This Statement retains the
fundamental provisions of FAS 121 for recognition and measurement of impairment,
but amends the accounting and reporting standards for segments of a business to
be disposed of. During 2002, the provisions of this Statement will have an
impact on the Company because of the discontinuance of the Latin American
operations. Currently, the Company is assessing but has not yet determined how
the adoption of SFAS No. 144 will impact its financial position and results of
operations.

2. THE COMPANY

    The Company was originally organized under the name of AGILE, LLC on January
15, 1997. The Company was subsequently incorporated on August 8, 1997 under the
name U.S. RealTel, Inc. ("Predecessor Corporation"). On November 3, 1997, the
Predecessor Corporation merged into a shell corporation, Admiral Two Capital
Corporation (which had 4,179,000 shares outstanding which were issued in 1997),
and the surviving company's name was changed to U.S. RealTel, Inc. ("Surviving
Corporation"). As of the date of the merger, shareholders of the Predecessor
Corporation were issued 2,214,870 common shares of the Surviving Corporation.
Also on the merger date, 2,214,870 common shares of the Surviving Corporation
held by a principal shareholder were surrendered and returned to the Surviving
Corporation's authorized, but unissued, shares. The merger transaction was
accounted for as a reverse acquisition into a public shell.



                                       38
<PAGE>

    In addition to the merger in 1997, the Company issued 73,750 shares of
common stock as follows:

     o    43,750 shares related to the exercise of warrants at $4 per share

     o    25,000 shares sold at $4 per share

     o    5,000 shares related to debenture conversion at $5 per share

    In May 2000, the Company's stockholders approved a plan to reincorporate the
Company in the State of Delaware. The Company also authorized 5,000,000 shares
at $.001 par value for the Series A Convertible Preferred Stock.

    The Company's primary business is to provide comprehensive data, voice and
video communications services to businesses located in commercial office
buildings in select major metropolitan markets within the United States. The
Company has operated in this segment since the acquisition of Cypress
Communications in February 2002 (Note 16). During 2001 and through most of the
first quarter of 2002, the Company's business also included leasing
telecommunication rights from owners of real property for sublease to
telecommunications providers requiring access to real estate for their services
to reach building occupants and/or for placement of antenna networks, all of
which operations were being conducted outside of the U.S., in Argentina and
Brazil. In March 2002, the Company decided to discontinue the operations in
Latin America (Note 16). In December 2000, the Company sold its then existing
North American operations (Note 4) and entered into a two-year noncompete
agreement with respect to the wholesale future business in North America,
Mexico and certain parts of Europe. During 1998, the Company established a
separate wholly owned finance subsidiary (inactive) and a 71%-owned Argentinean
subsidiary (see Note 8(a)). In February 2000, the Company established an
89%-owned Brazilian subsidiary. The minority interests of both international
subsidiaries are substantially owned by related parties. For purposes of the
accompanying consolidated financial statements, the Company has expensed all
amounts advanced to the Argentinean and Brazilian subsidiaries until they
become operational and such advances are considered recoverable. Accordingly,
no minority interest is recognized in the consolidated financial statements.
The net losses of the Argentinean and Brazilian subsidiaries included in the
consolidated financial statements were approximately $5,287,000 and $2,777,000
in 2001 and 2000, respectively, and $9,184,000 since inception.

    Since our inception, we have focused our efforts on raising capital,
recruiting and training personnel, adding properties to our property database
and marketing these sites. In late 2000 and throughout 2001 we have focused on
repositioning the Company, selling our old North American operations and seeking
to develop our international telecom rights businesses. Most recently we have
focused on the acquisition of Cypress Communications (Note 16), and after March
2002, on discontinuing our operations in Latin America (Note 16) and refocusing
on property specific telecommunications services. To date, we have received
immaterial net revenues from our telecommunications rights operations.
Accordingly, we are considered to be in the development stage and our
consolidated financial statements represent those of a development stage
enterprise. No assurance can be given as to when, or if, we will be able to
attain profitable operations.

3. LIQUIDITY

    As reflected in the accompanying consolidated financial statements, the
Company has cumulative losses since inception and has negative cash flows from
operations. In 2001, operating costs associated with our efforts to develop our
markets in Argentina and Brazil, our corporate burn rate, which included
existing commitments entered into prior to the sale of the old North American
operations, and a declining economy in Argentina, all negatively affected our
cash position during the year. Disposition of our international operations and
our efforts to develop our telecommunications services business may continue to
impact the Company's cash position and may cause a further decrease in the
Company's cash position during 2002. As of December 31, 2001, we had cash and
cash equivalents of approximately $2,061,000.

    Management initiated during the third quarter 2001 certain actions intended
to improve liquidity and operating results. Such actions included, among other
things, (i) adjusting staffing levels in all subsidiaries, (ii) implementing
cost control procedures by centralizing disbursement approval at corporate
level, (iii) reducing operating budgets by focusing on specific initiatives
which can result in an immediate impact on the Company's revenues, and (iv)
implementing steps to reduce pricing in an attempt to increase sales volume
within our core business.



                                       39
<PAGE>

    As more fully discussed in Note 16 to the consolidated financial statements,
in February 2002, we completed a tender offer and short form merger for the
acquisition of all the outstanding shares of common stock of Cypress
Communications (Note 16). We believe that by capitalizing on Cypress
Communications' infrastructure and its customer base, while reducing Cypress
Communications' operating costs, we will be able to improve operations at
Cypress Communications to the point that such operations will generate positive
cashflow, and, therefore, provide the additional cash flow required to improve
our cash position. Additionally, the Company is pursuing other potential
acquisitions which could provide additional cash flow to the Company, as well as
various sources of debt and/or equity financing to support such acquisitions and
to fund our working capital requirements. There can be no assurance as to when,
if at all, we will be able to effect such operations and, even if affected,
whether such operations will meet our business and liquidity objectives.

    In March 2002, the Company decided to discontinue its telecommunications
rights operations in Argentina and Brazil, which are now held for disposition or
in the process of liquidation (Note 16).

