|   | U.S. SECURITIES AND EXCHANGE COMMISSION |   |
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| Washington, D.C. 20549 |
|------------------------|

| Form 10-KSB |
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| [X] | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934for the Fiscal Year Ended December 31, 2002 |
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| [ ] | Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934for the Transition Period From ________ to ________ |
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| Commission File No. 1-15383 |
|-----------------------------|

|   | USURF America, Inc. |   |
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| (Name of Small Business Issuer in its Charter) |
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|   | Nevada                                                        |   | 91-2117796                          |   |
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|   | (State or Other Jurisdiction ofIncorporation or Organization) |   | (IRS Employer IdentificationNumber) |   |

|   | 6005 Delmonico Drive, Suite 140, Colorado Springs, Colorado80919 |   |
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|   | (Address of Principal Executive Offices, Including Zip Code)     |   |

|   | (719) 260-6455                                   |   |
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|   | (Issuer's Telephone Number, Including Area Code) |   |

|   | Securities Registered under Section 12(b) of the Exchange Act: |   |
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|   | Title of Each Class |   | Name of Exchange on Which Registered |   |
|--------|---------------------|--------|--------------------------------------|--------|
|   | Common Stock        |   | The American Stock Exchange          |   |

| Securities Registered under Section 12(g) of the Exchange Act: None |
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| Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of theExchange Act during the past 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject of such filing requirements for the past90 days. Yes [X] No [ ]                               |
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| Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-Bcontained in this form, and no disclosure will be contained, to the best of registrant'sknowledge, in definitive proxy or information statements incorporated by reference in Part IIIof this Form 10-KSB or any amendment to this Form 10-KSB. [ ] |
| Registrant's revenues for its most recent fiscal year were $19,683.                                                                                                                                                                                                                                                                               |
| The aggregate market value of the voting stock held by non-affiliates computed based on theclosing price of such stock as of April 10, 2003, was approximately $3,303,120.                                                                                                                                                                        |
| The number of shares outstanding of the issuer's common equity as of April 10, 2003, was77,797,203 shares of common stock, par value $.0001.                                                                                                                                                                                                      |
| Documents Incorporated by Reference: Current Report on Form 8-K, date of event: January16, 2003; Current Report on Form 8-K, date of event: March 10, 2003; and Current Report onForm 8-K, date of event: March 31, 2003.                                                                                                                         |
| Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]                                                                                                                                                                                                                                                                       |

