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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington D.C. 20549

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FORM 10-QSB

QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly Period Ended September 30, 2002

Commission File Number 000-29433

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

|Delaware(State or other jurisdiction of
incorporation or organization) |  | 84-1592698(IRS Employer
Identification No)
|---------------------------------------------------------------------- |  | ------------------------------------------

1111 Orange Avenue
Coronado, California 92118(Address of principal executive offices)

(619) 435-2929(Issuer's telephone number)

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(Former
name, former address, and former fiscal year if changed since last report)

Check
whether the Issuer: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or 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 ý    No o

State
the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: The issuer had 6,559,904 shares of common stock outstanding as
of November 30, 2002.

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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This report on Form 10-QSB contains forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. The forward-looking statements are contained principally in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." These
statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results,
performances or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "could," "would," "expects," "plans," "anticipates,"
"believes," "estimates," "projects," "predicts," "potential" and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future
events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We discuss many of these
risks in this report in greater detail under the heading "Factors Affecting Future Performance." These forward-looking statements represent our estimates and assumptions only as of the date of this
report, and we do not assume any obligation to update any of these statements.

2

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PART IFINANCIAL INFORMATION

ITEM 1FINANCIAL STATEMENTS

USA BROADBAND, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
$ 000's

|                                                     |                                                                                                   | September 30,
2002                                                                                                   |                                      | June 30,
2002 |      
|---------------------------------------------------- | ------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ------------- | -----
|
|ASSETS                                               |                                                                                                   |                                                                                                                      |                                      |               |      
|Current Assets:                                      |                                                                                                   |                                                                                                                      |                                      |               |      
|                                                     | Cash                                                                                              |                                                                                                                      | $                                    | 33            |      
|                                                     | Restricted cash                                                                                   |                                                                                                                      |                                      | 500           |      
|                                                     | Accounts receivable, net                                                                          |                                                                                                                      |                                      | 164           |      
|                                                     | Prepaid expenses and other current assets                                                         |                                                                                                                      |                                      | 9             |      
|                                                     |                                                                                                   |                                                                                                                      |                                      |               |      
|                                                     |                                                                                                   |                                                                                                                      | Total current assets                 |               |      
|Property and Equipment:                              |                                                                                                   |                                                                                                                      |                                      |               |      
|                                                     | Cable properties                                                                                  |                                                                                                                      |                                      | 4,994         |      
|                                                     | Cable equipment                                                                                   |                                                                                                                      |                                      | 975           |      
|                                                     | Leasehold improvements                                                                            |                                                                                                                      |                                      | 2             |      
|                                                     | Furniture and equipment                                                                           |                                                                                                                      |                                      | 34            |      
|                                                     | Computer software and equipment                                                                   |                                                                                                                      |                                      | 113           |      
|                                                     | Vehicles                                                                                          |                                                                                                                      |                                      | 7             |      
|                                                     |                                                                                                   |                                                                                                                      |                                      |               |      
|                                                     |                                                                                                   |                                                                                                                      |                                      | 6,125         |      
|                                                     | Less accumulated depreciation                                                                     |                                                                                                                      |                                      | (1,191        | )    
|                                                     |                                                                                                   |                                                                                                                      |                                      |               |      
|                                                     |                                                                                                   |                                                                                                                      | Net property and equipment           |               |      
|Note receivable                                      |                                                                                                   |                                                                                                                      | 842                                  |               |      
|Assets held for sale, net                            |                                                                                                   |                                                                                                                      | 3,670                                |               |      
|other assets                                         |                                                                                                   |                                                                                                                      | 70                                   |               |      
|                                                     |                                                                                                   |                                                                                                                      |                                      |               |      
|Total Assets                                         |                                                                                                   | $                                                                                                                    | 10,222                               |               | $    
|                                                     |                                                                                                   |                                                                                                                      |                                      |               |      
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)       |                                                                                                   |                                                                                                                      |                                      |               |      
|Current Liabilities:                                 |                                                                                                   |                                                                                                                      |                                      |               |      
|                                                     | Line-of-credit                                                                                    |                                                                                                                      | $                                    | 100           |      
|                                                     | Current portion of long-term debt and capital lease obligations                                   |                                                                                                                      |                                      | 6,216         |      
|                                                     | Accounts payable                                                                                  |                                                                                                                      |                                      | 3,549         |      
|                                                     | Accrued liabilities                                                                               |                                                                                                                      |                                      | 849           |      
|                                                     | Deferred revenues                                                                                 |                                                                                                                      |                                      |              |      
|                                                     |                                                                                                   |                                                                                                                      |                                      |               |      
|                                                     |                                                                                                   |                                                                                                                      | Total current liabilities            |               |      
|Deferred Revenues                                    |                                                                                                   |                                                                                                                      | 325                                  |               |      
|Other Liabilities                                    |                                                                                                   |                                                                                                                      |                                     |               |      
|Commitments and Contingencies                        |                                                                                                   |                                                                                                                      |                                      |               |      
|Stockholders' Equity (Deficit):                      |                                                                                                   |                                                                                                                      |                                      |               |      
|                                                     | Preferred stock, $.001 par value; 50,000,000 shares authorized                                    |                                                                                                                      |                                      |               |      
|                                                     |                                                                                                   | Series A convertible preferred stock; 7,000,000 shares designated; outstanding, liquidation preference of $5,844,000 |                                      |               | 5,550
|                                                     |                                                                                                   | Series B preferred stock; 2,625,000 shares designated; 2,625,000 outstanding, liquidation preference of $2,809,000   |                                      |               | 2,391
|                                                     |                                                                                                   | Series C preferred stock; 7,875,000 shares designated; 7,875,000 outstanding, liquidation preference of $7,875,000   |                                      |               | 7,875
|                                                     | Common stock, $.001 par value; 100,000,000 shares authorized; 6,500,486 and 6,299,000 outstanding |                                                                                                                      |                                      | 6             |      
|                                                     | Additional paid in capital                                                                        |                                                                                                                      |                                      | 7,061         |      
|                                                     | Accumulated deficit                                                                               |                                                                                                                      |                                      | (23,700       | )    
|                                                     |                                                                                                   |                                                                                                                      |                                      |               |      
|                                                     |                                                                                                   |                                                                                                                      | Total stockholders' equity (deficit) |               |      
|                                                     |                                                                                                   |                                                                                                                      |                                      |               |      
|Total Liabilities and Stockholders' Equity (Deficit) |                                                                                                   | $                                                                                                                    | 10,222                               |               | $    
|                                                     |                                                                                                   |                                                                                                                      |                                      |               |      

See accompanying notes to these financial statements.