     Given the Company's current and expected operating results, including the
addition of Cypress Communications and its potential restructuring, we believe
that the Company's cash position, even though it will continue to erode in the
near term, ultimately should stabilize, albeit initially at lower levels We
believe that cash used in operations should be reduced as we continue into the
year 2002,and by the end of year 2002 or the beginning of 2003 should stabilize.
We cannot, however, give any assurance as to the attainment of additional
revenues from our newly acquired operation in the U.S., whether the costs which
we will incur in disposing of our Latin American operations, will, in fact, be
immaterial, the effectiveness of an overall reduction in our cash used in
operating activities or the availability of outside funding. The consolidated
financial statements do not include any adjustments that might result from these
uncertainties and were prepared based on the assumption that the Company will
continue as a going concern.

4. SALE OF NORTH AMERICAN OPERATIONS

    On December 8, 2000, the Company completed an Asset Purchase Agreement to
sell substantially all of its assets relating to its North American operations
to Apex Site Management, Inc., a wholly owned indirect subsidiary of SpectraSite
Holdings, Inc.

    The net proceeds from the Sale were $15.3 million after approximately $1
million in related expenses. In addition, the acquirer assumed certain
liabilities, primarily the Company's corporate office lease. The sale included
certain Facility Site Master Leases and Subleases related to the Company's U.S.
telecommunications rights, the Company's "USRT Telecom Grid" and "9-Stage
Tracking System" and certain other assets.

    A portion of the net sale proceeds from the sale of its old North American
operations was used to repay approximately $4.355 million of debt outstanding
consisting of a Convertible Debenture (Note 8(b)) and the interim bridge
financing (Note 8(c)). The Company used a significant portion of the remaining
proceeds to develop and expand its international markets, including Argentina
and Brazil. The Company had a $15.5 million net gain on the sale of its old
North American operations for the year ended December 31, 2000 after related
expenses.

    The Company continued operating its remaining subsidiaries in Argentina and
Brazil during fiscal year 2001. The fiscal year ended December 31, 2001
represent only the results from the operations in Argentina, Brazil and
corporate headquarters expenses in Fort Lauderdale, Florida and are therefore
not comparable to the financial results from the Fiscal Year 2000, which
included the results from the old North America operations (Note 15).

5. PROPERTY AND EQUIPMENT

    Property and equipment at December 31, 2001 and 2000 consist of the
following:

<TABLE>
<CAPTION>
                                                        2001             2000
Equipment                                             -------          --------
<S>                                                   <C>              <C>
Equipment                                             $78,597          $111,079
Office furniture and fixtures                          23,933            76,786
</TABLE>



                                       40
<PAGE>

<TABLE>
<CAPTION>
<S>                                                    <C>               <C>
Leasehold improvements                                  20,393             40,150
                                                       -------           --------

                                                       122,923            228,015
Less accumulated depreciation                           68,343             48,873
                                                       -------           --------

Net property and equipment                             $54,580           $179,142
                                                       =======           ========
</TABLE>



6. INTANGIBLE ASSETS

    In February 2001, the Company purchased 2,667 shares (approximately 20%) of
the outstanding capital stock of its Argentine subsidiary from a minority
shareholder for $600,000. After the transaction, the Company's ownership
percentage increased to 71%. The transaction was accounted for by the purchase
method of accounting and resulted in cost in excess of net assets acquired of
$600,000. The asset was being amortized over 20 years, however, in December
2001, the company wrote off the carrying amount of goodwill as a result of the
lack of performance of the operations in Latin America and the subsequent
decision to discontinue such operations (Note 16). The goodwill in Argentina
had a net carrying amount of $575,000. In connection with this transaction the
Company entered into a non compete agreement with the minority shareholder in
the amount of $300,000 for the period of two years from the effective date of
the transaction. This intangible asset, which had a net carrying amount of
$175,000 was also written-off, as of December 31, 2001.

    The Company paid $600,000 in cash at closing of the acquisition of such
minority interest and issued a non-interest bearing note payable to the seller
in the amount of $300,000, with respect to which $100,000 was to be paid on
August 16, 2001, $100,000 was to be paid on February 16, 2002 and $100,000 was
to be paid on February 16, 2003. In August 2001, the former minority shareholder
agreed to sign an agreement releasing the Company from any future liability
between the parties. In return, the Company agreed to change the payment terms
for the $300,000 note payable to $150,000 to be paid at the execution date of
the contract, $100,000 to paid be on February 16, 2002 and $50,000 to be paid on
February 16, 2003.



                                       41
<PAGE>


7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

    Accounts payable and accrued expenses at December 31, 2001 and 2000 consist
of:

<TABLE>
<CAPTION>
                                                                                2001                        2000
                                                                                ----                        ----

<S>                                                                             <C>                         <C>
Accounts payable                                                              $303,122                     $343,753
Accrued professional fees                                                       60,000                      111,095
Accrued compensation                                                            87,098                      236,417
Interest                                                                            --                       49,758
Other                                                                           13,008                      121,099
                                                                              --------                     --------
                                                                              $463,228                     $862,122
                                                                              ========                     ========
</TABLE>

8. CONVERTIBLE NOTES AND DEBENTURES

(a) CONVERTIBLE NOTE PAYABLE WITH RELATED PARTY

    The Company executed a $1,500,000 promissory note on September 24, 1999
("Convertible Note") with a related party. It bore interest at a rate of 12% (7%
through September 24, 2000), compounded annually. Principal and interest under
the Convertible Note were due and payable on January 2, 2001. The Convertible
Note is convertible into the Company's common stock or into stock of the
Company's Argentinean subsidiary, owned by the Company.

    On January 2, 2001, the Convertible Note was converted into stock of the
Company's Argentinean subsidiary, reducing the Company's ownership of the
Argentinean subsidiary to 51%. Upon the conversion of the debt, the Company
recorded an increase in additional paid-in capital of approximately $1,500,000.