| PART I |
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| Item 1. | Description of Business |   |
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|   | The Company |   |
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|   | In July 1999, we changed our name to "USURF America, Inc.", from "Internet MediaCorporation". We were incorporated on November 1, 1996, under the name "MediaEntertainment, Inc." |
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|   | Our headquarters are located at 6005 Delmonico Drive, Suite 140, Colorado Springs,Colorado 80919; our telephone number is (719) 260-6455. |
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|   | Current Overview |   |
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|   | During 2002, we expanded our business plan beyond solely offering wireless Internet accessservice.  We currently operate as a provider of voice (telephone), video (cable television)and data (Internet) services to business and residential customers.  We also market and selltelecommunications-related hardware and software. |
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|   | Our business plan involves obtaining, through internal growth, as many voice, video anddata customers as possible.  Our growth strategy also includes acquisitions oftelecommunications-related businesses and/or properties which would provide animmediate or potential customer base for our services. |
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|   | In early 2003, we restructured our operations by creating three new subsidiary corporationsthat reflect our operating divisions: |
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| - | USURF Development, Inc. - this subsidiary secures right of entry (ROE) agreementsfor the provision of voice, video and/or data services with owners of multiple dwellingunit (MUD) properties, as well as to “greenfield” developers, that is, developers ofundeveloped land. |
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| - | USURF Systems & Technologies, Inc. - this subsidiary conducts all of ourtelecommunications-related equipment and software sales operations for businesscommunications. |
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| - | USURF Communications, Inc. - this subsidiary, directly and through subsidiaries,provides voice, video and data services to our customers, working in close coordinationwith USURF Development, Inc. |
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|   | References to “us”, “our” and “we” include USURF America, Inc., USURF Development,Inc., USURF Systems & Technologies, Inc. and USURF Communications, Inc. |
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|   | Industry Background. |   |
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|   | The  United  States  cable  and  telecommunications  industry  is large and robust.  In recentyears the  cable  television  industry  has  changed  from a provider  of a single  product,analog  CATV,  into a  competitive  provider of multiple entertainment, information andtelecommunications services. Cable's new broadband  infrastructure  has allowed companiesto expand into services such as telephony,  high-speed  Internet access and digital CATV. |
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|   | As a result of technological and regulatory changes that have occurred over the past fewyears, smaller companies have been able to compete more effectively in the CATV andtelephony markets  traditionally  dominated by larger companies. This  shift has enabledcompanies like ours to become effective competitors to the franchised local cable televisionoperators in the cable television and telephony markets.  In particular, the potential marketfor servicing MDU properties remains largely undeveloped, creating significantopportunities for alternative providers, like us, with the  technological, operational,marketing and administrative ability to manage growth effectively.  Based on its industryexperience, our management has determined that there is a growing market for alternativetelecommunications providers to obtain ROE agreements with MDU property owners. |
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|   | The Internet, commonly known as the World Wide Web, or simply the Web, is a collectionof connected computer systems and networks that link millions of public and privatecomputers to form, essentially, the largest computer network in the world. The Internet hasexperienced rapid growth in recent years and is expected to continue its growth, which iswhy we continue to develop our wireless high-speed, broadband Internet access servicebusiness. |
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|   | Our Business |   |
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|   | We offer voice (telephone), video (cable television) and data (Internet) services to ourcustomers.  We also market and sell telecommunications-related hardware and software.Our management believes our ability to offer bundled telecommunications services hasallowed it to garner ROE agreements with Denver-area MDUs that it would otherwise nothave been able to obtain.  As we develop our business plan, our mode of choice forproviding voice, video and data services will be through leading-edge technology overInternet Protocol (IP) networks.  We have determined that distribution of these services inthis manner will be more cost effective and will complement our developing IP telephonyservices. |
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|   | We currently provide local telephone and dial-up Internet access to customers in Arizona;we provide cable television service to customers in Denver, Colorado; we provide high-speed wireless Internet access service to customers in Denver and Colorado Springs,Colorado; and we market and sell telecommunications-related hardware and softwarethroughout the United States. |
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|   | Assuming we obtain adequate funding, of which there is no assurance, our plan is to expandour markets rapidly, yet prudently,  without sacrificing the quality of our services or thecustomer's experience.  We will seek to grow within our existing markets first,  as webelieve that  geographical clustering enhances overall enterprise value and results inoperating efficiencies.  However, we will continue to be opportunistic in reviewing potentialacquisitions and in examining potential new markets, entering them only if they appear tomake strategic geographic sense and offer the opportunity to achieve immediate scale in themarket.  It is our  expectation  that the  majority of new growth in 2003 will occur withinexisting markets, through both acquisition and internal growth. |
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|   | We  plan on expanding our operations by marketing our telecommunications services byobtaining new ROE agreements through internal sales efforts, as well as through theacquisition of private telecommunications companies.  Where possible, we will seek tomaximize  subscriber  penetrations  and  revenue  by  providing a compelling suite ofbundled communications products and services. |
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|   | We currently have ROE Agreements with four active residential developments in theDenver, Colorado, area.  The terms of these ROE agreements range to 20 years, with anaverage remaining term of approximately 15 years. |
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|   | Telephone (Voice) Services |   |
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|   | At December 31, 2002, we did not provide telephone service to any customers.However, in February 2003, we acquired the customer base of an Arizona-basedcompetitive local exchange carrier (CLEC) and currently provide local, long-distanceand dial-up Internet access service to approximately 1,700 customers.  We provide localtelephone service to nearly all of these customers and long-distance and dial-up Internetservices to a small number of these customers.  We are in the process of obtaining aCLEC licence in Arizona.  We are aware of no impediment to our becoming a licensedCLEC in Arizona.  Until we obtain this license, we have contracted with an Arizona-licensed CLEC, DJM Communications, Inc., to provide services to our customers on anagency basis.  Currently, we derive approximately $100,000 in monthly revenues fromour Arizona operations. |
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|   | In January 2003, we acquired DMJ Communications (Colorado), Inc., a small CLEClicensed to operate as such by the State of Colorado.  At the time of acquisition, thisCLEC provided local telephone service to approximately 100 customers.  Ourapplication to the Colorado Public Utilities Commission (PUC) for approval of thechange in ownership of this CLEC recently has become stalled.  Due to deficiencies inthe acquired CLEC’s administrative filings, we anticipate that approval of our PUCapplication will not occur in the near term, if at all.  Should our PUC applicationultimately be denied, we may elect to rescind the acquisition.  Due to thesecircumstances, none of the acquired customer base remains. |
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|   | In Arizona, through our agency agreement with DMJ Communications, we are capableof providing all of the most popular residential telephone features, including callwaiting, call forwarding, caller ID and voice mail. Our switching systems aresoftware-driven and capable of feature enhancement and efficient, remote servicingthrough software interfaces. We currently provide long-distance service  through ourswitches by buying  wholesale minutes from interexchange carriers. |
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|   | Cable Television (Video) Services |   |
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|   | At December 31, 2002, we did not provide cable television service to any customers,although our cable television passings totaled 1,409 at that date. Currently, we providecable television service to 161 customers in Denver, Colorado, with total passings of2,022.  Our monthly revenues derived from our cable television services isapproximately $5,000. |
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|   | We deliver our cable television services by  re-transmitting programming signals viaantenna and principal head-end electronic equipment that receive  and process signalsfrom satellites, via both analog and digital transmissions.  Currently, we obtain ourprogramming through program access agreements with Redline PerformanceManagement Group and DirecTV.  We also process and distribute  off-air  transmissionsignals from local network affiliates and independent  television stations.  For analogservices,  our system  architecture  generally  eliminates  the need for set-top converterboxes when it is connected to cable-ready television sets, and enables  us to  activateservice  for  subscribers  without  entering  into  an apartment.  For digital services,  aset-top  converter box is required.  In the future,  we plan to employ the  technologythat  provides  the most  attractive return on invested capital without compromisingservice. |
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|   | We offer our subscribers a complete array of popular cable television programming atcompetitive prices. Our expanded basic retail prices generally approximate the ratescharged by the incumbent franchise  CATV  operators, and includes uninterruptedfull-length motion pictures, regional sports channels, sporting events, concerts and otherentertainment programming.   Premium channels, including  HBO(TM), Cinemax(TM)and Showtime(TM) are generally offered individually or in discounted  packages withbasic or other services. Digital service can be added and includes additional expandedbasic channels, music channels, multiplex  premium channels, pay-per-view availabilityand an interactive programming guide. |
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|   | Internet (Data) Services |   |
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|   | Wireless Access |   |
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|   | What is Wireless Internet Access? |   |
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|   | "Wireless Internet" is a relatively new type of communications spectrumdesignated by the FCC. Wireless Internet access requires a transmission facilitymaintained by an ISP employing a wireless system and the user's modem (atransmitter/receiver modem) equipped with an antenna. Wireless Internetcapability allows users to access the Internet from a stationary computer or, insome situations, from a mobile, lap-top computer. |
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|   | Prior to the arrival of our new management, in April 2002, we marketed ourproprietary wireless Internet access system under the “Quick-Cell” brand name.Our management has continued to market our wireless communicationsproducts under the “Quick-Cell” name, but no longer relies on a proprietaryproduct design.  Rather, we now use “off-the-shelf” components in constructinga wireless Internet system and delivering our wireless Internet services tocustomers.  This change in equipment strategy, is based on our management’sbelief that the off-the-shelf components, though more expensive, offer greaterreliability and greater certainty of supply, as numerous manufacturers nowproduce equipment that meets all Wi-Fi (wireless fidelity) 802.11(x) standardsthat utilize the unlicensed 2.4 and 5.8GHz 802.11b spectra. |
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|   | The number of server modems needed for a particular system depends on a fewfactors: |
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| - | the geographic size of the city to be served - the larger the city, thegreater the number of server modems required; |
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| - | the population density of the city to be served - the greater thepopulation density, the greater the number of server modems required; |
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| - | the terrain of the city to be served - the hillier the terrain, the greater thenumber of server modems required; and |
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| - | the density of foliage of the city to be served - more densely foliatedareas require a greater number of server modems. |
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|   | Within a particular system, each additional server modem is configured to sharetransmitted data with the other server modems, so as to provide anuninterrupted connection to the Internet. |
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|   | Data transmission speeds remain constant within a system's transmission radius,regardless of the distance from the server modem. On the fringes of a system'stransmission radius, a customer's connection may fade in and out, similar to thereception of distant AM radio stations. To avoid this circumstance, we will notinstall a customer modem within the fringe areas. |
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|   | Current Markets |   |
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|   | We are currently developing a wireless Internet network that is to serviceCentral Denver.  Our progress has been slowed, due to our need to move ourprimary server cell to a location with a greater bandwidth connection to theInternet.  We currently provide high-speed, broadband wireless Internet accessto a few customers in Denver.  However, beginning in the second half of April,we will begin to market this service aggressively to Central Denver businesses,including office building owners or property managers who may be interested inproviding our wireless Internet access service to their tenants on a building-widebasis. |
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|   | In addition to our Denver-area wireless Internet operations, we have started todevelop a wireless Internet network in Colorado Springs.  We currently providehigh-speed, broadband wireless Internet access to a few business customers andan MDU property on a beta-test basis.  Near the end of the second quarter of2003, we expect to begin to market this service aggressively in ColoradoSprings. |
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|   | In each of our markets, our progress in developing our wireless Internetbusiness has been impaired by a lack of capital.  Unless we obtain neededcapital, the growth of this business segment will continue to be slow. |
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|   | From September 2001 through the end of 2002, we had wireless Internetoperations in Del Rio, Texas.  Due to geographic separation from our Colorado-based operations, our management determined to abandon the Del Riooperations.  At the time of this decision, we had approximately 50 customers inDel Rio and customer response has been excellent, but growth there had beenstymied by a lack of capital. |
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|   | Cable Access |   |
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|   | We are capable of offering high-speed Internet dedicated service via cable modemsusing the existing cable infrastructure at our MDU properties.  Currently, we do notprovide this service.  However, it is likely that, during 2003, we will begin to offerthis service in certain of our MDU properties.  If and when we begin this service,the subject property will be connected to the Internet via a T-1 telephone line thatwould be leased from a bandwidth provider. |
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|   | Dial-up Access |   |
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|   | We currently provide dial-up Internet access to a small number of our customers inArizona.  It is our intention to provide this service to customers who request it, butwe do not intend to market actively this service. |
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|   | As recently as September 2000, our CyberHighway subsidiary, now in Chapter 7bankruptcy, provided dial-up Internet service to about 25,000 customers. By theend of February 2001, we had lost all of these customers. |
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|   | Equipment and Software Sales |   |
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|   | In February 2003, we acquired assets from a telecommunications company that haveenabled us to begin to operate as a seller of telecommunications-related hardware andsoftware.  We offer a broad array of products and the start to this part of our businesshas shown some success.  In March 2003, we booked approximately $45,000 inequipment sales. |
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|   | Our Sales and Marketing Strategy |   |
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|   | For our bundled (voice, video and/or data) telecommunications services, we targetMDU properties and the tenants living there.  Our selling cycle for obtaining ROEagreements that will permit us to offer our services to MDU tenants includes  proposalpresentation, contract negotiations and service implementation, a cycle that can requireup to nine months to complete. While we plan to bolster our growth throughacquisitions, securing new ROE agreements through direct marketing efforts is anintegral part of our strategy to grow and achieve operating efficiencies. |