3

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USA BROADBAND, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

$000's

|                                             |                                     | Three Months
Ended
September 30,
2002 |                      | Three Months
Ended
September 30,
2001 |      
|-------------------------------------------- | ----------------------------------- | ------------------------------------- | -------------------- | ------------------------------------- | -----
|
|Revenues                                     |                                     | $                                     | 165                  |                                       | $    
|Cost of Revenues                             |                                     |                                       | 89                   |                                       |      
|                                             |                                     |                                       |                      |                                       |      
|                                             |                                     |                                       | Gross profit         |                                       |      
|Operating Expenses:                          |                                     |                                       |                      |                                       |      
|                                             | Selling, general and administrative |                                       |                      | 2,381                                 |      
|                                             | Depreciation                        |                                       |                      | 93                                    |      
|                                             |                                     |                                       |                      |                                       |      
|                                             |                                     | Total operating expenses              |                      |                                       | 2,474
|                                             |                                     |                                       | Loss from operations |                                       |      
|                                             |                                     |                                       |                      |                                       |      
|Other Income (Expense):                      |                                     |                                       |                      |                                       |      
|                                             | Interest expense, net               |                                       |                      | 143                                   |      
|                                             | Other income (expense), net         |                                       |                      | 8                                     |      
|                                             |                                     |                                       |                      |                                       |      
|Net Loss from Continuing Operations          |                                     |                                       | (2,533               | )                                     |      
|Discontinued Operations (Note 5)             |                                     |                                       |                      |                                       |      
|Income from discontinued operations          |                                     |                                       | 115                  |                                       |      
|                                             |                                     |                                       |                      | Net loss                              |      
|                                             |                                     |                                       |                      |                                       |      
|Accrued Cumulative Preferred Stock Dividends |                                     |                                       | 116                  |                                       |      
|                                             |                                     |                                       |                      |                                       |      
|Net Loss Applicable to Common Shareholders   |                                     | $                                     | (2,534               | )                                     | $    
|                                             |                                     |                                       |                      |                                       |      
|Net Loss Per Common Share                    |                                     | $                                     | 0.38                 | )                                     | $    
|                                             |                                     |                                       |                      |                                       |      
|Weighted Average Common Shares Outstanding   |                                     |                                       | 6,613,000            |                                       |      
|                                             |                                     |                                       |                      |                                       |      

See accompanying notes to these financial statements.

4

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USA BROADBAND, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

$000

|                                                                         |                                                                    | For the
Three Months
Ended
September 30, 2002 |        | For the
Three Months
Ended
September 30, 2001 |     
|------------------------------------------------------------------------ | ------------------------------------------------------------------ | --------------------------------------------- | ------ | --------------------------------------------- | ----
|
|OPERATING ACTIVITIES:                                                    |                                                                    |                                               |        |                                               |     
|Net Loss                                                                 |                                                                    | $                                             | (2,418 | )                                             | $   
|Adjustments to reconcile net loss to net cash from operating activities: |                                                                    |                                               |        |                                               |     
|                                                                         | Depreciation                                                       |                                               |        | 329                                           |     
|                                                                         | Loss on disposal of fixed assets                                   |                                               |        | 1,482                                         |     
|                                                                         | Amortization of deferred financing costs                           |                                               |        | 17                                            |     
|                                                                         | Stock based compensation                                           |                                               |        |                                              |     
|                                                                         | Allowance for bad debt                                             |                                               |        |                                              |     
|                                                                         | Stock and warrants issued                                          |                                               |        |                                              |     
|                                                                         | Interest expense accrual                                           |                                               |        | 112                                           |     
|Changes in operating assets and liabilities:                             |                                                                    |                                               |        |                                               |     
|                                                                         | Accounts receivable                                                |                                               |        | 7                                             |     
|                                                                         | Prepaid expenses                                                   |                                               |        | 6                                             |     
|                                                                         | Accounts Payable                                                   |                                               |        | 113                                           |     
|                                                                         | Accrued liabilities                                                |                                               |        | 114                                           |     
|                                                                         | Deferred revenues                                                  |                                               |        | (143                                          | )   
|                                                                         | Other liabilities                                                  |                                               |        |                                              |     
|                                                                         |                                                                    |                                               |        |                                               |     
|                                                                         |                                                                    | Net cash used in operating activities         |        |                                               | (381
|                                                                         |                                                                    |                                               |        |                                               |     
|INVESTING ACTIVITIES:                                                    |                                                                    |                                               |        |                                               |     
|                                                                         | Cash acquired in DDC acquisition                                   |                                               |        |                                              |     
|                                                                         | Advances to DDC prior to acquisition                               |                                               |        |                                              |     
|                                                                         | Purchases of property and equipment                                |                                               |        |                                              |     
|                                                                         | Advances to Las Americas                                           |                                               |        | (338                                          | )   
|                                                                         | Acquisition costs                                                  |                                               |        |                                              |     
|                                                                         | Increases in restricted cash                                       |                                               |        |                                              |     
|                                                                         | Payment of life insurance premiums                                 |                                               |        |                                              |     
|                                                                         |                                                                    |                                               |        |                                               |     
|                                                                         |                                                                    | Net cash used in investing activities         |        |                                               | (338
|                                                                         |                                                                    |                                               |        |                                               |     
|FINANCING ACITIVITES:                                                    |                                                                    |                                               |        |                                               |     
|                                                                         | Proceeds from issuance of common stock                             |                                               |        | 271                                           |     
|                                                                         | Net borrowing on line of credit                                    |                                               |        |                                               |     
|                                                                         | Principal payments on long term debt and capital lease obligations |                                               |        | (27                                           | )   
|                                                                         | Borrowing of notes payable                                         |                                               |        | 420                                           |     
|                                                                         |                                                                    |                                               |        |                                               |     
|                                                                         |                                                                    | Net cash provided by financing activities     |        |                                               | 664 
|                                                                         |                                                                    |                                               |        |                                               |     
|NET INCREASE (DECREASE) IN CASH                                          |                                                                    |                                               | (55    | )                                             |     
|CASH,at beginning of year                                                |                                                                    |                                               | 88     |                                               |     
|                                                                         |                                                                    |                                               |        |                                               |     
|CASH,at end of period                                                    |                                                                    | $                                             | 33     |                                               | $   
|                                                                         |                                                                    |                                               |        |                                               |     
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                        |                                                                    |                                               |        |                                               |     
|                                                                         | Cash paid for interest                                             |                                               | $      | 143                                           |     
|                                                                         |                                                                    |                                               |        |                                               |     
|NON-CASH TRANSACTIONS:                                                   |                                                                    |                                               |        |                                               |     
|                                                                         | Accounts payable converted to Notes Payable                        |                                               | $      | 600                                           |     

See accompanying notes to these financial statements.

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USA BROADBAND, INC. AND SUBSIDIARIES
NOTES TO THE CONCOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

1.    Interim Financial Information:

The accompanying interim financial statements are unaudited. However, in the opinion of management, the interim data includes all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of the results for the interim period. The results of operations for the interim periods presented are not necessary indicative of those
to be expected for the fiscal year.

The
financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and
regulations.

Management
believes the disclosures made are adequate to make the information not misleading and suggest that these condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's Form 10KSB for the year ended June 30, 2002.

2.    Liquidity and Basis of Presentation:

The Company's financial statements have been presented on the going concern basis, which contemplates the realization of assets and liquidation of liabilities in
the normal course of business. At September 30, 2002, the Company had a working capital deficit of $10,008,000. The Company's net loss for the three months ended September 30, 2002 was
$2,418,000. At September 30, 2002, the Company was in default of the terms of its debt, capital lease obligations.

The
Company's ability to continue as a going concern is dependent upon its ability to raise the capital necessary to successfully implement its business plan, and ultimately to achieve
profitable operations. Management's plans in this regard are set forth below. As a result of the Company's proposed merger with Las Americas (Note 3), the Company's efforts will be concentrated
on concession-based cable services in Baja, Mexico.

The
Company has begun a program to divest MDU operation assets outside of the California market, with the intention of using the proceeds of these sales to repay debt, with excess
proceeds to be invested in the Company's new business strategy. The Company has entered into letters of intent for the sale of a portion of the non-strategic assets, and has retained
various brokers and advisors to assist in system sales.

3.    Proposed Merger With Las Americas Broadband, Inc.:

On April 23, 2002, The Company entered into a definitive merger agreement with Las Americas Broadband, Inc. ("Las Americas") under which Las
Americas will merge with and into the Company, with Las Americas' shareholders receiving approximately .125 shares of USAB common stock for each share of Las Americas' common stock. Las Americas
develops and operates cable television systems and broadband networks for video, data, and Internet.