(b) CONVERTIBLE DEBENTURE

    On December 28, 1999, the Company completed a private placement, which
included:

               (i) The issuance of a convertible debenture ("Convertible
         Debenture"), which could be drawn upon until December 28, 2000, up to
         $3,000,000. This Convertible Debenture carried interest at 12% payable
         quarterly, and was due at the earlier of July 1, 2001 or the completion
         of a public offering of at least $10 million (see iii. below). This
         Convertible Debenture was convertible into the Company's common stock,
         at any time, at $7.50 per share. The Convertible Debenture holder also
         had the option to receive interest in shares of the Company's common
         stock, rather than cash, at $6.50 per share.

         The difference between the conversion rate of $7.50 per share and the
         market price of the Company's common stock of $8.625 per share resulted
         in a favorable conversion rate interest expense of $225,000 in 1999
         related to the original $1.5 million drawn on December 28, 1999. The
         market price of the Company's common stock was less than the conversion
         rate on the remaining $1.5 million drawn in 2000.

               (ii) The sale of 384,615 shares of common stock at $6.50 per
         share, net of expenses of $32,297.

               (iii) The issuance of warrants to purchase 600,000 shares of the
         Company's common stock at an exercise price of $8 per share. These
         warrants are exercisable through December 31, 2004.

    Based on the Black-Scholes pricing model, the warrants issued were valued at
$1,170,000, which increased additional paid-in capital and decreased the
Convertible Debenture (debt discount). The debt discount was amortized as
financing costs until the Convertible Debenture was repaid, with the remainder
considered as a part of the extraordinary item.



                                       42
<PAGE>

    In 2000, in accordance with EITF 00-27, the Company remeasured the value of
the beneficial conversion option after allocating the proceeds between the
Convertible Debenture and the warrants and recognized the increase in the
beneficial conversion feature of $1,170,000 as a cumulative effect of a change
in an accounting principle.

    The Company repaid this Convertible Debenture with a portion of the proceeds
received from the Sale (Note 4). The difference ($455,000) between the principal
amount of the Convertible Debenture paid and the net carrying amount was treated
as an extraordinary loss in 2000.

(c) INTERIM BRIDGE FINANCING WITH RELATED PARTIES

    In August 2000, the Company received an interim bridge financing commitment
from related parties. Under this commitment the Company had the right to require
the purchase of promissory notes in the principal amount of up to $1.75 million
which were issuable with warrants to purchase up to 638,462 shares of the
Company's common stock at an exercise price of $3.25 per share. The promissory
notes carried interest at 12% per annum and were due on December 14, 2000
(subject to acceleration as provided therein). Warrants issued are exercisable
through August 15, 2005.

    At the time of the commitment, the Company drew down $1,355,000 against the
commitment and issued 466,921 warrants. Based on the Black-Scholes pricing
model, the 466,921 warrants issued were valued at $574,000, which increased
paid-in capital and decreased the interim bridge financing (debt discount). The
debt discount was amortized over the estimated life of the debt as financing
costs when the Company repaid the $1,355,000 balance of this financing from a
portion of the proceeds received from the Sale (Note 4).

(d) CONVERSION OF CONVERTIBLE DEBENTURES

    On December 3, 1997, the Company completed a Series A convertible debenture
bridge financing of $525,000 resulting in net proceeds of approximately $470,000
(after expenses of the offering). The debentures were payable, together with
interest at the rate of 9% per annum, on the earlier of June 1, 1998 (which was
amended to December 31, 1998) or the date of funding of a secondary equity
offering, as defined. The debentures were convertible at maturity into shares of
the Company's common stock with a conversion price of $5.25 per share. In
connection with this financing, the Company issued to its investment banking
firm warrants to acquire 54,375 shares of the Company's common stock at an
exercise price of $4 per share. These warrants are exercisable through November
2000 (extended to November 2003).

    On March 5, 1998, the Company completed a Series B convertible debenture
bridge financing of $1,550,000 resulting in net proceeds of approximately
$1,400,000 (after expenses of the offering). The debentures were payable,
together with interest at the rate of 9% per annum, on the earlier of December
31, 1998 or the date of funding of a secondary equity offering, as defined. The
debentures were convertible at maturity into shares of common stock with a
conversion price of $5.25 per share. The Company also issued 7,500 shares of
common stock to its investment-banking firm in connection with this financing,
which were recorded as financing costs and subsequently as interest expense when
the debentures were converted.

    On October 2, 1998 and December 31, 1998, the Series A and Series B
convertible debenture bonds were converted to 518,750 shares of common stock, at
a $4 per share conversion rate rather than the original $5.25 per share
conversion rate. The revision in the conversion rate was accounted for in 1998
by an increase in additional paid-in capital and interest expense of $1.4
million for the additional shares issued. Costs associated with these
conversions were approximately $56,215 during 1998. These costs are netted
against the principal amount of debt converted in the accompanying consolidated
statements of changes in stockholders' equity. The Company also issued to an
investment banking firm in 1998 92,262 warrants with an exercise price of $4.75
per share, expiring in March 2001. The Company also issued options to purchase
175,190 shares of common stock at $5.25 per share to the debenture holders as a
part of the conversion, of which 4,000 options were exercised in 1998, 24,548
options were exercised in 1999 and the balance expired.

(e) PROMISSORY NOTE



                                       43
<PAGE>

    The Company had a promissory note payable to a shareholder, due on the
earlier of October 14, 1999 or the funding of a secondary equity offering, as
defined. Interest, to be paid quarterly, was calculated at the prime rate plus
two percent. In December 1997, this note was repaid through the conversion of
this debt into 5,000 shares of the Company's common stock, pursuant to the terms
of the note.



                                       44
<PAGE>


9.  STOCKHOLDERS' EQUITY

(a) COMMON STOCK ISSUANCES

    In addition to the common stock issued through debt conversions (Note 8) and
the merger and other 1997 transactions discussed in (Note 2), common stock was
issued as follows:

         In 1998 -

         (i)          Sale of common stock - In connection with a private
                      placement, the Company sold 575,000 shares at $4 per share
                      in October 1998. Expenses related to this sale were
                      approximately $182,000. The Company also issued warrants,
                      which expire in October 2003, to purchase 402,500 shares
                      of the Company's stock at an exercise price of $4 per
                      share in connection with this private placement.