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|   | While royalty arrangements encourage property owners to enter into ROE agreementswith us, we believe that delivery of competitive products and superior customer servicethat are targeted to our MDU niche market are the key to obtaining ROE agreements.We use a marketing strategy whereby we concentrate on entering into ROE agreementswith the large national owners of high-quality   MDU properties that own properties inour markets, in conjunction with marketing our services to smaller owners whoseproperties typically lie within a single geographic market. |
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|   | We offer property owners and management companies a great amenity that promotesincreased occupancy, as well as an attractive new revenue source in the form ofroyalties. Under the ROE agreements,  property owners generally are paid a percentageof net monthly receipts collected for services delivered to subscribers  on a property.The percentage  paid to property owners under this arrangement  typically varies,depending upon the total number of subscribers to our services in relation to the totalnumber of dwelling units on a property.  We attempt to focus our efforts on negotiatinglong-term ROE agreements with owners of MDU portfolios, because we believe thatstrategic relationships with these owners are critical to market penetration andlong-term success.  These ROE agreements, to date, generally provide for a term ofseven  to 20 years and give us the right to be the preferred provider of voice, videoand/or data services on the subject property.  The property owner typically agrees tomarket and promote our services on a property. |
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|   | Once we have obtained the ROE agreement and services have been activated on theproperty, we utilize the on-site leasing personnel to market the services to the residents,which typically takes place at the time the residents sign their leases.  The services arepackaged at competitive  prices,  with discounts for  signing-up for two or moreservices.  For the resident,  this easy sign-up process  eliminates  the need  for them tocontact  several  different  service providers,  and saves  them money and time.  Inaddition,  we attempt to schedule service installations prior to the move-in date of theresident.  This eliminates the  inconvenience for the resident of having to meet theinstallation  technicians,  as is the case with the competition.  All of our services arebilled on a single  invoice,  and the resident only has one company to contact for anyquestions or concerns.  We believe that the  combination  of convenience,  savings, andquality service presented to the resident at the time of move-in is a very powerfulmarketing  advantage.  Additionally,  the leasing agents  are  given  an  incentive  to  sellthe  services,  since  we pay  them commissions  (directly or through the propertyowner's  management  company) for signing up residents. The leasing agents are trainedby us and are provided with marketing and other support  literature to facilitate  sales ofthe products and services. |
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|   | Our  acquisition  strategy is to pursue  properties that we can acquire for costscomparable or below those of a standard build-out.  These generally tend to be ROEagreements held by small private telecommunications providers. |
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|   | During 2003,  we may enter a new market or new markets, depending on the level offunding we are able to obtain.  We expect a large majority of our new passings growthwill occur from acquisitions with the remaining from internal growth  activities fromlocal marketing efforts. |
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|   | Key Suppliers |   |
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|   | We currently have agreements with Redline Performance Management Group andDirecTV for cable television programming.  One of our MDU properties in Denver.While alternative suppliers do exist for analog and digital cable programming, thesealternatives are either not as robust and/or are not as economically advantageous as theproduct(s) offered by these programming suppliers.  As a result,  if we were required toreplace Redline and DirecTV for any reason, it is likely we would not be able to offerour current  programming  packages to tenants or that the cost of providing thesepackages would significantly increase. |
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|   | Customer Service and Support |   |
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|   | We are committed to the highest levels of customer satisfaction. We believe thatmaintaining high levels of customer satisfaction will remain as a key competitive factor.Currently, we provide customer support during normal business hours. Our customersupport operations can be expected to expand, if and when we obtain needed capital. |
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|   | Competition |   |
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|   | The market for cable television and telephony services is extremely competitive. Under theterms of our ROE agreements, we generally are required to provide  products and servicesthat are competitive with those offered by other providers.  We compete for customers onthe basis of price, services offered and customer service.  Local franchised cable televisionproviders, such as Comcast and Adelphia, represent our principal competition.  Thesecompetitors are typically very large  companies with significantly greater resources thanours. |
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|   | While technology and regulatory changes have allowed companies like us to compete moreeffectively with the incumbents, there is no assurance that we will be able to develop andexecute upon  financially viable business models. As is the case with us, telecommunicationsservice providers like us have greater  flexibility to customize their products and servicesthan their competition, but they typically pay higher programming costs than the localfranchise cable television providers and do not have the scale of those businesses to  absorbfixed administrative, customer service and field operations costs. Additionally, companieslike us that serve MDUs incur the higher churn associated with these residents (the averagelife cycle of an apartment resident is 18 months  vs. seven  years for a  single-familyhousing  resident), which results in a greater percentage of marketing costs and customerservice calls than those of the incumbent providers. |
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|   | We believe that the primary competitive factors determining success as an Internet accessprovider are: a reputation for reliability and high-quality service; effective customersupport; access speed; pricing; effective marketing techniques for customer acquisition;ease of use; and scope of geographic coverage. We believe that we will be able to addressadequately all of these factors, except that we will not be able to offer scope of geographiccoverage for the foreseeable future. It is also possible that we will not address any of thesecompetitive factors successfully. Should we fail to do so, our business would likely neverearn a profit. We currently lack capital necessary to compete effectively. |
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|   | We face competition from other wireless Internet access providers, as well as large,national providers of cellular telephone service providers who are beginning to enter thismarket. |
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|   | The market for the provision of dial-up Internet access services, in which our Quick-Cellwireless Internet access service will compete, is extremely competitive and highlyfragmented. Current and prospective competitors include many large, nationally-knowncompanies that possess substantially greater resources, financial and otherwise, marketpresence and brand name recognition than do we. We currently compete, or expect tocompete, for the foreseeable future, with the following: national Internet service providers,numerous regional and local Internet service providers, most of which have significantmarket share in their markets; established on-line information service providers, such asAmerica Online, which provide basic Internet access, as well as proprietary information notavailable through public Internet access; providers of web hosting, co-location and otherInternet-based business services; computer hardware and software and other technologycompanies that provide Internet connectivity with their products; telecommunicationscompanies, including global long distance carriers, regional Bell operating companies andlocal telephone companies; operators that provide Internet access through television cablelines; electric utility companies; communications companies; companies that providetelevision or telecommunications through participation in satellite systems; and, to a lesserextent, non-profit or educational Internet access providers. |
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|   | With respect to potential competitors, we expect that manufacturers of computer hardwareand software products, as well as media and telecommunications companies will continue toenter the Internet services market, which will serve to intensify competition. In addition, asmore consumers and businesses increase their Internet usage, we expect existingcompetitors to increase further their emphasis on Internet access and electronic commerceinitiatives, resulting in even greater competition. The ability of competitors or others toenter into business combinations, strategic alliances or joint ventures, or to bundle theirservices and products with Internet access, could place us at a significant competitivedisadvantage. We currently lack capital necessary to compete effectively and we may neverobtain enough capital to permit us to compete effectively in our markets. |
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|   | Moreover, we expect to face competition in the future from companies that provideconnections to consumers' homes, such as telecommunications providers, cable companiesand electrical utility companies. For example, recent advances in technology have enabledcable television operators to offer Internet access through their cable facilities atsignificantly higher speeds than existing analog modem speeds. These types of companiescould include Internet access in their basic bundle of services or offer such access for anominal additional charge. Any such developments could reduce our market share, therebyimpairing our ability to earn a profit. |
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|   | Regulation |   |
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|   | General |   |
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|   | Our telecommunications business is subject to regulations under both state and  federaltelecommunications  laws  which  are fluid and  rapidly  changing.  On the state level,rules and policies are set by each state's Public Utility Commission or Public ServiceCommission (collectively, PUC). At the federal level, the FCC, among other  agencies,dictates  the  rules  and  policies  which  govern  interstate communications  providers.The FCC is also the main agency in charge of creating rules and  regulations toimplement the 1996 Telecommunications Act (the "1996 Act"). |
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|   | Telephony Regulation |   |
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|   | In providing telecommunications services to our customers, we are authorized tooperate as either a shared tenant service (STS) provider or a  competitive localexchange carrier (CLEC), as well as an interexchange carrier (IXC).  Few states imposecertification  and/or tariffing  requirements on STS providers, while virtually all statesdo so with respect to CLECs. While the FCC and a majority of states imposecertification  and/or tariffing  requirements on IXCs,  federal and state regulation ofIXCs has been relaxed  substantially over the  past  few  years.  CLECs  remain  subjectto a wide  array  of  regulatory constraints  and  obligations.  By contrast, regulation ofSTS  providers  is minimal. In the near future, we expect to become certified as a CLECin the State of Arizona and  intend to seek like  authority when we enter other states.We also expect to gain authority to operate as an IXC in the same state and will seekauthority to act as an IXC to the extent such authority is required when we enter newstates. |
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|   | The 1996 Act opened the local telecommunications  markets to competition bymandating the  elimination of many legal,  regulatory,  economic and operationalbarriers to competitive  entry. These changes provided us with new opportunities toprovide local telephone  services on a more  cost-effective  basis. |
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|   | Cable Television Regulation |   |
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|   | Regulatory  Status and  Regulation  of Private Cable  Operators.  Franchise cableoperators are subject to a wide range of FCC  regulations  regarding such matters  asthe  rates  charged  for  certain  services,  transmission  of local television broadcastsignals, customer service standards/procedures, performance standards  and  systemtesting  requirements.   In  addition,   the  operator's franchise,  which  can be  issued  atthe  municipal,  county  or  state  level, typically imposes  additional  requirements foroperation.  These relate to such matters as construction, provision of channel capacityand production facilities for public educational and government use, and the payment offranchise fees and the provision of other "in kind" benefits to the city. |
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|   | The operator of a video distribution system that serves subscribers without using anypublic right-of-way, as we do, referred to generally as a private cable operator (PCO),is exempt from the majority of FCC regulations applicable to franchised systems whichdo use public rights-of-way.  Moreover, a state or local government cannot impose afranchise requirement on such operators. |
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|   | In an attempt to remain  exempt from  extensive  FCC  regulation  and local franchisingrequirements,   we  intend  to   continue  to  confine  our  video distribution  facilities tocontiguous  private property and obtain  programming primarily via satellite  masterantenna  television  (SMATV)  facilities  and digital (DBS) transport.  We intend to be aprivate  cable  operator in all of the markets that we serve. |
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|   | Access to Property.  Federal law provides  franchise cable operators access to  publicrights-of-way  and  certain  private  easements.   These  provisions generally  have beenlimited by the courts to apply only to external  easements and  franchise  operatorshave not been able to use these  rights to access the interior  of  MDUs  without  ownerconsent.  In some  jurisdictions,  franchise operators  have been able to use state orlocal  access  laws to gain  access to property over the owner's objection and inderogation of a competing  provider's exclusive contractual right to serve the property.These statutes,  referred to as  "mandatory  access"  provisions,  typically  empoweronly  franchise  cable operators  to  force  access  to an  MDU to  provide  service  tothe  residents regardless  of whether the owner  objects or has entered into a contractwith an alternative  provider of video services such as us. Thus, in jurisdictions where amandatory  access  provision has been enacted,  a franchise  operator would be able toaccess an MDU and provide  service in competition  with us regardless of whether wehave an  exclusive  ROE with the  owner.  The  ability  of  franchise operators  to forceaccess to an MDU and take a portion of the  subscriber  base could  negatively  effectour operating margin at a particular  property.  It is often the case,  particularly  at thelocal  level,  that the  mandatory  access provision is suspect under  constitutionalprinciples because,  for example, it does not provide the MDU owner compensation forthe "taking" of its property. |
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|   | The FCC has granted direct broadcast  satellite (DBS) and  multi-channel, multi-pointdistribution  service (MMDS) operators rights on a national basis similar to themandatory  access  provided to franchise  cable operators in some state and localjurisdictions.  The FCC has adopted rules prohibiting homeowners associations,manufactured  housing parks and state and local  governments from imposing  anyrestriction  on  a  property  owner  that  impairs  the  owner's installation,  maintenanceor use of DBS and MMDS antennas one meter or less in diameter  or  diagonalmeasurement.   We do not believe our  business will be significantly impacted by theserights. |
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|   | Inside Wiring.  In 1998, the FCC issued rules  governing the disposition of inside wiringby incumbent  operators in MDUs upon  termination  of service when the incumbentoperator owns the wiring. In some instances,  a provider, such as us, faces  difficulty  intaking over a property  because the ownership of the wiring is  uncertain or  contestedand the property  owner is hesitant to allow installation  of  additional  wiring.  Theserules, in general, were designed to foster competition from new providers, require theincumbent operator to choose between sale, removal or abandonment of the wiringwithin certain time constraints. |
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|   | Regulation of Franchise  Cable  Television  Rates.  The FCC,  through localgovernments,  regulates the rates that  franchised  cable systems can charge for basicmonthly service and certain customer premises  equipment, unless “effectivecompetition” exists in a local market.  This general  requirement  does not apply tocharges for pay services.  Further,  the regulations allow certain bulk discounts to MDUcustomers,  enabling  franchised cable systems to be more competitive with privatecable operators such as us. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Actions by the FCC that expand the freedom of  franchise  operators  to set rates or thetermination of rate  regulation  altogether  could allow franchise operators to subsidizecompetition at MDUs through their  citywide  operations. This could have a materialadverse effect on our business,  financial  condition and results of operations. |
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|   | Copyright.  The  broadcast  programming  to be  distributed  by us contains copyrightedmaterial.  Accordingly,  we pay  copyright  fees  for  use of  that material (copyrightliability for  satellite-delivered  programming is typically assumed by the supplier).  TheU.S. Copyright Office has ruled that private systems located in "contiguouscommunities" (or operating from one head-end) will be treated as one system and thatthe revenue for such  systems must be combined in the  calculation  of copyright  fees.If the combined  revenue figure is high enough,  it results in more  complicated  feecalculations  and higher fees. We intend to structure  our  programming  to minimize therevenue  associated  with retransmission  of  television  and radio  broadcasts in aneffort to maintain a simplified  filing status and to reduce our copyright  liability in theevent we must file under the more complicated formula. |
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|   | Wireless Internet Regulation |   |
|--------|------------------------------|--------|