As
a condition of the merger, the Company is obligated to provide Las Americas a loan of up to $2,000,000 within 180 days of the merger. On May 3, 2002, Las Americas signed
a promissory note to the Company in the amount of $750,000 (as amended) with interest at a rate of 8% per annum, which was due in full on September 21, 2002. Through September 30, 2002,
the Company has advanced $830,000 to Las Americas under the note with $12,000 of accrued interest due. The note is

6

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collateralized by certain cable assets of Las Americas and no payment has been made on the note which is currently in default.

The
Company is pursuing additional equity and debt financing, and has implemented cost-reduction measures. Management believes that these measures will be sufficient to allow
the Company to continue as a going concern.

4.    Notes Payable:

In July 2002, a shareholder of the Company advanced $170,000 to the Company under a proposed note arrangement the terms of which are still being
negotiated.

On
July 18, 2002, the Company entered into an unsecured note payable to stockholders in the aggregate amount of $100,000.

On
August 21, 2002, the Company entered into an unsecured note payable to a shareholder in the amount of $150,000.

5.    Stockholders' Equity:

In July 2002, the Company commenced an offering of up to $10,000,000 of common stock. To date they have raised $229,353 in the offering through the sale of
114,676 shares at a price of $2.00 per share. The price per share of the shares sold in the offering, was intended to be at a discount to the market value of the Company's common stock, and may be
reduced below $2.00. If the price is reduced, the company will increase the number of shares to be issued to investors who have already made purchases in the offering.

In
July 2002, the Company issued a total of 23,161 shares of common stock to RateXchange Corporation, the parent company of RTX Securities who acted as the placement agent in a
prior offering. Of the shares issued, 9,200 shares were issued as compensation for the services of RTX Securities, and the remaining 13,961 shares were issued in lieu of an $18,000 commission, which
the Company had agreed to pay RTX Securities in connection with the offering.

In
September 2002, the Company agreed to issue 30,000 common shares to The Research Works as consideration for research services. In addition, in September 2002 we issued
to Corporate Capital Management warrants to purchase 300,000 shares of our common stock in consideration for financial advisory services.

6.    Assets Held For Sale and Discontinued Operations:

During the quarter ended September 30, 2002 the Company decided to change its business strategy to focus on providing video, data and internet service in
the state of California and in the Northern Baja region of Mexico. As a result of this change in strategy, the Company plans to sell its assets in regions outside of California and the Northern Baja
region of Mexico.

The
related assets to be sold have been reclassified as Assets Held for Sale as of September 30, 2002 at the lower of carrying amount or net realizable value, and the results of
operations for the three months ended September 30, 2002 have been presented as discontinued operations. Revenues from discontinued operations for the three months ended September 30,
2002 were $471,000.

7.    Subsequent Events:

Subsequent to September 30, 2002, the Company has loaned an additional $6,000 to Las Americas under the merger agreement.

7

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On
October 30, 2002 The Company obtained a bridge loan from a shareholder in the amount of $500,000. The note bears interest at 18% and is due June 30, 2003 or at such
earlier date pending consummation of permanent financing in the amount of $3,000,000. In addition, the Company issued the shareholder a warrant to purchase 250,000 shares of the Company's common stock
at an exercise price of $1.00 per share expiring in 2007.

On
November 4, 2002 The Company obtained a bridge loan from a shareholder in the amount of $25,000. The note bears interest at 18% and is due June 30, 2003 or at such
earlier date pending consummation of permanent financing in the amount of $3,000,000. In addition, the Company issued the shareholder a warrant to purchase 12,500 shares of the Company's common stock
at an exercise price of $1.00 per share expiring in 2007.

On
November 5, 2002 The Company obtained a bridge loan from a firm in the amount of $15,254. The note bears interest at 18% and is due June 30, 2003 or at such earlier date
pending consummation of permanent financing in the amount of $3,000,000. In addition, the Company issued the firm a warrant to purchase 7,627 shares of the Company's common stock at an exercise price
of $1.00 per share expiring in 2007.

As
of September 30, 2002, the Company had two unsecured notes payable outstanding in the amount of $150,000 each. The holders of these notes, Theodore Swindells and Paul Moore,
each beneficially own over 5% of the Company's common stock. The notes were issued on March 4, 2002, bear interest at the rate of 10% per year and have a due date of October 31, 2002.

On
October 18, 2002, the Company entered into a new loan agreement with Mr. Swindells, which extended the due date of the note payable to Mr. Swindells under the
same terms and conditions as the previous note. The Company is currently in default under the note with Mr. Moore.

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

General

We are seeking to position ourselves as an industry leader in providing digital television, entertainment, data, Internet and broadband services. Our current
operations consist of providing video service to multiple dwelling units, or "MDU," subscribers through Cable Concepts, Inc. which we acquired in July 2001. We receive revenues from
subscriber fees and revenue-sharing payments from DirectTV.

Proposed Merger with Las Americas Broadband, Inc.

On April 23, 2002, we entered into a definitive merger agreement with Las Americas Broadband, Inc. under which Las Americas will merge with and into
us, with Las Americas' shareholders receiving approximately .125 shares of our common stock for each share of Las Americas' common stock. Las Americas develops and operates cable television
systems and broadband networks for video, data, and Internet.

One
of the conditions to Las Americas' obligation under the merger agreement was that we advance Las Americas up to $2,000,000 within 180 days of the date of the merger agreement.
On May 3, 2002, Las Americas issued a promissory note to us in the amount of $750,000 in connection with advances made through that date. As of September 30, 2002 we had advanced
$830,000 to Las Americas under the note with $12,000 of interest due. However, we have not advanced the full $2,000,000 required. In addition, Las Americas has failed to meet certain closing
conditions.

8

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Under the merger agreement, our obligation, and that of Las Americas, to proceed with the merger are each subject to various conditions. Some of the conditions to Las Americas'
obligations have not been satisfied, including our receipt of a fairness opinion with respect to the transaction by July 15, 2002 and, as discussed above, our providing $2,000,000 in bridge
financing to Las Americas by 180 days from the date of the merger agreement. Similarly, we believe that some of the conditions to our obligation to complete the merger have not been satisfied
by Las Americas. However, we are in discussions with Las Americas regarding a completion of the merger notwithstanding a failure of these conditions. There is no assurance that these discussions will
lead to a successful completion of the merger.

Cable
California S.A. de C.V., an entity organized under the laws of the United Mexican States and managed by Las Americas, has a 30-year advanced telecommunications
broadband concession from the Mexican government to construct and operate a 750-MHz fiber-optic network providing high-speed Internet, telephone, data and multi-channel cable
television to residents and businesses. Cable California is constructing a 1,300-mile broadband network in the Northern Baja California region of Mexico for the delivery of cable
television, data and Internet service. Cable California has completed the first phase of this cable build, including its head-end, central operations center, and over 100 miles of cable
plant now serving 2,000 customers.

Las
Americas has a management contract managing Cable California, and a condition to the merger is that Las Americas acquire majority control of Cable California through a Mexican
subsidiary. Las Americas, through a wholly-owned operating subsidiary, also owns and operates a 450-MHz cable television system serving approximately 1,800 subscribers in Kern County,
California and doing business under the name "Country Cable."

After
the merger with Las Americas, we will continue to manage the approximately 3,600 MDU subscribers we presently serve in California, as well as the approximately 1,800 Country Cable
franchise cable subscribers, also in California, we will acquire through the proposed merger.