         (ii)         Stock options exercised - During 1998, one stock option
                      for 4,000 shares was exercised at $5.25 per share, less
                      commission of $1,890.

         (iii)        Services rendered - The Company issued 13,750 shares of
                      common stock to an investment-banking firm for services
                      rendered in connection with the private placement
                      discussed above.

         In 1999 -

         (i)          Sale of common stock - In connection with a private
                      placement, the Company sold 578,500 shares at $6 per
                      share in January through April 1999. Expenses related
                      to this sale were $155,102.

         (ii)         Stock option exercised - Stock options for 24,548 shares
                      (Note 8(d)) were exercised at $5.25 per share, less
                      commission of $11,599.

         In 2000 -

         (i)          Warrants exercised - Warrants for 25,000 shares were
                      exercised at $.01 per share (Note 9).

 (b) STOCK OPTIONS AND WARRANTS OUTSTANDING


<TABLE>
<CAPTION>
                                                                                      Exercise
                                                                                         Price
                                                                                           Per        Expiration
Date Issued                        Description                             Shares        Share              Date
-----------                        -----------                             ------     --------        ----------

<S>          <C>                  <C>                                      <C>           <C>       <C>
Stock Options:
    February 1998                  Options issued to Company executives    88,888       $ 5.25        March 2003
    October 1999                   Options issued to Company executive     37,500       $ 6.50      October 2004
    April 1998                     Options issued to Employee               1,000       $ 4.00        April 2003
    December 1999                  Options issued under the Employee
                                   Equity Incentive Plan (Note 9(e))      350,000       $ 8.00     December 2005
    June 2000                      Options issued under the Employee
                                   Equity Incentive Plan                   10,000       $10.00     December 2005
    May 2001                       Options issued under the Employee
                                   Equity Incentive Plan                   55,000       $ 1.60          May 2007
                                                                           ------
</TABLE>


                                       45
<PAGE>

<TABLE>
<CAPTION>
                                                                                       Exercise
                                                                                          Price
                                                                                            Per         Expiration
Date Issued                        Description                               Shares       Share               Date
-----------                        -----------                               ------       -----         ----------

<S>                               <C>                                       <C>           <C>        <C>
                                   Option shares                            542,388
                                                                            -------
Warrants:
    November 1997                  Three shareholders                       234,216       $1.92       October 2003
    December 1997                  Investment banking fee - Series A
                                   debentures (Note 9(e))                    54,375       $4.00      November 2003
    August 1998                    In connection with bridge financing       17,543       $4.00        August 2003
    October 1998                   Investment banking fee for sale of
                                   common stock                              30,667       $5.25       October 2003
    October 1998                   Issued with common stock sold            402,500       $4.00       October 2003
    October 1998                   Directors fees                            50,000       $4.00       October 2003
    October 1998                   Cancellation of investment banking
                                   agreement                                 43,750       $4.00       October 2003
    October 1998                   Investment banking fee for sale of
                                   common stock                               9,625       $4.00       October 2003
    December 1998                  Debenture conversion                       8,810       $5.25      December 2003
    March 1999                     Investment banking services                4,348       $5.25         March 2004
    December 1999                  Issued with Convertible Debenture
                                   (Note 9(e))                              600,000       $8.00      December 2004
    February 2000                  Director fees                             25,000       $8.00      February 2005
    August/October 2000            In connection with interim bridge
                                   financing                                466,921       $3.25        August 2005
                                                                            -------

                                   Warrant shares                         1,947,755
                                                                          ---------
                                   Total options and warrant shares       2,490,143
                                                                          =========
</TABLE>


    All stock options and warrants issued before 2001 are currently exercisable.
Stock options and warrants issued in 2001 vest ratably over three years. As a
result of the sale of the Company's old North American operations (Note 4), all
of the Company's stock options and warrants outstanding as of the date of such
sale became currently exercisable. The Company's outstanding stock options and
warrants expire as follows:

<TABLE>
<CAPTION>
                                                                                                                   Weighted
                                                                                                                    Average
                                                                                                                   Exercise
Year Ending December 31,                                                                              Shares          Price
------------------------                                                                              ------          -----

<S>                                                                                                <C>                <C>
2003                                                                                                 932,486          $3.87
2004                                                                                                 641,848           7.89
2005                                                                                                 860,809           5.16
2006                                                                                                      --             --
2007/9                                                                                                55,000           1.60
                                                                                                      ------          -----
Total                                                                                              2,490,143          $5.31
                                                                                                   =========          =====
</TABLE>

(c) NON-CASH EQUITY TRANSACTIONS

    In connection with the non-cash aspects of certain issuances of common
stock, options and warrants, the Company valued such transactions as follows in
2001, 2000 and since inception:

<TABLE>
<CAPTION>
                                                                                Inception
                                                                             (January 15,
                                                                                    1997)
                                                                                  Through            Year Ended       Year Ended
                                                                             December 31,          December 31,     December 31,
Issuance                                                                             2001                  2001             2000
--------                                                                     ------------          ------------     ------------

<S>                                                                          <C>                   <C>              <C>
Interest expense related to conversion
   rate of convertible debentures(i)                                           $2,022,000          $         --       $1,170,000
</TABLE>


                                       46
<PAGE>

<TABLE>
<CAPTION>
                                                                               Inception
                                                                            (January 15,
                                                                                   1997)
                                                                                Through            Year Ended       Year Ended
                                                                            December 31,          December 31,     December 31,
Issuance                                                                            2001                 2001             2000
--------                                                                    ------------          -----------      -----------

<S>                                                                          <C>                       <C>              <C>
Interest expense related to debt
  discount generated by warrant
  issuances(iv)                                                               1,744,000                   --         1,744,000

Revision of debt conversion
  rate(ii)                                                                    1,400,000                   --                --

Common stock issued for
  cancellation of investment
  banking agreement and debt
  issuance(iii)                                                                 889,000                   --                --

Stock option compensation(i)                                                    646,748                   --           538,860

Options issued to debenture
  holders for debenture
  conversion(iv)                                                                95,000                    --                --

Warrants issued for services(iv)                                               907,500                    --           426,000
                                                                            ----------            ----------        ----------
Total                                                                       $7,704,248            $       --        $3,878,860
                                                                            ==========            ==========        ==========
</TABLE>

    (i)  Value based on excess market price of the Company's publicly traded
         common stock over the conversion or exercise price. The excess stock
         option value is amortized over the vesting period of the options.