|   | Our wireless Internet access products operate in unregulated spectra, the 2400 MHz,5200 MHz and 5800 MHz being the primary frequencies, and we expect that suchspectra will remain unregulated. |
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|   | Regulation of Internet Access Services |   |
|--------|----------------------------------------|--------|

|   | We provide Internet access, in part, using telecommunications services provided bythird-party carriers. Terms, conditions and prices for telecommunications services aresubject to economic regulation by state and federal agencies. As an Internet accessprovider, we are not currently subject to direct economic regulation by the FCC or anystate regulatory body, other than the type and scope of regulation that is applicable tobusinesses generally. In April 1998, the FCC reaffirmed that Internet access providersshould be classified as unregulated "information service providers" rather than regulated"telecommunications providers" under the terms of the 1996 Act. As a result, we arenot subject to federal regulations applicable to telephone companies and similar carriersmerely because we provide our services using telecommunications services provided bythird-party carriers. To date, no state has attempted to exercise economic regulationover Internet access providers. |
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|   | Governmental regulatory approaches and policies to Internet access providers andothers that use the Internet to facilitate data and communication transmissions arecontinuing to develop and, in the future, we could be exposed to regulation by the FCCor other federal agencies or by state regulatory agencies or bodies. In this regard, theFCC has expressed an intention to consider whether to regulate providers of voice andfax services that employ the Internet, or IP, switching as "telecommunicationsproviders", even though Internet access itself would not be regulated. The FCC is alsoconsidering whether providers of Internet-based telephone services should be requiredto contribute to the universal service fund, which subsidizes telephone service for ruraland low income consumers, or should pay carrier access charges on the same basis asapplicable to regulated telecommunications providers. To the extent that we engage inthe provision of Internet or Internet protocol-based telephony or fax services, we maybecome subject to regulations promulgated by the FCC or states with respect to suchactivities. We cannot assure you that these regulations, if adopted, would not adverselyaffect our ability to offer certain enhanced business services in the future. |
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|   | Regulation of the Internet |   |
|--------|----------------------------|--------|

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

|   | We have six employees, including four officers. All of our officers have entered intoemployment agreements.  In addition, we contract for the services of a few consultants forengineering and installation services. |
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|   | None of our employees is covered by any collective bargaining agreement, nor have weever experienced a work stoppage. Our management believes employee relations to begood. Much of our future success will depend, in large measure, upon our ability tocontinue to attract and retain highly skilled technical, sales, marketing and customer supportpersonnel. |
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|   | Financing Transactions with Fusion Capital |   |
|--------|--------------------------------------------|--------|

|   | First Fusion Capital Financing Transaction |   |
|--------|--------------------------------------------|--------|

|   | In May 2001, we entered into an amended and restated common stock purchaseagreement with Fusion Capital, pursuant to which Fusion Capital agreed to purchase upto $10 million of our common stock. The selling price of the shares was equal to a pricebased upon the market price of our common stock without any fixed discount to themarket price.  In March 2003, this agreement ended, with Fusion Capital havingpurchased all 6,000,000 shares available for sale under the agreement for cash in thetotal amount of approximately $585,000. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Second Fusion Capital Financing Transaction |   |
|--------|---------------------------------------------|--------|

|   | In March 2003, we entered into another similar common stock purchase agreement withFusion Capital, pursuant to which Fusion Capital agreed to purchase up to $10 millionof our common stock. The selling price of the shares will be equal to a price based uponthe future market price of the common stock without any fixed discount to the marketprice.  Sales under this agreement will not commence until such time as we havecompleted a registration proceeding with respect thereto. |
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|   | Risk Factors Concerning Us and Our Common Stock |   |
|--------|-------------------------------------------------|--------|

|   | Because we have a short operating history, thereis a limited amount of information about us uponwhich you can evaluate our business and potentialfor future success. |   |
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|   | We were incorporated in 1996 and have only a limited operating history upon whichyou can evaluate our business and prospects. You must consider the risks anduncertainties frequently encountered by early stage companies in new and rapidlyevolving markets, such as the market for wireless Internet access services. Some ofthese risks and uncertainties relate to our ability to: |
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| - | gain access to sufficient capital with which to support anticipated growth; |
|---|-----------------------------------------------------------------------------|

| - | achieve customer acceptance of our telecommunications products; |
|---|-----------------------------------------------------------------|

| - | expand our customer base and related revenues; |
|---|------------------------------------------------|

| - | compete successfully in a highly competitive market; and |
|---|----------------------------------------------------------|

| - | recruit and train qualified employees. |
|---|----------------------------------------|

|   | We cannot assure you that we will successfully address any of these risks anduncertainties. |
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|   | Unless we obtain $500,000 in new capital, we willbe unable to remain in business. |   |
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|   | During the next twelve months, we will need approximately $500,000 just to continueour operations at their current levels. Absent this amount of funding, we will be unableto continue our operations. |
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|   | We lack the capital necessary to pursue our full-scale business plan. |   |
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|   | We do not possess the capital necessary to pursue our full-scale business plan and thereis no assurance that we will ever obtain enough capital.  In this circumstance, it is likelythat we would be unable to earn a profit. |
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|   | We had an accumulated deficit of $40,807,504(unaudited) as of December 31, 2002, and weexpect to continue to incur losses for theforeseeable future. |   |
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|   | We have had substantial losses since our inception and our operating losses maycontinue in the future. |
|--------|--------------------------------------------------------------------------------------------------------|

|   | We have incurred annual operating losses since our inception. As a result, at December31, 2002, we had an accumulated deficit of $40,807,504 (unaudited). Our grossrevenues for the years ended December 31, 2002 and 2001, were $19,683 (unaudited)and $7,446, respectively, with losses from operations of $3,610,419 (unaudited) and$2,954,189, respectively. Our net losses for the years ended December 31, 2002 and2001, were $3,806,876 (unaudited) and $2,498,468, respectively. We cannot assureyou that we will experience revenue growth, or that we will be profitable in the future. |
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|   | As we pursue our business plan, we expect our operating expenses to increasesignificantly, especially in the areas of sales and marketing. As a result of these expectedcost increases, we will need to generate increased revenues to become profitable.Accordingly, we cannot assure you that we will ever become or remain profitable. Ifour revenues fail to grow at anticipated rates or our operating expenses increasewithout a commensurate increase in our revenues, our financial condition will beadversely affected. Our inability to become profitable on a quarterly or annual basiswould have a materially adverse effect on our business and financial condition. Also, themarket price for our stock could fall. |
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|   | You will suffer substantial dilution in the nettangible book value of the common stock youpurchase. |   |
|--------|-----------------------------------------------------------------------------------------------------|--------|