After
the completion of the proposed merger, Las Americas founder Richard G. Lubic, a thirty-year cable veteran, will serve as our Chairman and CEO. We also are moving our
headquarters to Coronado, California.

Critical Accounting Policies and Estimates

Our condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which require us to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. A summary of those significant accounting policies can be found in our
Notes to the Consolidated Financial Statements included in our Report on Form 10-KSB for the transition period ended June 30, 2002. The estimates we use are based upon our
historical experiences combined with management's understanding of current facts and circumstances. Some of our accounting policies are considered critical because they are important to the portrayal
of our financial condition and the results of our operations and because they require significant or complex judgments on the part of management. We believe that the following represent our critical
accounting policies as described in Financial Reporting Release No. 60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies," which was issued by the Securities and
Exchange Commission: deferred income taxes; allowance for doubtful accounts; and recoverability of long-lived assets.

Deferred
income taxes are recognized for the expected tax consequences in future years stemming from differences between the tax bases of assets and liabilities and their financial
reporting amounts, based upon enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Our significant deferred tax assets are
related to net operating loss carryforwards, allowance for bad debts and deferred revenue. We have established a valuation allowance to reduce deferred tax assets to the net amount expected to be
recovered in future periods.

9

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The estimates for deferred tax assets and the corresponding valuation allowance require management to exercise complex judgments. We periodically review and adjust those estimates based upon the most
current information available. However, because the recoverability of deferred tax assets is directly dependent upon our future operating results, actual recoverability of deferred tax assets may
differ materially from our estimates.

Our
allowance for doubtful accounts reflects a reserve that reduces customer accounts receivable to the net amount estimated to be collectible. Estimating the credit worthiness of
customers and the recoverability of customer accounts requires us to exercise considerable judgment. In estimating uncollectible amounts, we consider factors such as general economic and
industry-specific conditions, historical customer performance and anticipated customer performance. While we consider our processes to be adequate to effectively quantify our exposure to doubtful
accounts, changes in economic, industry or specific customer conditions may require us to adjust our allowance for doubtful accounts.

Our
long-lived assets will from time to time be analyzed for impairment as events and conditions indicate that an analysis be performed. Factors that we consider in
performing an impairment analysis are current and historical agreements to sell comparable assets, our current business strategy and our expectations of future cash flows for the asset or asset group
being analyzed. Future changes in the economic conditions, the regulatory environment and our strategies may materially affect our estimate of the recoverability of fixed assets.

Results of Operations

The following table sets forth our selected operations data for the three-month periods ended September 30, 2002 and September 30, 2001. This data
should be read in conjunction with our financial statements in Item 1 of this Form 10-QSB.

Selected Financial Data for USA Broadband, Inc.

|                                           |  | Three Months Ended September 30, 2002 |        | % of Revenues |          | Three Months Ended September 30, 2001 |   | % of Revenues |   | % Change from September 30, 2001 to September 30, 2002 |  
|------------------------------------------ |  | ------------------------------------- | ------ | ------------- | -------- | ------------------------------------- | - | ------------- | - | ------------------------------------------------------ | -
|Revenues                                   |  | $                                     | 165    |               | 100.0    | %                                     | $ | 1,214         |   | 100.0                                                  | %
|Cost of Revenues                           |  |                                       | 89     |               | 53.9     | %                                     |   | 544           |   | 44.8                                                   | %
|                                           |  |                                       |        |               |          |                                       |   |               |   |                                                        |  
|Gross Profit                               |  |                                       | 76     |               | 46.1     | %                                     |   | 670           |   | 55.2                                                   | %
|Selling, General & Administrative Expenses |  |                                       | 2,381  |               | 1,443.0  | %                                     |   | 4,287         |   | 353.1                                                  | %
|Depreciation                               |  |                                       | 93     |               | 56.4     | %                                     |   | 475           |   | 39.1                                                   | %
|Total Operating Expenses                   |  |                                       | 2,474  |               | 1,499.4  | %                                     |   | 4,762         |   | 392.3                                                  | %
|Loss from Operations                       |  |                                       | (2,398 | )             | -1,453.3 | %                                     |   | (4,092        | ) | -337.1                                                 | %

Comparison of Three-Month Period Ended September 30, 2002 to the Three-Month Period ended September 30, 2001

The decline in our revenues for the three months ended September 30, 2002 from the three months ended September 30, 2001 is the result of several
factors. First, in the past year we have sold ROE agreements governing many of our properties and had some of our lease contracts terminated. We also changed our business strategy to focus on
providing video, data and Internet service in the State of California and in the Northern Baja region of Mexico. As a result of this change in strategy all of our revenue derived from assets outside
of California or the Baja region of Mexico has been

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presented as discontinued operations and not as revenues. Our cost of revenues also declined as the result of the reduction in the number of subscribers served.

Our
selling, general and administrative expenses were substantially lower for the three months ended September 30, 2002 than for the comparable period in 2001 because we
substantially reduced personnel and staff as a result of the change in our business focus. We also closed one of our office facilities in the State of Washington. The substantial decrease in our
depreciation expense was due to the reduction in assets resulting from the sale and termination of ROE agreements.

Liquidity and Capital Resources

Our financial statements are presented on a going-concern basis. This contemplates the realization of assets and liquidation of liabilities in the normal course
of business. At September 30, 2002, we had a working capital deficit of approximately $10,008,000. Our ability to continue as a going concern depends on our ability to raise the capital
necessary to successfully implement our business plan and ultimately achieve profitable operations. During the three-month period ended September 30, 2002, we continued to implement
cost-cutting measures designed to increase operational efficiency, focus the geographic concentration of our operations and dispose of assets that are not consistent with our plan, either
from a geographic or operational perspective. We intend to use the proceeds of asset sales to repay debt and other obligations, and to reinvest the remaining net proceeds, if any, in existing or new
assets.

During
the three-month period ended September 30, 2002, we sold contracts under which we received a fee from property owners to provide video services using equipment owned by the
property owner. We received cash consideration owed to us through the sale of our California cable operations during the quarter ended September 30, 2002. Substantially all of the proceeds of
the sales have been or will be used to repay our lines of credit and other indebtedness.

In
recent periods, we have had limited access to investment capital to support working capital deficits or to expand existing operations. Consequently, the financial conditions of our
operating subsidiaries deteriorated in the three months ended September 30, 2002 and has deteriorated since then. We have been focused on negotiations with prospective lenders and investors as
we seek to refinance all outstanding loans and liabilities in order to provide working capital. These negotiations are continuing. We require working capital for existing operations pending their sale
or disposition and in connection with the proposed combined business of USA Broadband and Las Americas.

As
of September 30, 2002, we had a note payable in the amount of approximately $1,543,000 bearing interest at a rate of 10% per year which was due on December 15, 2002.
After September 30, 2002, we entered into an agreement under which this debt would be assumed. See the information under the heading "Subsequent Events" below. We also have a bank line of
credit in the amount of $100,000, which expires in January 2003. This line of credit bears interest at the prime rate, which as of September 30, 2002 was 4.75%.

We
have previously announced our focus on developing a cable television system in Northern Baja, California, and to divest ourselves of some of our operating assets in the United States
in order to enhance our balance sheet and reduce debt associated with the acquisition of our MDU assets in July, 2001. In addition, we are in continued discussions with certain creditors, including
key advisors and consultants, for the conversion of liabilities owed to them into our common stock in exchange for negotiated cash settlements. In total, we are seeking to eliminate or convert
approximately $1.5 to 2.0 million of our obligations, however, there is no guarantee that these discussions will lead to a reduction in our liabilities.