    (ii) Value based on increased common shares issued, due to the reduced
         conversion rate, using the market price of the Company's publicly
         traded common stock.

    (iii)Value based on market price of the Company's publicly traded common
         stock.

    (iv) Value based on Black-Scholes pricing model.

    Based on current accounting practices, the Company used the valuation
methods above rather than values of its common stock from private placements on
or near the related transaction dates. The Company's common stock has limited
public trading, which commenced in February 1998, on the OTC Bulletin Board. The
Company filed a Form 10-KSB in April 2000 and became a public reporting company
effective June 19, 2000.

    The amounts in the table above were charged to the following expense
accounts:

<TABLE>
<CAPTION>
                                                                    Inception
                                                                  (January 15,
                                                                         1997)
                                                                      Through           Year ended           Year ended
                                                                  December 31,         December 31,         December 31,
                                                                         2001                 2001                 2000
                                                                  -----------          -----------           ----------

<S>                                                               <C>                  <C>                   <C>
Salaries and benefits                                            $  870,748                 $ --             $  538,860
Professional and
  investment banking fees                                         1,119,500                   --                200,000
Interest expense                                                  4,318,000                   --              1,744,000

Cumulative effect of
  changes in accounting
  principles                                                      1,396,000                   --              1,396,000
                                                                  ---------            ---------              ---------
</TABLE>



                                       47
<PAGE>

<TABLE>
<CAPTION>
                                                                    Inception
                                                                  (January 15,
                                                                         1997)
                                                                      Through      Year ended         Year ended
                                                                  December 31,    December 31,       December 31,
                                                                         2001            2001               2000
                                                                  -----------      -----------        ----------

<S>                                                             <C>                <C>                <C>
Total                                                            $7,704,248        $        --         $3,878,860
                                                                 ==========        ===========         ==========
</TABLE>

(d) EMPLOYEE EQUITY INCENTIVE PLAN

    In April 1999, the Company's Board of Directors approved a 10-year Employee
Equity Incentive Plan ("Plan"), subject to approval of its stockholders. The
stockholders ratified the Plan in September 1999. Under the Plan, 484,655 shares
of the Company's common stock are reserved for issuance under various award
plans including stock options, restricted stock, bonus and performance shares,
etc. Options for 466,500 (415,000 outstanding as of December 31, 2001, after
forfeitures) shares of common stock under the Plan have been granted through
December 31, 2001 at $1.60, $8 and $10 per share. Options are normally vested
ratably over three years and expired five years after they became exercisable.

    As a result of the sale of the Company's old North American operations, all
options issued before December 2000 became exercisable and will expire in
December 2005. To the extent the market price on the date these options were
granted exceeded the exercise price, compensation expense was provided by
amortizing the excess over the vesting period of the options. As a result of the
sale, $351,000 of unamortized compensation expense attributable to such options
was recognized in December 2000. In the aggregate, the Company has charged
approximately $647,000 against operations since inception for such options.

    The Company also granted an option for 37,500 shares at $6.50 per share in
October 1999. Similar to the options mentioned above, the excess of the market
price at grant date over the option price was amortized as compensation expense
over the vesting period. As a result of the sale of the Company's old North
America operations, the $84,375 unamortized portion of the compensation expense
was recognized in December 2000.

    In May 2001, the Company approved a total of 55,000 stock options for
employees with a vesting period of three years and a strike price of $1.60 per
share, the market value of the stock on the date of grant. Under APB 25, because
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation cost was
required.

    FASB Statement 123, Accounting for Stock Based Compensation, requires the
Company to provide pro forma information regarding net income and earnings per
share as if compensation cost for the Company's stock option plan has been
determined in accordance with the fair value based method prescribed in FASB
Statement 123. The Company estimates the fair value of each stock option at the
grant date by using the Black-Scholes option-pricing model with the following
assumptions used for grants in 2001: no dividends yield for all years; expected
volatility of 120 percent; risk-free interest rate of 4.75 percent; and,
expected life of 3 years. The estimated fair value for the options granted in
2000 was deemed to be insignificant.

    Under the accounting provisions of FASB Statement 123, the Company's net
(loss) income and the net (loss) income per common share would have been as
follows:

<TABLE>
<CAPTION>
                                                                         2001                 2000
                                                                         ----                 ----

<S>                                     <C>                       <C>                  <C>
Net (loss) income                        As reported               $(8,235,705)         $2,669,085
                                         Pro forma                 $(8,249,286)         $2,669,085

Net (loss) income per common share,      As reported                    $(1.32)               $.41
Basic and diluted                        Pro forma                      $(1.32)               $.41
</TABLE>

    The following table summarizes the Company's employee stock option activity:

                                       48
<PAGE>

<TABLE>
<CAPTION>
                                                                                                Exercisable
                                                                                                -----------
                                                                                  Weighted                     Weighted
                                                                                   Average                      Average
                                                                                  Exercise                     Exercise
                                                                        Shares       Price         Shares         Price
                                                                        ------       -----         ------         -----

<S>                                                                   <C>          <C>            <C>            <C>
1998:
    Granted and outstanding at December 31, 1998                        89,888      $5.25          34,333         $5.21
                                                                       =======       ====         =======         =====
1999:
    Granted                                                            439,000      $7.87
                                                                       -------
Outstanding at December 31, 1999                                       528,888      $7.42          75,305         $5.54
                                                                       =======      =====         =======         =====
2000:
    Granted                                                             10,000     $10.00
    Forfeited                                                          (51,500)     $8.00
                                                                       -------
Outstanding at December 31, 2000                                       487,388      $7.42         487,388         $7.42
                                                                       =======     ======         =======         =====

2001:
    Granted                                                             55,000      $1.60
                                                                       -------
Outstanding at December 31, 2001                                       542,388      $6.83         487,388         $7.42
                                                                       =======      =====         =======         =====
</TABLE>

 (e) WARRANT OFFERING PROGRAM

    In March 2000, the Company's Board of Directors approved a Warrant Offering
Program ("Program") for the owners of office building portfolios who meet
certain criteria, which program was modified in April 2000. The Program provides
for up to 400,000 warrants to be offered, at an exercise price of $2.50 per
share, upon the execution of a master lease. The number of warrants issued will
be determined by formula based on the number of square feet committed. As of
December 31, 2000, 5,028 warrants, expiring in November 2005, were issued under
the Program. The warrants were valued at $50,000 by the Company. In April 2001,
the Company repurchased such warrants for $50,000. This Program has been
terminated.