|   | Should you purchase shares of our common stock at market-level prices, you will suffersubstantial and immediate dilution, due to the lower book value per share of ourcommon stock compared to the purchase price per share of our common stock. Wecannot predict your actual dilution, because dilution will depend on the price at whichyou purchase our common stock. |
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|   | The market price of our common stock willcontinue to be extremely volatile, and it may dropunexpectedly. |   |
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|   | The market price of our common stock has fluctuated significantly in the past and weexpect this volatility to continue in the future. Since January 2000, trading prices forour common stock have ranged from $.04 per share to $11.00 per share. The closingprice of our common stock on April 14, 2003, was $.06. It is possible that the marketprice of our common stock could fall below the price you paid for your shares of ourcommon stock. |
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|   | The stock prices for many telecommunications and high technology companies recentlyhave experienced wide fluctuations and extreme volatility. This volatility has often beenunrelated to the operating performance of such companies, so our stock price coulddecline even if our wireless Internet access business is successful. Also, followingperiods of volatility in the market price of a company's securities, securities class actionclaims frequently are brought against the subject company. To the extent that themarket price of our shares falls dramatically in any period of time, shareholders maybring claims, with or without merit, against us. Such litigation would be expensive todefend and would divert management attention and resources regardless of outcome. |
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|   | Our common stock could be delisted from theAmerican Stock Exchange. |   |
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|   | In July 2002, we were notified by AMEX that we have fallen below the continuedlisting standards of AMEX. We have 18 months in which to regain compliance withAMEX's continued listing standards. We have fallen below certain of AMEX'scontinued listing standards: (1) losses from operations in its two most recent fiscal yearswith shareholders' equity below $2 million; and (2) sustained losses so substantial inrelation to the company's overall operations or its existing financial resources, or itsfinancial condition in relation to its overall operations or its existing financial resources,or its financial condition has become so impaired that it appears questionable, theopinion of AMEX, as to whether the company will be able to continue operationsand/or meet its obligations as they mature. After AMEX reviewed our plan forregaining compliance, we were granted an extension of time (18 months) to regaincompliance with the continued listing standards. We will be subject to periodic reviewby the AMEX staff during the extension period. Failure to make progress consistentwith the plan or to regain compliance with the continued listing standards by the end ofthe extension period could result in our being delisted from AMEX. Should ourcommon stock be delisted from AMEX, it is very likely that the market price for ourstock could drop dramatically. We cannot assure you that we will be able to maintainour listing on AMEX. In addition, should our stock be delisted from AMEX, we wouldbe in default under the Fusion Capital agreement and unable to obtain fundingthereunder. In this circumstance, it is likely that we would not have access to capitalnecessary to sustain our operations. |
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|   | In addition, should our stock be delisted from AMEX, we would be in default under thesecond Fusion Capital agreement and be unable to obtain funding thereunder. In thiscircumstance, it is likely that we would not have access to capital necessary to sustainour operations. |
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|   | If we are unable to maintain our AMEX listing, our common stock would likely beginto trade on the NASD's OTC Bulletin Board and become a "penny stock", as long as ittrades below $5.00 per share. Broker-dealer practices in connection with transactions inpenny stocks are regulated by penny stock rules adopted by the SEC. The penny stockrules require a broker-dealer, prior to a transaction in a penny stock not otherwiseexempt from the rules, to deliver a standardized risk disclosure statement prepared bythe SEC that provides information about penny stocks and the nature and level of risksin the penny stock market. The broker-dealer also must provide the customer withcurrent bid and offer quotations for the penny stock, the compensation of thebroker-dealer and its salesperson in the transaction, as well as the monthly accountstatements showing the market value of each penny stock held in the customer'saccount. In addition, the penny stock rules require that, prior to a transaction in a pennystock not otherwise exempt from such rules, the broker-dealer must make a specialwritten determination that the penny stock is a suitable investment for the purchaser andreceive the purchaser's written agreement to the transaction. |
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|   | These disclosure requirements may have the effect of reducing the level of tradingactivity in the secondary market for a stock that becomes subject to the penny stockrules. Should our common stock return to trading on the OTC Bulletin Board, it can beexpected that investors in our common stock may find it more difficult to profit on theirinvestments in our stock. |
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|   | The resale of shares purchased by Fusion Capitalcould cause the price of our stock to decline,which could impair our ability to obtain neededcapital in the future. |   |
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|   | All of the shares of our common stock issuable to Fusion Capital under our secondagreement with them, up to 22,250,000 shares in total, will be freely tradable, exceptthat Fusion Capital has agreed that it will not sell or otherwise transfer 2,250,000 sharesissued to it as part of its commitment fee until the earlier of the termination of theFusion Capital agreement, our default under that agreement or approximately October2005. Fusion Capital may sell none, some or all of the shares of common stockpurchased from us at any time and from time to time. This circumstance could impairour ability to accomplish our business objectives, due to a potential lack of capital. |
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|   | The lower our stock price at the time FusionCapital makes a purchase, the more shares ofstock Fusion Capital will receive. |   |
|--------|----------------------------------------------------------------------------------------------------------------------------|--------|

|   | Fusion Capital will receive more shares at the time it makes a purchase, the lower theprice of our stock, since the shares covered under the Fusion Capital agreement areissuable at a floating rate based on our stock price. |
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|   | Given the low market price of our common stock, it appears likely that we will beunable to obtain $10 million under the second agreement with Fusion Capital, unless weelect to issue more than the 20,000,000 shares reserved for issuance under thatagreement, which we have the right, but not the obligation, to do, or the market price ofour common stock increases significantly in the near future. We cannot assure you thatthe market price of our common stock will increase at all. |
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|   | Fusion Capital may purchase more than 9.9% ofour common stock. |   |
|--------|----------------------------------------------------------------|--------|

|   | Even though the Fusion Capital agreement restricts Fusion Capital from owning anymore than 9.9% of our stock at any one time, this restriction does not prevent FusionCapital from selling a portion of its holdings and later purchasing additional shares.Thus, it is possible that the total number of shares purchased by Fusion Capital wouldbe greater than 9.9% of the then-outstanding common stock. |
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|   | The existence of our agreement with FusionCapital could cause downward pressure on themarket price of our common stock. |   |
|--------|-------------------------------------------------------------------------------------------------------------------------|--------|

|   | Simply the existence of the Fusion Capital agreement could cause holders of ourcommon stock to sell their shares, which could cause the market price of our commonstock to decline. Also, prospective investors anticipating future downward pressure onthe price of our common stock due to the shares that may be available for sale byFusion Capital could refrain from purchases or effect sales in anticipation of a decline ofthe market price. |
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|   | We may be unable to obtain sufficient capital tosustain our business or pursue our growthstrategy. |   |
|--------|----------------------------------------------------------------------------------------------------|--------|

|   | Currently, we do not have sufficient financial resources to implement our business planor grow our operations. Therefore, excluding any funding that we might receive fromFusion Capital in the future, we will need additional funds to continue our operationsand to grow our business. Assuming we do not receive any further funding from FusionCapital, there is no assurance that we will be able to generate revenues that aresufficient to sustain our operations and we would require additional sources of financingin order to satisfy our working capital needs. Should needed financing be unavailable orprohibitively expensive when we require it, it is possible that we would be forced tocease operations. |
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|   | We have designed a very aggressive growth strategy for our business.  This strategy isexpected to place a significant strain on our managerial, operational and financialresources. In particular, our planned wireless Internet expansion will require significantcapital with which to purchase equipment necessary for the construction andimplementation of systems. If we are unable to secure enough capital, we will be unableto achieve our growth objectives. We cannot assure you that we will be able to obtainenough capital for our growth needs. |
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|   | Even if we are able to access significant funds under the second Fusion Capitalagreement, we will need additional capital to implement fully our growth plans. |
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|   | Because we depend heavily on outside suppliers,our business may suffer, should our suppliers failto perform in a timely manner. |   |
|--------|---------------------------------------------------------------------------------------------------------------------------------|--------|

|   | We depend on third-party suppliers of hardware components and telecommunicationscarriers to provide equipment and communications capacity. The failure of one or moreof our suppliers to perform in a timely manner could cause a significant disruption inour business and cause our operating results to suffer. |
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|   | We have not purchased insurance that covers ouroperations. |   |
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|   | We have not purchased any insurance that would cover property loss or loss of incomewith respect to any of our. Damage to any of our uninsured property could cause aninterruption in our telecommunications services. It is possible that we would be unableto afford to repair any items of damaged equipment, due to our extreme lack of capital. |
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|   | Our failure to manage future growth would hinderour efforts in earning a profit. |   |
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|   | Without additional capital, we will be unable to expand significantly our operations.Should we obtain capital with which to expand, our expected expansion will place asignificant strain on our management and operating systems. In order to accommodatethis sort of growth, we will need to hire and retain appropriate management personnel.We may not be able to hire and retain enough qualified managers. This circumstancewould likely hinder our growth and reduce our chance of earning a profit. |
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|   | If and when we experience our anticipated rapid growth, we may encounter difficultiesin developing and implementing needed internal systems, including our recruiting andmanagement systems. Our failure to do so will reduce the likelihood that we will earn aprofit. |
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|   | We are a new competitor in our markets andconsumer acceptance of our services may not beachieved. |   |
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|   | Because we lack capital with which to engage in significant marketing activities, wemay be unable to secure ROE agreements with enough MDU property owners or toobtain significant numbers of wireless Internet access customers to permit us to earn aprofit. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | We could fail to overcome the severe competitionfor telecommunications customers, which wouldimpair our ability to earn a profit and cause ouroverall financial condition to deteriorate. |   |
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|   | The telecommunications market is highly fragmented and extremely competitive. Asthere are no significant barriers to entry, we expect that competition will intensify overtime. |
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|   | Our cable television competitors include many large, nationally-known companies, suchas Comcast and Adelphia; our telephone service competitors include nationally-knowncompanies, such as Qwest Communications; our wireless Internet access servicecompetitors include many nationally-known companies, such as America Online,Earthlink as well as the locally operating “Bell” companies. These and other companiespossess greater resources, particularly access to capital sources, market presence andbrand name recognition than do we. In addition, we will face competition from otherwireless Internet access providers and larger, national cellular telephone serviceproviders. If we are unable to overcome this severe competition, we do not expect thatwe would earn a profit and our overall financial condition would decline. |
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|   | Our directors and executive officers own enoughof our common stock effectively to controldirectors' elections and thereby control ourmanagement policies. |   |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

|   | Our directors and executive officers own approximately 16% of our currentlyoutstanding common stock. Two of our directors, as well as three other persons, haveentered into a voting agreement relating to the voting in elections of directors.Currently, approximately 21% of our outstanding shares of common stock are subjectto this voting agreement. These shareholders may be able effectively to control theoutcome of corporate actions requiring shareholder approval by majority action. Theirstock ownership may have the effect of delaying, deferring or preventing a change incontrol of USURF America. |
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|   | Our business plan is not based on independentmarket studies, so we cannot assure you that ourstrategy will be successful. |   |
|--------|---------------------------------------------------------------------------------------------------------------------------|--------|

|   | We have not commissioned any independent market studies concerning the extent towhich customers will utilize our services and products. Rather, our plans forimplementing our business strategy and achieving profitability are based on theexperience, judgment and assumptions of our key management personnel, and uponother available information concerning the communications industry. If ourmanagement's assumptions prove to be incorrect, we will not be successful inestablishing our wireless Internet access business. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Nearly all of our shares are eligible for future sale,which could cause the market price for ourcommon stock to decline. |   |
|--------|--------------------------------------------------------------------------------------------------------------------------|--------|