As
of September 30, 2002, we had two unsecured notes payable outstanding in the amount of $150,000 each. In addition we owed $17,400 in accrued interest on these notes at
September 30, 2002. The holders of these notes, Theodore Swindells and Paul Moore, each beneficially own over 5% of our

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common stock. The notes were issued on March 4, 2002, bear interest at the rate of 10% per year and have a due date of October 31, 2002. After September 30, 2002, we entered into
a new loan agreement with Mr. Swindells which extended the due date of the note payable to Mr. Swindells. See the information under the heading "Subsequent Events" below. We are
currently in default under the note with Mr. Moore.

As
of September 30, 2002, we had a note payable to a bank in the amount of approximately $1,477,000 which matures in April 2004 and which bears interest at a annual rate
equal to prime plus two hundred basis points, or 6.75% as of September 30, 2002. This debt is secured by all of our assets and, in addition, a $500,000 certificate of deposit. We are in default
under the loan agreement relating to the note payable and are seeking a waiver of some of the agreements' covenants from the bank.

As
of September 30, 2002, we had a note payable to a vendor in the amount of approximately $225,000, principal and interest at 18% due in monthly installments with the final
payment due March 2003. The payments due under the note are past due and we are currently in default under the note agreement.

As
of September 30, 2002, we owed a total of approximately $1,180,000 to Geneva Associates Merchant Banking Partners, an entity in which Russell Myers, one of our directors, has
an interest. Of this $1,180,000, $832,000 is due under a promissory note held by Geneva Associates Merchant Banking Partners, consisting of the $750,000 principal value of the note and $82,000 in
accrued interest. This note was due in October 2002 and bears interest at the rate of 14%. We are currently in default under this note. The remaining $348,000 owed to Geneva Associates Merchant
Banking Partners is due under a reimbursement agreement under which Geneva Associates Merchant Banking Partners, through a financial institution, issued a letter of credit to a bank to be used as
security for a line of credit we have with the bank. Of this $348,000, $300,000 represents the $300,000 in principal owed under the agreement, $18,000 represents accrued and unpaid interest, and
$30,000 represents an unpaid 10% fee in connection with the issuance of the letter of credit. The outstanding balance under the reimbursement agreement bears interest at a rate of 16% per year. We are
currently in default under the reimbursement agreement.

In
addition to the above liabilities, as of September 30, 2002, we owed a total of approximately $420,000 to shareholders who have advanced us funds. We have not yet negotiated
the terms of notes payable with these shareholders.

The
following table sets forth information regarding our contractual obligations as of September 30, 2002 and the periods in which payments are due.

|                                  |  | Payments Due by Period |           | 
|--------------------------------- |  | ---------------------- | --------- | 
|
|Lines of Credit and Notes Payable |  | $                      | 3,938,412 | 
|Capital Lease Obligations         |  |                        | 437,063   | 
|Operating Lease Obligations       |  |                        |          | 
|                                  |  |                        |           | 
|Total Contractual Cash            |  | $                      | 4,375,575 | 
|                                  |  |                        |           | 

In
addition to the above obligations, we may have an obligation under an asset purchase agreement with Verizon Media Ventures, Inc. and GTE Southwest Incorporated. Before the
quarter ended September 30, 2002, we decided not to complete the purchase of the rights for some of the properties, located in Texas, included in this asset purchase agreement. We believe that
Verizon Media Ventures and GTE Southwest are attempting to sell the properties in question to third parties, and that these entities may seek to collect from us any difference between the price we
agreed to pay and the prices received in connection with these sales to third parties. We have also signed a performance guarantee in the amount of $250,000 with regard to the asset purchase
agreement. This guarantee is in

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the form of a deposit note bearing an interest rate of 19% which will become payable if we fail to perform under the agreement. Verizon Media Ventures and GTE Southwest may seek to hold us liable for
the amount of the performance guarantee. Neither entity has made any claim against us as a result of our decision not to purchase the rights for the properties in question.

In
September, 2002, we issued a promissory note for $600,000 to our outside counsel in connection with unpaid legal fees. This promissory note is secured by all of the assets of USAB
Video Corp. II, Inc., one of our subsidiaries.

After
September 30, 2002, we obtained three separate bridge loans in the aggregate amount of $540,254. Each note bears interest at 18% and is due June 20, 2003 or on the
date we obtain permanent financing, in the amount of at least $3,000,000, if earlier. See the information under the heading "Subsequent Events" below.

Cash flows from Operating Activities

Our operations utilized net cash of approximately $381,000 for the three-month period ended September 30, 2002. The use of cash was related primarily to
funding the net losses from our operations, reduced by adjustments for non-cash expenses such as depreciation and loss on disposal of fixed assets and an increase in accounts payable and
accrued liabilities.

Cash Flows from Investing Activities

During the three-month period ended September 30, 2002, investing activities resulted in a reduction of cash of approximately $338,000. This was a result
of advances to Las Americas in connection with our proposed merger.

Cash Flows from Financing Activities

During the three-month period ended September 30, 2002, financing activities generated approximately $664,000. This resulted primarily from proceeds from
the sale of stock and from long-term borrowings, offset by reductions in principal payments on long-term debt and capital lease obligations.

Subsequent Events

After September 30, 2002, we advanced an additional $6,000 to Las Americas under the merger agreement.

On
October 18, 2002, we entered into a new loan agreement with Mr. Swindells, which extended the due date of his $150,000 note payable described under the heading
"Liquidity and Capital Resources" above under the same terms and conditions as the previous note. In consideration of the note extension we assigned to Mr. Swindells, as security for the note
payable service and access agreements to certain properties.

Between
October 30, 2002 and November 5, 2002, we issued three bridge notes in the total amount of $540,254 to two of our shareholders and a firm. The holder of one of the
bridge notes, in the amount of $500,000, is Theodore Swindells, who beneficially owns over 5% of our common stock. In connection with the bridge loans evidenced by these notes, we issued to the
investors warrants to purchase a total of 270,127 shares of our common stock at an exercise price of $1.00 per share. Each of the bridge notes bears interest at 18% and is due on
June 30, 2003, or on the date we obtain permanent financing in the amount of at least $3,000,000, if earlier. If we obtain permanent financing, each noteholder has the right to convert all, but
not part, of the principal amount and accrued interest on their note into shares of our common stock or preferred stock in connection with the permanent financing at a discount of 10% to the offering
price. Additionally, for every month that any principal payment on the notes is overdue, each noteholder will receive 10,000 warrants per $100,000 in principal

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under the note, or pro-rata portion thereof, with a strike price of the lower of $1.00 or the average bid price for our common stock for the 20 trading days preceding issuance of the
warrants.

On
November 29, 2002, we entered into an agreement in principle with Direct Services Inc. ("DSI"), a Washington corporation, to exchange debt for subscribers. This
agreement was subsequently modified on December 19, 2002 to reflect a reduction in the number of subscribers. Under the modified agreement, we will exchange the right to serve approximately
1,800 subscribers located in Texas, Arizona, Louisiana, and a small number of subscribers in Sacramento, California, in exchange for an assumption of $1.8 million in our debt, including the
note payable with a principal balance of $1,543,000 as of September 30, 2002 discussed under the caption "Liquidity and Capital Resources" above. In addition to eliminating $1.8 million
in loans payable from our balance sheet, we believe that this transaction will reduce operating deficits at our operating subsidiary, Cable Concepts, Inc., and allow us to focus on our
California operations. Upon completing this transaction, DSI has expressed interest in assuming an additional $600,000 note in exchange for additional subscribers. There is no guarantee that either
transaction will be completed.