    In July 1, 2000, the Company adopted the Financial Accounting Standards
Board issued FASB Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation, an Interpretation of APB Opinion No. 25" (the
"Interpretation"), which, among other issues, requires that non-employee
directors be treated as employees for stock compensation paid for service as
directors. As a result, warrants issued to the Company's directors for services
as directors are to be valued at the excess of the market value of the
Company's publicly traded common stock on the grant date over the exercise
price rather than the value based on the Black-Scholes pricing model, the
latter being the accounting policy previously followed by the Company.

    Accordingly, the Company has recorded additional compensation expense of
$226,000 for the year ended December 31, 2000, as a cumulative effect of the
change in accounting principle as of January 1, 2000, to value options granted
to directors in prior years for services as directors. The effect of the change
on 2000 results of operations was an increase of $150,000 in income before
extraordinary item and net income and an increase of $.02 on the related per
share amounts.

10. TREASURY STOCK

    In July 2001, the Company purchased for approximately $800,000 (fair value)
an aggregate of 533,333 shares of the Company's common stock from a former
Company director and members of his family. The shares are accounted for as
treasury stock and are shown separately as a deduction from the total common
stock.

11. RELATED PARTY TRANSACTIONS

    The Company entered into an agreement with an affiliate of one of its
principal shareholders (the "Affiliate"), that provided that the Company pay a
minimum investment banking fee to the Affiliate of $100,000 per year for a
three-year period commencing July 28, 1997, extendable for an additional nine
years under certain conditions. The agreement also provided for the
reimbursement of certain expenses incurred by the Affiliate up to $17,000 and
for the issuance of .5% of the Company's common stock (20,895 shares), as
defined, to a charitable foundation. In 1998, this agreement was canceled and
the Affiliate was paid $150,000 and issued 83,395 shares of common stock and
43,750 warrants with an exercise price of $4 per share, expiring in October
2003. In 1998, the Company paid, in cash, $225,000 to the Affiliate for
investment banking services ($300,000 from inception to December 31, 2001).

    In 2000, the Company paid consulting fees of $143,000 to one of
the Company's directors. No such amounts were paid during the year ended
December 31, 2001.

    During 1999, the Company issued warrants to a stockholder to purchase 25,000
shares of the Company's common stock at $.01 per share for investment banking
services. These warrants, valued at $162,000 using the Black-Scholes pricing
model, were exercised in April 2000.



                                       49
<PAGE>
    In June 2000, a $35,000 non-interest bearing short-term advance was made by
a stockholder to the Company, such amount was repaid in May 2001.

    See also Notes 7(a), (b) and (c), 8(a) and (b), and 16 for interim bridge
financing and a convertible note payable with related parties, equity securities
issued to related parties and subsequent event, respectively.

12. INCOME TAXES

    In 2001, due to net operating losses and the uncertainty of realization, no
tax benefit had been recognized for operating losses.

    The provision for income taxes for the year ended December 31, 2001 and 2000
was as follows:

<TABLE>
<CAPTION>
                                                                                      2001               2000
                                                                                   -----------        -----------
<S>                                                                                <C>                <C>
Current income taxes
    Federal                                                                        $        --        $  160,000
    State                                                                                   --            40,000
                                                                                    ----------         ---------
                                                                                   $        --        $  200,000
                                                                                    ==========         =========
</TABLE>

    At December 31, 2001, net federal operating losses of approximately $3.1
million were available for carryforward against future years' taxable income and
expire through 2020. The Company also has an alternative minimum tax credit
carryforward of $160,000, which does not expire. The Company's ability to
utilize its federal net operating loss and alternative minimum tax credit
carryforwards is uncertain and thus a valuation reserve has been provided
against the Company's net deferred tax assets.

    The reconciliation of income tax computed at the United States Federal
statutory rate of 34% to income expense differs primarily due to the valuation
allowance adjustment.

    The net deferred tax assets consist of the following at December 31, 2001
and 2000:

<TABLE>
<CAPTION>
                                                                              2001                     2000
                                                                           ----------               ----------

<S>                                                                        <C>                      <C>
Net federal operating loss carryforwards                                   $ 1,196,000               $ 396,000
Alternative minimum tax credit
    carryforwards                                                              160,000                 160,000
Intangible assets                                                              339,000                      --
Other                                                                               --                  51,000
Valuation allowance                                                         (1,695,000)               (607,000)
                                                                           -----------                --------
Net deferred tax assets                                                    $        --               $      --
                                                                           ===========                ========
</TABLE>

13. COMMITMENTS AND CONTINGENCIES

(a) LEASES - OFFICE SPACE

    The Company leased office space in Argentina and Brazil during the fiscal
year 2001. In February 2002, the Company vacated the office space in Argentina
and Brazil as part of a cost saving initiatives to improve liquidity and
operating results (Note 3) and in March 2002, the Company decided to discontinue
operations in Latin America (Note 16).

    In January 2001, the Company moved its corporate headquarters from Chicago
to Fort Lauderdale, Florida. During 2001, the Company occupied an office space
that it subleased from Access Financial, an affiliate, such sublease was not
pursuant to an executed lease assignment.

    In March 2002, the Company decided to relocate its corporate headquarters
from Fort Lauderdale, Florida to Atlanta, Georgia following the acquisition of
Cypress Communications (Note 16). Rent expense for 2001 and 2000 was
approximately $159,00 and $344,000, respectively.