|   | Nearly all of the outstanding shares of our common stock owned by non-affiliates areeligible for resale to the public. This amount of common stock represents a significantoverhang on the market for our common stock. The sale of a significant amount ofthese shares at any given time could cause the trading price of our common stock todecline and to be highly volatile. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 2. | Description of Property |   |
|---------|-------------------------|--------|

|   | General |   |
|--------|---------|--------|

|   | We own equipment, including office equipment, necessary to conduct our business. |
|--------|----------------------------------------------------------------------------------|

|   | In Colorado Springs, Colorado, we lease our executive office space for a monthly rental of$1,500 and we lease a small office in Englewood, Colorado, in conjunction with ourDenver-area operations for a small monthly rental. |
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|   | Wireless Cable Properties |   |
|--------|---------------------------|--------|

|   | We own the rights to wireless cable channels in Poplar Bluff, Missouri, Lebanon, Missouri,Port Angeles, Washington, The Dalles, Oregon, Sand Point, Idaho, Fallon, Nevada, andAstoria, Oregon. We have abandoned our efforts to develop these wireless cable properties,due to current market conditions. Rather, we intend to develop these properties intooperating wireless Internet systems, at such time as two-way data transmission on thesefrequencies is permitted. We cannot predict when this permission will be granted, if ever. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Intellectual Property |   |
|--------|-----------------------|--------|

|   | We currently rely on common law principles for the protection of our copyrights andtrademarks and trade secret laws to protect our proprietary intellectual property rights. Wedo not intend to file patent applications relating to our wireless Internet access products. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | We have received authorization to use the products of each manufacturer of software thatis bundled in its software for users with personal computers operating on the Windows orMacintosh platforms. While certain of the applications included in our start-up kit forInternet access services subscribers are shareware that we have obtained permission todistribute or that are otherwise in the public domain and freely distributable, certain otherapplications included in our start-up kit have been licensed where necessary. We currentlyintend to maintain or negotiate renewals of all existing software licenses and authorizationsas necessary. We may also enter into licensing arrangements for other applications, in thefuture. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 3. | Legal Proceedings |   |
|---------|-------------------|--------|

|   | CyberHighway Involuntary Bankruptcy |   |
|--------|-------------------------------------|--------|

|   | On September 29, 2000, an involuntary bankruptcy petition was filed againstCyberHighway in the Idaho Federal Bankruptcy Court, styled In Re: CyberHighway, Inc.,Case No. 00-02454.  The petitioning creditors were ProPeople Staffing, CTC Telecom,Inc. and Hawkins-Smith.  In December 2000, CyberHighway and the petitioning creditorsfiled a joint motion to dismiss this proceeding.  The joint motion to dismiss was deniedbecause the creditors believe that CyberHighway’s as-yet unasserted damage claims againstthe original petitioning creditors and their law firm and a claim against Dialup USA, Inc.represent CyberHighway’s most valuable assets.  These as-yet unasserted claims includeclaims for bad faith filing of the original bankruptcy petition as to the original petitioningcreditors and their law firm, as well as claim for tortious interference with beneficialbusiness relationships as to Dialup USA, Inc.  It is likely that, at some time in the future, afinal order of bankruptcy will be entered with respect to CyberHighway, no prediction ofthe timing of such an order can be made, although we believe that such an order wouldcome only after the final adjudication of the claims described above. |
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|   | Other Litigation |   |
|--------|------------------|--------|

|   | In November 2000, CyberHighway requested and received a temporary restraining orderagainst Darrell Davis, formerly one of our officers, and his wife, Deanna Davis.  We havealleged that the Davises have diverted dial-up customers from CyberHighway to a companycontrolled by him, all while he was an employee of USURF America.  It is our expectationthat this legal proceeding will be abandoned by us in the near future.  This case is styled:CyberHighway, Inc. versus Deanna Davis, individually and d/b/a Cyber-Trail, Inc., andDarrell D. Davis, 19th Judicial District Court, Parish of East Baton Rouge, State ofLouisiana, Case No. 478320. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | In January 2000, we instituted arbitration proceedings against Christopher L. Wiebelt, ourformer vice president of finance and chief financial officer.  At the recent hearing, wealleged that Mr. Wiebelt violated certain terms of his employment agreement and soughtdamages resulting from those violations, while Mr. Wiebelt claimed wrongful terminationunder his employment agreement.  The arbitrator has awarded Mr. Wiebelt $75,000.  Weare attempting to negotiate payment terms. This case is styled: USURF America, Inc.versus Christopher L. Wiebelt, American Arbitration Association, Case No. 71-160-00087-01.                            |
|   | In July 2002, we became aware of an existing default judgment against us, dated June 7,2001, in the approximate amount of $22,000.  The lawsuit, filed by a law firm in Boise,Idaho, went unchallenged as a result of administrative error.  We are attempting tonegotiate payment terms.  This case is styled: Marcus, Merrick, Montgomery, Christian &Hardee, LLP vs. USURF America, Inc., District Court of the Fourth Judicial District of theState of Idaho, in and for the County of Ada, Case No. CV OC 0101693D.                                                                                                                                |

| Item 4. | Submission of Matters to Vote of Security Holders |   |
|---------|---------------------------------------------------|--------|

| No matters were submitted to a vote of our security holders during the fourth quarter of thefiscal year ended December 31, 2002. |
|----------------------------------------------------------------------------------------------------------------------------------|

| PART II |
|---------|

| Item 5. | Market for Common Equity and Related Stockholder Matters |   |
|---------|----------------------------------------------------------|--------|

|   | Market Information |   |
|--------|--------------------|--------|

|   | Our common stock trades on the American Stock Exchange, under the symbol "UAX". Thetable below sets forth, for the periods indicated, the high and low closing sales prices forour common stock, as reported by the American Stock Exchange: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Quarter Ended      |   | High  |   | Low   |   |
|--------|--------------------|--------|-------|--------|-------|--------|
|   | March 31, 2000     |   | 11.00 |   | 3.625 |   |
|   | June 30, 2000      |   | 6.00  |   | 2.25  |   |
|   | September 30, 2000 |   | 2.50  |   | .875  |   |
|   | December 31, 2000  |   | 1.25  |   | .1875 |   |
|   | March 31, 2001     |   | .80   |   | .22   |   |
|   | June 30, 2001      |   | .78   |   | .33   |   |
|   | September 30, 2001 |   | .50   |   | .17   |   |
|   | December 31, 2001  |   | .27   |   | .08   |   |
|   | March 31, 2002     |   | .25   |   | .08   |   |
|   | June 30, 2002      |   | .12   |   | .04   |   |
|   | September 30, 2002 |   | .11   |   | .04   |   |
|   | December 31, 2002  |   | .13   |   | .04   |   |
|   | March 31, 2003     |   | .09   |   | .05   |   |

|   | You should note that our common stock, like many technology-related stocks, hasexperienced significant fluctuations in its price and trading volume. We cannot predict thefuture trading patterns of our common stock. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Holders |   |
|--------|---------|--------|

|   | On April 10, 2003, the number of record holders of our common stock, excluding nomineesand brokers, was 1,194, holding 77,797,203 shares. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | Dividends |   |
|--------|-----------|--------|

|   | We have never paid cash dividends on our common stock.  We intend to re-invest anyfuture earnings for the foreseeable future. |
|--------|-------------------------------------------------------------------------------------------------------------------------------|

|   | Our board of directors has declared property dividends, the values of which have beenwritten-off in our financial statements, comprised of common stock of three privatecompanies acquired by us.  These dividends of stock are: 1,500,000 shares of New WaveMedia Corp., acquired by us in exchange for all of our community-television-related assets;400,000 shares of Argo Petroleum Corporation, acquired by us in exchange for 10,000shares of our common stock; and 800,000 shares of Woodcomm International, Inc.,acquired by us in exchange for 7,500 shares of our common stock. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | None of the three dividend distributions will occur unless and until a registration statementrelating to each distribution transaction has been declared effective by the SEC. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 6. | Management’s Discussion and Analysis of Financial Condition and Resultsof Operations |   |
|---------|--------------------------------------------------------------------------------------------|--------|

| Background |   |
|------------|--------|

|   |  During 2001 and the first quarter of 2002, we focus all of our efforts and capital on theexploitation of our wireless Internet access products.  Beginning in April 2002, with thearrival of our new president, we began to expand our business.  By the end of 2002, we hadbecome a provider of a broad range of telecommunications services. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Current Overview |   |
|------------------|--------|

|   | We currently operate as a provider of voice (telephone), video (cable television) and data(Internet) services to business and residential customers.  We also market and selltelecommunications-related hardware and software.                                                                            |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Our business plan involves obtaining, through internal growth, as many voice, video anddata customers as possible.  Our growth strategy also includes acquisitions oftelecommunications-related businesses and/or properties which would provide animmediate or potential customer base for our services. |

|   | In early 2003, we restructured our operations by creating three new subsidiary corporationsthat reflect our operating divisions.  In the future, our reports on operations will containbusiness segment information.  However, for 2002 and 2001, no discussion of businesssegment operations appears. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Since the end of 2002, we have acquired a competitive local exchange carrier (CLEC)licensed in the State of Arizona and currently provide local telephone, long-distance anddial-up Internet access to approximately 1,700 customers there.  Our monthly revenuesassociated with these customers is approximately $100,000. Also, we acquired assets froma telecommunications company that have enabled us to begin to operate as a seller oftelecommunications-related hardware and software.  We offer a broad array of productsand the start to this part of our business has shown some success.  In March 2003, webooked approximately $45,000 in equipment sales.  We have begun to build our wirelessInternet network in Denver.  Also, we have begun to build our wireless Internet network inColorado Springs.  We have become the preferred telecommunications services provider infour Denver-area MDU properties, providing voice, video and data services to theseproperties.  In the aggregate we now provide cable television services to approximately 160customers in Denver. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | First Fusion Capital Financing Transaction |   |
|--------|--------------------------------------------|--------|