Effective
December 1, 2002, we entered into a six-month consulting agreement with Edward Mooney, a director and our former interim CEO, under which Mr. Mooney
has agreed to provide general corporate advisory and development services. We will pay Mr. Mooney $3,000 per month plus reimbursement for expenses. As of the date of this filing, we owe
Mr. Mooney approximately $225,000 in unpaid expenses, contractual bonuses and salary.

Impact of Recently Issued Accounting Principles

In July 2002, the FASB issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities
("SFAS 146"). SFAS 146 requires a company to recognize costs associated with exit or disposal activities when they are incurred rather than when the company makes a commitment to an exit
or disposal plan. Examples of costs covered by SFAS 146 include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation,
plant closing, or other exit or disposal activity. SFAS 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. We do not expect the adoption
of SFAS 146 to have a material effect on our financial position or results of operations.

FACTORS AFFECTING FUTURE PERFORMANCE

The market for our common stock is limited and price changes may be volatile.

The shares of our common stock are not traded on an exchange or through the Nasdaq National Market or the Nasdaq SmallCap Market. Instead, our shares are traded
over-the-counter and the market for these shares is not as developed as it would be if our shares were listed on an exchange or included in the Nasdaq National or SmallCap
markets.

The
market price of our common stock is expected to be volatile for the foreseeable future. Factors such as quarterly fluctuations in results of operations, the announcement of new
contracts or changes in either earnings estimates or investment recommendations by stock market analysts, among others, may cause the market price of our common stock to fluctuate, perhaps
substantially. In addition, in recent years the stock market in general, and the shares of companies in the technology sector in particular, have experienced extreme price fluctuations which may
continue for the foreseeable future. These broad market and industry fluctuations may adversely affect the market price of our common stock. Further, a share of our common stock currently falls within
the SEC's definition of a "penny stock." The SEC has special disclosure requirements which broker-dealers must follow for most transactions in penny stocks. In addition, many broker-dealers will not
deal in penny stocks. These factors may further limit the market for our common stock.

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Our Credit Arrangements Limit Our Ability to Pay Dividends

We do not anticipate paying cash dividends on our common stock in the foreseeable future. In addition, our debt instruments restrict our ability to pay cash
dividends on our common stock. Moreover, we are a holding company and our ability to pay dividends is dependent upon the receipt of dividends from our direct and indirect subsidiaries.

Our Substantial Indebtedness Could Adversely Affect Any Investment in Securities Outstanding From Time to Time

We have incurred significant indebtedness and may incur significant additional amounts of indebtedness in acquiring other assets or companies. Our operations do
not provide enough cash to service our indebtedness. Our indebtedness could have important consequences. For example, it could:



Our
ability to make payments on and to refinance our indebtedness or preferred stock and to fund capital expenditures and other activities depends on our ability to generate cash either
from operations or from investing or other financing activities. To date, we have generated the bulk of our cash flow from the sale of securities or by borrowing money. There is no assurance that we
will be able to continue generating cash in this fashion, particularly if our operating subsidiaries do not begin generating cash. Our ability to generate cash is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are beyond our control. We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure you
that we will be able to
refinance any of our indebtedness, including our credit facilities, on commercially reasonable terms, if at all.

A Change of Control May Be Difficult

Our certificate of incorporation contains, among other things, provisions authorizing the issuance of "blank check" preferred stock. We are also subject to
provisions of Delaware law which affect merger and other change of control transactions. These provisions could delay, deter or prevent a merger, consolidation, tender offer, or other business
combination or change of control involving us that our stockholders may consider to be in their best interests.

The Sale of a Substantial Number of Shares of Our Common Stock in the Public Market Could Adversely Affect the Market Price of Our Common Stock

As of November 30, 2002, a total of approximately 10.2 million shares of our common stock were issuable on exercise of options or warrants
previously issued by us or on conversion of outstanding preferred stock or reserved for issuance under a stock grant plan approved by our board of directors in June 2002. Sales or the
expectation of sales of a substantial number of shares of our common stock, including shares issuable upon exercise or conversion of outstanding options, warrants or preferred stock, likely would have
an adverse effect on the prevailing trading price of our common stock.

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Satellite and Direct Broadcast Satellite Technology Could Fail or Be Impaired

Direct broadcast satellite technology is highly complex and is still evolving. As with any similar product or system, this technology might not function as
expected or may not last for its expected life. If any of the DirecTV satellites are damaged or stop working partially or completely for any of a number of reasons, DirecTV customers would lose
programming. In turn, we likely would lose customers, which could materially and adversely affect our operations, financial performance and the trading price of our common stock.

We do not control DirecTV

We are an intermediary for DirecTV and do not control DirecTV or have any input on its programming. DirecTV generally purchases its programming from third
parties. DirecTV's success, and
therefore ours, depends in large part on DirecTV's making good judgments about programming sources and ability to obtain programming on favorable terms. We have no control or influence over DirecTV.

Increases in Programming Costs Could Adversely Affect Our Direct Broadcast Satellite Business

Programmers could increase the rates that DirecTV pays for programming. As a result, our costs would increase. We would be faced with either increasing our rates
and potentially losing customers or suffering a reduction in our margins. Further, the rules implementing the law requiring programming suppliers that are affiliated with cable companies to provide
programming to all multi-channel distributors, including DirecTV, on nondiscriminatory terms are scheduled to expire in 2002. If these rules are not extended, these programmers could increase
DirecTV's costs, and therefore our costs. If our costs increase and we therefore increase our rates, we may lose customers. If we do not increase our rates, our costs, revenues and financial
performance could be adversely affected.

Replacement Of The Current DirecTV Satellites Could Adversely Affect Our Business

We may or may not be able to continue in the direct broadcast satellite business after the current DirecTV satellites are replaced. If we can continue, we cannot
predict what it will cost us to do so. Our revenues and financial performance would be adversely affected if we are not able to continue in the direct broadcast business or if we cannot locate
suitable replacement programming for our customers.

The Effect of New Federal Satellite Television Legislation on Our Business Is Unclear

On November 29, 1999, former President Clinton signed the Satellite Home Viewer Improvement Act of 1999. This act contains provisions that will be phased
in over time. In addition, the FCC and other federal agencies have undertaken rulemakings and studies in connection with this legislation. We cannot predict the effect of this new law on our business.

The
Satellite Home Viewer Improvement Act resolved many of the issues between the networks and the direct broadcast satellite industry regarding retransmission of network programming to
direct broadcast satellite subscribers. Generally, the act preserves the satellite industry's right to retransmit distant network programming to subscribers in "unserved" areas. It also extends,
through December 31, 2004, the satellite industry's right to retransmit, for a royalty, independent programming, from so-called "superstations," to subscribers as "distant" signals.
Further, satellite carriers are required to deliver signals only to households that cannot clearly receive over-the-air network signals with a rooftop antenna.

The
Satellite Home Viewer Improvement Act also directs the FCC to take actions to prescribe the picture quality standard that the FCC uses to predict what households do not receive a
strong enough network broadcast signal over-the-air and therefore are eligible to receive distant network signals. The FCC has initiated a rulemaking proceeding to consider
this standard. The effect on our business of

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these FCC actions and other studies and rulemakings that the FCC will undertake cannot be predicted at this time. The FCC may define these standards in a manner that negatively affects our business.