                                       50
<PAGE>
(b) EMPLOYMENT AGREEMENTS

     In February 2002, Cypress Communications entered into employment agreements
with Charles B. McNamee and Gregory P. McGraw. In March 2002, the Company
entered into an employment agreement with Perry H. Ruda and concurrently agreed
to pay Mr. Ruda a cash severance payment for not extending his previous
employment agreement. Additionally, Jordon Glazov's existing employment
agreement will expire in 2002. The Company will pay Mr. Glazov approximately
$200,000 in 2002 pursuant to such agreement.

14. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

    Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of cash equivalents and trade
receivables. Concentrations of credit risk with respect to trade receivables are
limited due to the Company's customers generally being of significant size and
financial stability. The Company's cash and cash equivalents are primarily held
by two banks.

    In 2000, four U.S. telecommunications customers accounted for
approximately 71% of revenues. In 2000, 58% of revenue also was derived from
buildings owned by three real estate entities. The contracts related to these
revenues were transferred to Apex Site Management, Inc. as part of the sale of
the old North American operations (Note 4). The fiscal year ended December 31,
2001 only includes revenues from the operations in Argentina and the results are
therefore not comparable to the financial results from the fiscal year 2000,
which included the results from the old North American operations. In 2001,
three telecommunications customers in Argentina accounted for approximately 96%
of revenues. Those three customers were Impsat S.A., Diveo Argentina S.A., and
GTE PCS S.A.

15. FOREIGN OPERATIONS

The Company's operations are handled by each of its subsidiaries operating in
their respective countries.  Accordingly, management has chosen to organize its
segments on a geographic basis, whereby revenues and related data are
attributed to the subsidiary entity that generates such revenues.  Segment
information is presented below for each significant geographic region (in
thousands).

<TABLE>
<CAPTION>
                                                             UNITED STATES     ARGENTINA     BRAZIL     ELIMINATION      TOTAL
                                                             -------------     ----------    ------     -----------     -------
<S>                                                          <C>               <C>           <C>        <C>             <C>
YEAR ENDED DECEMBER 31, 2001:
Revenues                                                       $    29          $   253      $   --            --       $   282
                                                               -------          -------      ------       -------       -------
Operating income (loss)                                         (3,430)          (2,252)       (873)          276        (6,279)
                                                               -------          -------      ------       -------       -------
Income (loss) before income taxes, extraordinary item
   and cumulative effect of changes in accounting
   principles                                                   (2,949)          (4,355)       (932)           --        (8,236)
                                                               -------          -------      ------       -------       -------

Identifiable assets                                              9,156              114          32        (6,920)        2,382
                                                               -------          -------      ------       -------       -------

YEAR ENDED DECEMBER 31, 2000:
Revenues                                                       $ 1,595           $  125       $  --       $    --       $ 1,720
                                                               -------          -------      ------       -------       -------
Operating income (loss)                                         (6,552)          (2,014)       (754)          244        (9,076)
                                                               -------          -------      ------       -------       -------
Income (loss) before income taxes, extraordinary item
and cumulative effect of changes in accounting principles        7,497           (2,019)       (758)           --         4,720
                                                               -------          -------      ------       -------       -------
Identifiable assets                                              9,468              422         110             8        10,008
                                                               -------          -------      ------       -------       -------
</TABLE>

16. SUBSEQUENT EVENTS

    In February 2002, the Company completed the acquisition of Cypress
Communications through a tender offer and short form merger. The purchase price
was $3.50 per share, in cash, for a total purchase price of approximately $15.7
million. As a result of the acquisition, the Company, at the subsidiary level,
acquired 100% of Cypress Communications' assets including cash and
telecommunications infrastructure. Also, the subsidiary assumed all of the
liabilities of Cypress Communications, which includes operating lease
commitments, primarily related to former office space, and license agreements
with property owners and/or operators of several office buildings. The Company
obtained financing to purchase the shares and complete the merger through a loan
from a private entity affiliated with a director of the Company. The loan was
repaid in February 2002, including a commission fee of $850,000 and interest for
approximately $3,000.

    The transaction will be accounted for by the purchase method of accounting.
During the upcoming year, Cypress Communications will be considered the
predecessor, and therefore, future reporting will include prior year financial
statements for Cypress as well as US RealTel, Inc.

    In March 2002, the Company decided to discontinue its operations in Latin
America, which are now held for disposition or in the process of liquidation.
Ongoing operating costs associated with our efforts to develop our current
markets in Argentina and Brazil, an unstable and declining economy in our
principal market, Argentina, and the lack of revenues from our second market,
Brazil, had been negatively affecting our cash position. Discontinuing our
operations in Latin America will help us to preserve existing capital and allow
us to dedicate our resources to our telecommunications services business in the
US. We expect to incur various costs in connection with the disposition or
termination of such operations, which should not be material. We believe such
costs will be immediately offset by the benefits associated with reduced
expenditures for such operations and the ability to redeploy of our assets in
our new telecommunications business. Discontinuation of our Latin America
operations will also eliminate risks associated with international operations,
which included substantial foreign currency exchange risk, which risk resulted
in currency translations losses in 2001 and anticipated currency translation
losses for the first quarter of 2002.

    In February 2002, the Company's Cypress Communications subsidiary entered
into one year employment agreements, to continue year to year unless sooner
terminated, with Charles B. McNamee and Gregory P. McGraw. Pursuant to the
employment agreement,

                                       51
<PAGE>

Mr. McNamee will serve as Chief Executive Officer of Cypress Communications and
will receive an annualized salary of $200,000, in addition to options to
purchase 900,000 shares of the Company's common stock. Pursuant to the
employment agreement, Mr. McGraw will serve as President and Chief Operating
Officer of Cypress Communications and will receive an annualized salary of
$200,000, in addition to options to purchase 900,000 shares of the Company's
common stock.

     In March 2002, the Company entered into an employment agreement with Perry
H. Ruda whereby Mr. Ruda shall serve a two year term as President of the
Company. Pursuant to the employment agreement, Mr. Ruda will receive an annual
base salary of $55,000. Additionally, the Company awarded a severance payment to
Mr. Ruda, for not extending his previous employment agreement, of $300,000 in
cash and another $140,000 to be paid over two years in twenty-four equal monthly
installments. Mr. Ruda's prior employment agreement with the Company provided
for such a cash severance payment.