|   | In May 2001, we entered into an amended and restated common stock purchase agreementwith Fusion Capital, pursuant to which Fusion Capital agreed to purchase up to $10 millionof our common stock. The selling price of the shares was equal to a price based upon themarket price of our common stock without any fixed discount to the market price.  InMarch 2003, this agreement ended, with Fusion Capital having purchased all 6,000,000shares available for sale under the agreement for cash in the total amount of approximately$585,000. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Second Fusion Capital Financing Transaction |   |
|--------|---------------------------------------------|--------|

|   | In March 2003, we entered into another similar common stock purchase agreement withFusion Capital, pursuant to which Fusion Capital agreed to purchase up to $10 million ofour common stock. The selling price of the shares will be equal to a price based upon thefuture market price of the common stock without any fixed discount to the market price.Sales under this agreement will not commence until such time as we have completed aregistration proceeding with respect thereto. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | As the level of funding under the first Fusion Capital agreement was lower than we hadanticipated, during 2002 we obtained additional funds through sales of our securities toother parties in the approximate amount of $875,000. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The majority of these funds were used for operating expenses.  We will need further capital,as we continue to expand our business. |
|--------|------------------------------------------------------------------------------------------------------------------------------------|

| CyberHighway Bankruptcy |   |
|-------------------------|--------|

|   | In September 2000, an involuntary bankruptcy petition was filed against CyberHighway inthe Idaho Federal Bankruptcy Court, styled In Re: CyberHighway, Inc., Case No. 00-02454, by ProPeople Staffing, CTC Telecom, Inc. and Hawkins-Smith.  We expect a finalorder of discharge to be issued in the future.  At such time, but cannot predict when thisfinal order will be issued. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Results of Operations |   |
|-----------------------|--------|

|   | General. |   |
|--------|----------|--------|

|   | By the end of February 2001, CyberHighway had lost all of its dial-up Internet accesscustomers and we do not foresee the revitalization of CyberHighway’s business.  During2001, we derived no revenue from CyberHighway’s business.   For all of 2001 and 2002,our small amounts of revenues were dervied from our wireless Internet access operations.During 2002, our management expanded our business plan and caused an evolution of ourbusiness, which has led to changes in our operating structure.  We began to derive revenuesfrom our expanded and reorganized business in the first quarter of 2003.  We currently lackthe capital necessary to pursue our full-scale business plan, and we may never possessenough capital with which to do so.  In this circumstance, it is likely that we would neverearn a profit. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In the third quarter of 2001, we began wireless Internet operations in Del Rio, Texas, andthat system grew to have 50 customers online in a short period of time, but our growththere, during 2002, was slowed significantly due to our lack of capital.  Then, during thefourth quarter of 2002, our management determined to cease operations in Del Rio, due toDel Rio’s geographic separation from our home area of Eastern Colorado. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Our revenues for 2001and 2002 were small, due to a lack of funds with which to expandour operations.  However, during the first quarter of 2003, we have begun to derive greaterrevenues from our operations, approximately $100,000 per month.  Nevertheless, the levelof our future revenues cannot be predicted, due to our significant lack of capital. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Potential Rescission Claims. |   |
|--------|------------------------------|--------|

|   | At December 31, 2001, 2,138,726 shares of our common stock with an aggregate assignedvalue of $1,192,700 may have been issued in violation of Section 5 of the Securities Act.Our December 31, 2001, balance sheet reflects a Redeemable Common Stock line item withthis assigned value, since each of the issuees of these shares may have had a potential claimfor rescission of their respective issuance transactions.  None of these issuees made such aclaim within the various statute of limitations periods and, consequently, at December, 31,2002, none of our shares remained subject to potential rescission claims, whichcircumstance is reflected in the Redeemable Common Stock line item of our December 31,2002, balance sheet. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Year Ended December 31, 2002, versusYear Ended December 31, 2001. |   |
|--------|-------------------------------------------------------------------|--------|

|   | During both years, our small amounts of revenues were derived from our wireless Internetaccess business.  Without additional capital, our revenues will remain at these levels. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Our operating results for 2002 and 2001 are summarized in the following table:                                                                                                  |

|   |                                                   | 2002 (unaudited)        |   | 2001                         |
|--------|--------------------------------------------------------|-------------------------|--------|------------------------------|
|   | Revenues                                               | $19,683                 |   | $7,446                       |
|   | Internet Access Costs, Cost ofGoods Sold               | (14,100)                |   | (109,525)                    |
|   | Gross Profit (Loss)                                    | (129,162)               |   | (102,079)                    |
|   | Operating Expenses

Other Expense

Extraordinary Items | 3,481,257

(196,456)

0 |   | 2,852,110

(34,184)

489,905 |
|   | Loss from Operations                                   | (3,610,419)             |   | (2,954,189)                  |
|   | Net Loss                                               | (3,806,876)             |   | (2,498,468)                  |

|   | Our net loss of $3,806,876 (unaudited) for 2002 was higher than our net loss for 2001 of$2,498,468.  Certain line items in our statements of operations changed materially from2001 to 2002. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | Professional fees increased from $1,803,751 in 2001 to $2,379,416 (unaudited) in2002.  This increase is a result of our increased use of professional services during2002.  We paid substantially all of our consultants with shares of our commonstock, due to our lack of cash.  Should we continue to lack cash reserves, it is likelythat, during the remainder of 2003, we would issue shares of our common stock inpayment of certain professional fees. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | Salaries and commissions increased from $856,124 in 2001 to $899,967 (unaudited)in 2002.  This increase in salaries and commissions is attributable primarily toissuances of shares of our common stock to our officers under their employmentagreements in connection with the Evergreen transaction and in payment of accruedsalaries.  These payments with shares of common stock are summarized below. |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | As a result of the Evergreen transaction, we incurred a one-time charge against ourearnings during 2002 in the amount of $567,180 (net of forgiven accrued and unpaidsalaries and unpaid loans to certain of our officers), due to the following stock issuances: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | 3,000,000 shares issued to our new president and chief executive officer as a signingbonus under his employment agreement.                                                                                                                            |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| - | 2,000,000 shares to our former president (current Chairman of the Board) inconsideration of his agreeing to reduce the term of his employment agreement,waive the payment of accrued salary and waive the repayment of unpaid loans madeby him to us. |
| - | 2,000,000 shares to one of our vice presidents in consideration of his agreeing toreduce the term of his employment agreement and waive the payment of accruedsalary.                                                                                 |
| - | 2,000,000 shares to our vice president of corporate development in consideration ofhis agreeing to reduce the term of his employment agreement and waive thepayment of accrued salary.                                                                |

|   | In 2002, we issued shares of our common stock in payment of accrued salary of certain ofour officers, which shares were valued at $.07 per share, the closing price of our commonstock, as reported by AMEX, on the date of issuance.  We issued a total of 4,404,000shares in payment of approximately $290,000 in accrued salary. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Due to our severe lack of capital during 2001and 2002, we issued shares of our stock toconsultants in payment of their services.  The fair value of the shares issued to consultantsis included in our statements of operations under the “Professional Fees” line item.  Issuingshares of our common stock was the only means by which we could obtain the consultants’services. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Liquidity and Capital Resources |   |
|---------------------------------|--------|

|   | General. |   |
|--------|----------|--------|

|   | Since our inception, we have had a significant working capital deficit.  Currently, we aresubstantially illiquid, although we do possess enough cash to continue our current level ofbusiness activities, through the result of recent securities sales.  As the level of fundingunder the first Fusion Capital agreement was lower than we had earlier an approximateamount of $875,000. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The majority of these funds were used for operating expenses. |
|--------|---------------------------------------------------------------|

|   | We will need further capital, as we continue to expand our business.  It is possible that wewill not be able to secure adequate capital as we need it.  Also, without additional capital, itis possible that we would be forced to cease operations.                                                                                                                                                                                  |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | In July 2002, we became aware of an existing default judgment against us, dated June 7,2001, in the approximate amount of $22,000.  The lawsuit went unchallenged as a result ofadministrative error.  In August 2002, an arbitrator ruled against us in an arbitrationproceeding against our former chief financial officer, in the amount of $100,000.  We arecurrently negotiating terms wit respect to each of these liabilities. |

|   | Our Capital Needs. |   |
|--------|--------------------|--------|

|   | Due to our expanded business plan, our capital needs have increased significantly since thestart of 2002.  To sustain our current level of operations for the next twelve months, wewill require additional capital of approximately $500,000.  To accomplish our businessobjectives, we will require at least $2 million.  If we are unable to obtain this needed capital,we could be forced to cease our operations. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Currently we do not possess enough capital to accomplish our business objectives on a full-scale basis.                                                                                                                                                                                                                                                                                                                |

|   | Fusion Capital Agreements |   |
|--------|---------------------------|--------|

|   | Beginning in July 2001, we began to receive the first funds under our first agreement withFusion Capital.  Through December 31, 2002, we had received only $445,000 in paymentof a total of 4,200,000 shares under that agreement.  This agreement ended in March 2003,with Fusion Capital having purchased all 6,000,000 shares available for sale for a total of$585,000 in cash. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In March 2003, we entered into a second common stock purchase agreement with FusionCapital, which agreement is substantially similar to the first agreement.  Under the secondagreement, Fusion Capital is to purchase up to $10 million of our common stock, based onfuture stock prices.  We will not begin to sell shares to Fusion Capital under this agreement,until such time as we have completed a registration proceeding relating thereto with theSEC.  No prediction as to the timing of this circumstance can be made. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Should all of our outstanding warrants be exercised, we would receive cash proceeds ofapproximately $2,000,000.  Any funds derived from the exercise of warrants would be usedfor working capital.                                                                                                                                                                                                                                                                                                                                 |
|   | You should note that we may never receive any of the funds discussed above.  Our failureto obtain capital from these sources could cause us to cease our operations.                                                                                                                                                                                                                                                                                                                                                               |