We Could Lose Money Because of Signal Theft

Each year, the unauthorized receipt of direct broadcast or cable signals, or "signal theft," costs the industry significant revenues. To date, signal theft has
been contained. If, however, signal theft becomes widespread, our revenues likely would suffer. DirecTV uses encryption technology in an effort to prevent people from receiving programming without
paying for it. However, the technology is not foolproof, and there is no assurance that we will be protected from signal theft.

Direct Broadcast Satellite Services Face Competition from Cable Operators

Direct broadcast satellite services compete directly with cable operators. Although direct broadcast satellite systems have enjoyed certain competitive
advantages, many cable television operators are making significant investments to upgrade their systems from analog to digital. This upgrade will significantly increase the number of channels that
cable television operators can provide to their customers and the quality of the transmission, potentially eroding the advantages inuring to direct broadcast satellite systems. In addition, many cable
television operators are upgrading their systems to provide their customers with high-speed Internet access. These upgrades could make cable television a more attractive alternative for
property owners and consumers, which could have an adverse effect on our direct broadcast satellite business.

Direct Broadcast Satellite Equipment Shortages Could Adversely Affect Our Direct Broadcast Business

There have been periodic shortages of direct broadcast satellite equipment. These shortages may occur in the future. During periods of shortage, we may be unable
to accept new subscribers and, as a result, potential revenue could be lost. If we are unable to obtain direct broadcast satellite equipment in the future, or if we cannot obtain this equipment on
favorable terms, our business and results of operations could be adversely affected.

We Face Other Regulatory Risks

The direct broadcast satellite, television broadcast, and cable industries are subject to regulation by the FCC under the Communications Act of 1934 and, to a
certain extent, by state and local authorities. If the Communications Act is amended or abolished, it may adversely affect our business. In addition, DirecTV depends on FCC licenses to operate its
digital broadcast satellite service. If the FCC cancels, revokes, suspends, or fails to renew any of these licenses, our results of operations and financial condition and, hence, the trading price of
our common stock would be adversely affected.

We Have a History of Substantial Losses; We Expect Them to Continue; Losses Could Adversely Affect Our Stock Price and Access to Capital Markets

We have never made a profit. Our administrative costs and interest on our debt exceeds our revenues. Continuing losses could adversely affect our access to
capital markets and the trading price of our common stock.

We Face Significant Competition; the Competitive Landscape Changes Constantly

We compete with other multichannel programming distributors, including other direct broadcast satellite operators, direct-to-home
distributors, cable operators, wireless cable operators, Internet providers and local and long-distance telephone companies. These competitors may be better capitalized than we are and may
be able to offer more competitive packages or pricing than we or DirecTV can offer. Many of our competitors have substantially greater financial, technical and marketing resources, larger customer
bases, longer operating histories, greater name recognition and

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more established relationships in the industry. In addition, a number of these competitors may combine or form strategic partnerships. As a result, our competitors may be able to offer, or bring to
market earlier, products and services that are superior to our own in terms of features, quality, pricing or other factors. Our failure to compete successfully with any of these companies would have a
material adverse effect on our business and the trading price of our common stock.

Increased
competition also may result in reduced commissions and loss of market share. Further, as a strategic response to changes in the competitive environment, we may from time to
time make certain pricing, service or marketing decisions or acquisitions that could have a material adverse effect on our business and the trading price of our common stock.

We Expect to Need Additional Capital in the Future and it May Not Be Available on Acceptable Terms

We anticipate incurring substantial costs to install, operate and maintain our direct broadcast satellite systems and to further implement our business plan,
including our expansion into Mexico if our proposed merger with Las Americas Broadband is approved. We expect to need significant amounts of working capital for infrastructure, marketing, personnel
and general and administrative costs, and to fund existing losses.

We
will need to raise additional capital, either in the form of debt or equity. There is no assurance that additional capital will be available to us on favorable terms, if at all. If we
are not able to fund our capital needs, this would adversely affect our business and financial condition and, therefore, the trading price of our common stock.

Our Future Profitability Is Dependent on the Introduction and Acceptance of Our Broadband and Other Online Services in General and the Completion of our Proposed Merger with
Las Americas Broadband and Execution of its Business Plan in Particular

We anticipate generating revenues in the future from broadband and other Internet services. Demand and market acceptance for these recently introduced services
and products delivered over the Internet is highly uncertain. Critical issues concerning the use of the Internet, such as ease of access, security, reliability, cost and quality of service, exist and
may affect the growth of Internet use or the attractiveness of conducting commerce online. In addition, the Internet and online services may not be accepted as viable for a number of reasons,
including potentially inadequate development of the necessary network infrastructure or delayed development of enabling technologies and performance improvements. To the extent that the Internet and
online services continue to experience significant growth, there can be no assurance that the infrastructure of the Internet and online services will prove adequate to support increased user demands.
In addition, the Internet or online services could lose their viability due to delays in the development or adoption of new standards and protocols required to handle increased levels of Internet or
online service activity. Changes in, or insufficient availability of, telecommunications services to support the Internet or online services also could result in slower response times and adversely
affect usage of the Internet and online services generally and us in particular. If use of the Internet and online services does not continue to grow or grows more slowly than expected, if the
infrastructure for the Internet and online services does not effectively support growth that may occur, or if the Internet and online services do not become a viable commercial marketplace, our
business and the trading price of our common stock could be adversely affected.

We
have entered into a merger agreement with Las Americas Broadband, Inc. See the information under the caption "Proposed Merger with Las Americas Broadband, Inc." Our
ability to achieve profitability depends, in part, on the approval of this merger by our shareholders and the shareholders of Las Americas Broadband and our ability, following the merger, to execute
Las Americas Broadband's business plan calling for, among other things, an expansion into Northern Mexico. If the merger is not approved or we are not able to execute Las Americas Broadband's business
plan, we may be unable to achieve profitability.

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We Need to Hire and Retain Qualified Personnel to Sustain Our Business

We are currently managed by a small number of key management and operating personnel. Our future success depends, in part, on our ability to recruit and retain
qualified personnel. Failure to do so likely would have an adverse impact on our business and the trading price of our common stock. In addition, we do not maintain "key man" insurance on any
employee.

We have recently changed our strategy to focus on a limited number of markets, which increases our regulatory risk and will cause any downturn in these markets to have a
greater adverse effect on our operations than is currently the case.

We
have recently changed our strategy to focus on providing video, data and Internet service in the State of California and in the Northern Baja region of Mexico. As part of this
strategy, we have sold assets located in the Pacific Northwest, Midwest and Southeastern United States, and intend to make similar sales in the future. As a result, our success will be tied more
closely to the economic prospects of a relatively small number of regions. If the economies of these regions experience difficulties, this will have a greater adverse effect on our operations and
financial condition than would be the case if we continued to serve more markets. In addition, we have not previously operated in Mexico, and operating there involves regulatory hurdles not present in
the United States and with which we are not familiar. If we are unable to overcome these hurdles, we will not be able to achieve our anticipated revenues from our operations in Mexico, which will have
a material adverse effect on our financial condition and results of operations.

Various conditions to the parties obligations to proceed with our planned merger with Las Americas have not been satisfied, and if the merger is not completed we may not be
able to execute our business plan.

Under our merger agreement with Las Americas, our obligation, and that of Las Americas, to proceed with the merger are each subject to various conditions. Some of
the conditions to Las Americas' obligations have not been satisfied, including our receipt of a fairness opinion with respect to the transaction by July 15, 2002 and our providing $2,000,000 in
bridge financing to Las Americas by 180 days from the date of the merger agreement. Similarly, we believe that some of the conditions to our obligation to complete the merger have not been
satisfied by Las Americas. However, we are in
discussions with Las Americas regarding a completion of the merger notwithstanding a failure of these conditions. There is no assurance that these discussions will lead to a successful completion of
the merger. If the merger is not completed, we may not be able to execute our business plan. In particular, we may not be able to provide cable television services in Northern Baja, Mexico.