     In March 2002, the Company's board of directors adopted an amendment to
the Company's 1999 Equity Incentive Plan. The amendment increased the number of
shares of Company common stock available for issuance under the plan from
484,655 shares to 3,200,000 shares.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None.




                                       52
<PAGE>




                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT

     The information required in response to this item is hereby incorporated by
reference from the Company's definitive proxy statement to be filed with the
Commission pursuant to Regulation 14A for its Annual Meeting of Stockholders to
be held on June 26, 2002.

ITEM 10. EXECUTIVE COMPENSATION

     The information required in response to this item is hereby incorporated by
reference from the Company's definitive proxy statement to be filed with the
Commission pursuant to Regulation 14A for its Annual Meeting of Stockholders to
be held on June 26, 2002.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required in response to this item is hereby incorporated by
reference from the Company's definitive proxy statement to be filed with the
Commission pursuant to Regulation 14A for its Annual Meeting of Stockholders to
be held on June 26, 2002.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required in response to this item is hereby incorporated by
reference from the Company's definitive proxy statement to be filed with the
Commission pursuant to Regulation 14A for its Annual Meeting of Stockholders to
be held on June 26, 2002.

ITEM 13. EXHIBIT LIST AND REPORTS ON FORM 8-K

         (a) Exhibits

<TABLE>
<CAPTION>
     EXHIBITS       DESCRIPTION
     --------       -----------

<S>                <C>
       2.1          Form of Certificate of Merger (2.1)(1)
       2.2          Plan and Agreement of Merger (2.2)(1)
       2.3          Agreement and Plan of Merger, dated January 10, 2002 by and among Cypress
                    Communications, Inc., U.S. RealTel, Inc. and Cypress Merger Sub, Inc. (the
                    "Merger Agreement") (incorporated by reference to Exhibit d(i) of the
                    Company's Schedule To filed on January 22, 2002)
       2.3.1        Amendment No. 1 to the Merger Agreement, dated January 17, 2002 (incorporated
                    by reference to Exhibit d(ii) of the Company's Schedule To filed on January 22, 2002)
       3.1          Certificate of Incorporation (3.1)(1)
       3.2          Bylaws (3.2)(1)
       4.1          Form of Common Stock Certificate (4.1)(1)
       4.2          Registration Rights Agreement dated October 2, 1998 (4.3)(1)
       4.3          Amendment dated September 24, 1999 to Registration Rights Agreement dated October 2,
                    1998 (4.6)(1)

      10.1*         Employment Agreement dated as of February 21, 2002  between Cypress Communications,
                    Inc.  and Charles B. McNamee
      10.2*         Employment Agreement dated as of February 21, 2002  between Cypress Communications,
                    Inc.  and Gregory P. McGraw
      10.3*         Employment Agreement dated as of March 20, 2002  between the Company  and Perry H. Ruda
      10.4*         1999 Employee Equity Incentive Plan (10.6)(1)
      10.4.1*       First Amendment to the Company's 1999 Employee Equity Incentive Plan
      10.5*         Amendment to the Employment Agreement dated as of April 20, 1999 between the Company
                    and Jordan E. Glazov (10.5)(1)
       10.6         Exclusive Telecommunications Strategic Cooperation Agreement dated February 18, 2000
                    (10.7)(1)

       10.7         Asset Purchase Agreement dated as of October 18, 2000 between the Company and Apex Site
                    Management, Inc. (2)
       10.8         Stock Purchase Agreement dated July 26, 2001 between the Company and Craig M. Siegler (10.1)(3).
       21.1         List of the Company's Subsidiaries
</TABLE>



                                       53
<PAGE>

(1)  Incorporated by reference to the exhibit shown in the parentheses as filed
     with the Company's Registration Statement on Form 10-SB1 (Registration No.
     000-30401).

(2)  Incorporated by reference to the Company's Definitive Information Statement
     on Schedule 14C filed November 7, 2000.

(3)  Incorporated by reference to the Company's Form 10-QSB filed November 14,
     2001.

*    Management Compensation Plan or Arrangement.

         (b)      Reports on Form 8-K: None.



                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the Company
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on April 16, 2002.

                                                     U.S. REALTEL, INC.

                                                     By: /s/  Perry H. Ruda
                                                        ------------------------
                                                         Perry H. Ruda
                                                         President

                                POWER OF ATTORNEY

     Each person whose signature appears below on this Annual Report on Form
10-KSB hereby constitutes and appoints Perry H. Ruda and Edgardo Vargas, and
each of them, his true and lawful attorney-in-fact, acting alone, with full
powers of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities (until revoked in writing), to sign any or all
amendments to this Annual Report on Form 10-KSB of U.S. RealTel, Inc., and to
file the same, with exhibits thereto, and other documents to be filed in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact or his substitute,
acting alone, may lawfully do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
           SIGNATURE                                                    TITLE                                    DATE
           ---------                                                    -----                                    ----


<S>                                                      <C>                                               <C>
/s/ Perry H. Ruda                                        President and Director                             April 16,
-----------------------------                            (Principal Executive Officer)                      2002
Perry H. Ruda

/s/ Edgardo Vargas                                       Treasurer                                          April 16,
-----------------------------                            (Principal Financial and Accounting Officer)       2002
Edgardo Vargas

/s/ Mark J. Grant                                        Director                                           April 16,
-----------------------------                                                                               2002
Mark J. Grant

/s/ Jordan E. Glazov                                     Director                                           April 16,
-----------------------------                                                                               2002
Jordan E. Glazov

/s/ Ross J. Mangano                                      Director                                           April 16,
-----------------------------                            (Non-Executive Chairman)                           2002
Ross J. Mangano
</TABLE>


                                       54
<PAGE>

<TABLE>
<CAPTION>
<S>                                                    <C>                                                <C>
/s/ Gerard Sweeney                                       Director                                           April 16,
-----------------------------                                                                               2002
Gerard Sweeney
</TABLE>



                                       55