ITEM 3CONTROLS AND PROCEDURES

Based on the evaluation by Mr. Grant Miller, who is both our principal executive officer and chief financial officer, of the effectiveness of our
disclosure controls and procedures conducted as of a date within 90 days of the filing date of this quarterly report, Mr. Miller concluded that, as of the evaluation date,
(i) there were no significant deficiencies or material weaknesses in our disclosure controls and procedures, and (ii) no corrective actions were required to be taken. There were no
significant changes in our internal controls or in other factors that could significantly affect our internal controls after the date of our most recent evaluation of the controls. We continue to
monitor our controls and procedures on an on-going basis and will make any adjustments that we believe will enhance their effectiveness.

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PART IIOTHER INFORMATION

ITEM 1LEGAL PROCEEDINGS

In September 2001 Van Raden Properties, Inc., Greystone Manor Limited Partnership and Southmoor Limited Partnership filed an action against our
subsidiary, Direct Digital Communications, Inc., in the District Court, County of Cass, State of North Dakota. The plaintiffs, which own and operate apartment buildings and mobile homes
throughout North Dakota and Minnesota, entered into several contracts with Direct Digital for provision of satellite television services. The plaintiffs sought a declaratory judgment that, due to
Direct Digital's alleged failure to provide quality service, the contracts should be terminated. On August 13, 2002, the court issued an order terminating the contracts between Direct Digital
and the plaintiffs and ordered that it pay a total of approximately $81,000, consisting of damages and costs and expenses, to the plaintiffs.

On
April 19, 2002, Fairway Center Associates, L.L.C. filed a complaint against Direct Digital in the Superior Court of the State of Washington for King County. The complaint
purports to state a claim for breach of contract against Direct Digital arising out of a commercial lease entered into between
Fairway and Direct Digital, and seeks, among other relief, damages of approximately $114,000. We believe that this action is without merit and intend to vigorously defend it on behalf of Direct
Digital. In June 2002, OnePath Networks filed an action against Direct Digital in New Jersey state court located in Essex County, New Jersey, seeking the sum of $138,000 in connection with an
alleged breach of contract.

On
July 15, 2002, The Telecom Group, which does business under the name Gale Telecom Services, filed a complaint against Direct Digital in the Superior Court for Sacramento
County, California. In the lawsuit The Telecom Group alleges that Direct Digital owes approximately $89,000 for satellite video construction and maintenance services provided by The Telecom Group.

On
August 16, 2002, L.A. Commercial Group, Inc., which does business under the name Continental Commercial Group, filed a lawsuit against Cable Concepts, Inc.,
seeking a judgment in the amount of approximately $62,000 for money allegedly owed to the plaintiff for television programming. On October 24, 2002, the plaintiff made a request for entry of
default and entry of judgment in the amount of approximately $67,000, which includes the money allegedly owed, plus interest, costs and attorneys' fees.

ITEM 2CHANGES IN SECURITIES

In July, 2002, we commenced an offering of up to $10,000,000 of our common stock. To date we have raised $229,353 in the offering through the sale of
114,676 shares at a price of $2.00 per share. The price per share of the shares sold in the offering, which is intended to be at a discount to the market value of our common stock, may be
reduced below $2.00. If the price is reduced, we will increase the number of shares to be issued to investors who have already made purchases in the offering.

In
July 2002, we issued a total of 23,161 shares of our common stock to RateXchange Corporation, the parent company of RTX Securities who acted as the placement agent in a prior
offering. Of the shares issued, 9,200 shares were issued as compensation for the services of RTX Securities, and the remaining 13,961 shares were issued in lieu of an $18,000 commission,
which we had agreed to pay RTX Securities in connection with the offering.

We
are also in the process of issuing 30,000 shares of common stock to The Research Works as consideration for $39,900 worth of research services. The effective price per share of
the issuance is $1.33.

No
underwriting commissions or discounts were paid in connection with any of the above transactions. We relied upon the exemption from the registration requirements of the Securities Act

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under Section 4(2) of the Securities Act with respect to the offer and sale of the unregistered securities described above. We conducted no general solicitation or advertising in connection
with any of the transactions described above. Each of the persons that acquired unregistered securities had a preexisting relationship with us or one of our placement agents or founders. In addition,
each purchaser was required to complete a subscription document and confirm their status as a "sophisticated investor." We provided each potential investor with an opportunity to meet with, and ask
questions of, our management.

ITEM 3DEFAULTS UPON SENIOR SECURITIES

We are required to use 10% of the net proceeds from future sales or grants of equity through July, 2004, toward payment of a note payable held by Geneva
Associates Merchant Banking Partners, then for redemption of our Series B Preferred Stock, followed by redemption of our Series C Preferred Stock. We are not currently in compliance with
this requirement as it relates to either the note payable or the preferred stock.

As
of December 15, 2002, we were in default on both the principal and interest of a note payable held by Pacifica Bank in the amount of approximately $1,570,000. We have entered
into an agreement with another corporation to exchange the entire debt on the note for the right to serve our subscribers. There is no guarantee that the transaction will be completed. See the
information under the captions "Liquidity and Capital Resources" and "Subsequent Events" in Part I, Item 2 of this Form 10-QSB.

As
of September 30, 2002, we were in default on both principal and interest of a note payable to a bank in the amount of approximately $1,477,000. The note matures in
April 2004 and we are currently seeking a waiver of some of the note's provisions. There is no guarantee that we will obtain a waiver. See the information under the captions "Liquidity and
Capital Resources" and "Subsequent Events" in Part I, Item 2 of this Form 10-QSB.

We
are also in default for both principal and interest due under a promissory note and reimbursement agreement held by Geneva Associates Merchant Banking Partners totaling approximately
$1,180,000. As of September 30, 2002, we have yet to make a payment of either principal or interest on our obligations under these instruments. See the information under the caption "Liquidity
and Capital Resources" in Part I, Item 2 of this Form 10-QSB.

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

None.

ITEM 5OTHER INFORMATION

None.

ITEM 6EXHIBITS AND REPORTS ON FORM 8-K

| | Number |  | Description of Document                                                                            
| | ------ |  | ---------------------------------------------------------------------------------------------------
| | 10.1   |  | Letter Consulting Agreement with Edward Mooney dated November 24, 2002.                            
| | 99.1   |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| | 99.2   |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

None.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|Dated: December 20, 2002 |  | USA BROADBAND, INC.
|------------------------ |  | -------------------
|                         |  | By:                
|                         |  | Its:               

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CERTIFICATIONS

I, Grant Miller, certify that:

1.    I
have reviewed this quarterly report on Form 10-QSB of USA Broadband, Inc.;

2.    Based
on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.    Based
on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of USA Broadband, Inc. as of, and for, the periods presented in this quarterly report;

4.    USA
Broadband, Inc.'s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) for USA Broadband, Inc. and we have:



5.    USA
Broadband, Inc.'s other certifying officer and I have disclosed, based on our most recent evaluation, to USA Broadband, Inc.'s auditors and the audit
committee of USA Broadband, Inc.'s board of directors:



6.    USA
Broadband, Inc.'s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and
material weaknesses.

|Date: December 20, 2002 |  | /s/ GRANT MILLERGrant Miller, Principal Executive Officer and Chief Financial Officer
|----------------------- |  | -------------------------------------------------------------------------------------

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