|   | Potential Rescission Claims. |   |
|--------|------------------------------|--------|

|   | At December 31, 2001, 2,138,726 shares of our common stock with an aggregate assignedvalue of $1,192,700 may have been issued in violation of Section 5 of the Securities Act.Our December 31, 2001, balance sheet reflects a Redeemable Common Stock line item withthis assigned value, since each of the issuees of these shares may have had a potential claimfor rescission of their respective issuance transactions.  None of these issuees made such aclaim within the various statute of limitations periods and, consequently, at December 31,2002, none of our shares remained subject to potential rescission claims, whichcircumstance is reflected in the Redeemable Common Stock line item of our December 31,2002, balance sheet. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | December 31, 2002 |   |
|--------|-------------------|--------|

|   | Historically, we have had a significant working capital deficit.  At December 31, 2002, ourworking capital deficit was $1,099,862 (unaudited) which is lower than our $1,254,897deficit at December 31, 2001.  Our receipt of funds through sales of our securities during2002 permitted us to improve moderately our working capital deficit by the end of the year.Approximately 85% of our accounts payable are accounts payable of CyberHighway andare subject to the pending Chapter 7 bankruptcy proceeding of CyberHighway.  Withoutadditional capital, our working capital deficit can be expected to become larger eachquarter. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | The following table sets forth our current assets and current liabilities at December 31,2002, and 2001:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

|   |               |                                    | December 31,2002 (unaudited) |   | December 31,2001 (audited) |
|--------|--------------------|-----------------------------------------|------------------------------|--------|----------------------------|
|   | Current Assets     | Cash                                    | $111,568                     |   | $10                        |
|   |               | Accounts Receivable

Inventory          | 20,224

2,715                |   | 0

134,756                 |
|   |               |                                    |                         |   |                       |
|   | CurrentLiabilities | Disbursements in Excess ofCash Balances | $0                           |   | $15,539                    |
|   |               | Accounts Payable

Note Payable          | 1,145,765

87,604            |   | 1,034,619

0               |
|   |               | Accrued Payroll                         | 0                            |   | 265,978                    |
|   |               | Other Current Liabilities               | 0                            |   | 54,996                     |
|   |               | Notes Payable toStockholder             | 1,000                        |   | 18,521                     |

|   | We had no accrued payroll at December 31, 2002, due to our officers agreeing to have theiraccrued salaries paid in shares of our common stock, while at December 31, 2001, we hadaccrued payroll of $265,978, which was attributable to accrued salary of our officers.  Inconnection with the Evergreen transaction described above, three of our officers waivedpayment of all of their then-existing accrued salaries, in the approximate amount of$225,000, which is reflected on our December 31, 2002, balance sheet. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | We reduced our note payable to stockholder during 2002 by $17,521, and owed ashareholder $1,000 at December 31, 2002.  We do not expect that we will again borrowfunds from our shareholders.                                                                                                                                                                                                                                                                                                                               |
|   | As the level of funding under the first Fusion Capital agreement was lower than we hadanticipated, during 2002 we obtained additional funds through sales of our securities toother parties in the approximate amount of $875,000.                                                                                                                                                                                                                                                                                          |

|   | The majority of these funds were used for operating expenses.                                                                                                                                                                                                                                      |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Without obtaining at least $2,000,000 in new capital, we will continue to have a significantworking capital deficit and will not be able to operate from a position of liquidity.  This willimpair our ability to pursue our full-scale business plan and, thus, our ability ever to earn aprofit. |
|   | If we are unable to obtain significant additional capital, it is possible that we would beforced to cease operations.                                                                                                                                                                              |

|   | Cash Flows from Operating Activities. |   |
|--------|---------------------------------------|--------|

|   | During 2002, our operations used $652,634 (unaudited) in cash compared to cash used of$707,569 during 2001.  In both years, the use of cash in operations was a direct result ofthe lack of revenues compared to our operating expenses, particularly salaries andcommissions in 2001 and greater business development activities in 2002. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Cash Flows from Investing Activities. |   |
|--------|---------------------------------------|--------|

|   | Our investing activities used $73,359 (unaudited) in cash in 2002 and used $12,681 in cashduring 2001.  Capital expenditures comprised the use of cash in both periods. Because welack working capital, we cannot predict our cash flows from investing activities for all of2003. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Cash Flows from Financing Activities. |   |
|--------|---------------------------------------|--------|

|   | For 2002, our financing activities provided $690,832 (unaudited) in cash.  Our payments onnotes payable to stockholder of $17,521 and payments received on subscriptions receivableof $186,950 was offset by $664,800 in cash from sales of our common stock and $211,000in cash obtained by the exercise of certain warrants.  For 2001, our financing activitiesprovided $719,172 in cash.  Of this amount, $340,000 is attributable to private sales ofsecurities and $359,750 in subscriptions receivable.  We continue to seek capital andcannot, therefore, predict future levels of cash flows from financing activities. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Management's Plans Relating to Future Liquidity |   |
|-------------------------------------------------|--------|

|   | To sustain our current level of operations for the next twelve months, we will requireadditional capital of approximately $500,000.  To accomplish our business objectives, wewill require at least $2 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Our best opportunity for obtaining needed funds is pursuant to the second Fusion Capitalagreement.  We cannot predict the level of funding to be obtained under this agreement orthe commencement date thereunder.                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Since we only plan to sell up to 20,000,000 shares to Fusion Capital under the secondFusion Capital agreement, the selling price of our stock sold to Fusion Capital will need toaverage $.50 per share for us to receive the maximum proceeds of $10 million under thatagreement.  Assuming a selling price of $.06 per share, the closing sale price of thecommon stock on April 14, 2003, and the purchase by Fusion Capital of the full amount ofshares purchasable under the second Fusion Capital agreement, total proceeds to us wouldonly be approximately $1,200,000, unless we choose to issue more than 20,000,000 shares,which we have the right to do. |
|   | Should we obtain at least $2 million under the Fusion Capital agreement, we believe that wewill be able to make significant progress in implementing our business plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

|   | We cannot assure you that we will accomplish these objectives.                                              |
|--------|-------------------------------------------------------------------------------------------------------------|
|   | Currently, we have no other sources for funding on the scale contemplated by the FusionCapital transaction. |
|   | If we do not obtain the necessary funding, we would be forced to cease operations.                          |

| Capital Expenditures |   |
|----------------------|--------|

|   | During 2002, we made capital expenditures of $73,359, all for needed equipment.  Wecurrently have limited capital with which to make any significant capital expenditures.Should we obtain significant funding, of which there is no assurance, we would be able tomake significant expenditures on equipment.  The amount of these equipment purchasescannot be predicted due to the uncertainty of funding levels and timing.  However, withoutadditional capital, we will make no capital expenditures. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 7. | Financial Statements |   |
|---------|----------------------|--------|

| The financial statements required to be furnished under this Item 7 are attached at the end ofthis Annual Report on Form 10-KSB. An index to our financial statements is also includedbelow in Item 13(a). |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 8. | Changes In and Disagreements With Accountants on Accounting andFinancial Disclosure |   |
|---------|-------------------------------------------------------------------------------------|--------|

| On January 16, 2003, we dismissed Postlethwaite & Netterville as our independent auditor.  Atthe time of the dismissal, there was no disagreement with respect to any matter of accountingprinciples or practices, financial statement disclosure or auditing scope or procedure.  OnJanuary 17, 2003, we engaged Hein + Associates, LLP as our new independent auditor, toaudit our financial statements for the year ended December 31, 2002.  The lone member of theaudit committee of our board of directors recommended this change in auditors and the fullboard approved the change. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| PART III |
|----------|

| Item 9. | Directors, Executive Officers, Promoters and Control Persons; Compliancewith Section 16(a) of the Exchange Act |   |
|---------|----------------------------------------------------------------------------------------------------------------|--------|

|   | Directors and Executive Officers |   |
|--------|----------------------------------|--------|

|   | The following table sets forth the current officers and directors of USURF America. |
|--------|-------------------------------------------------------------------------------------|

|   | Name of Director |   | Age |   | Title(s) |   |
|--------|------------------|--------|-----|--------|----------|--------|

|   | Douglas O. McKinnon |   | 52 |   | Director, President and Chief ExecutiveOfficer |   |
|--------|---------------------|--------|----|--------|------------------------------------------------|--------|

|   | David M. Loflin |   | 45 |   | Chairman of the Board |   |
|--------|-----------------|--------|----|--------|-----------------------|--------|

|   | Richard E. Wilson |   | 61 |   | Director |   |
|--------|-------------------|--------|----|--------|----------|--------|

|   | Ross S. Bravata |   | 43 |   | Director |   |
|--------|-----------------|--------|----|--------|----------|--------|

|   | Kenneth J. Upcraft |   | 57 |   | Executive Vice President |   |
|--------|--------------------|--------|----|--------|--------------------------|--------|

|   | Christopher K. Brenner |   | 43 |   | Vice President of Finance andAdministration, Chief Financial Officerand Secretary |   |
|--------|------------------------|--------|----|--------|-----------------------------------------------------------------------------------|--------|

|   | Our current officers and directors serve until the next annual meeting of our board ofdirectors or until their respective successors are elected and qualified. All officers serve atthe discretion of our board of directors. There exists no family relationship between ourofficers and directors. Certain information regarding the backgrounds of each of the officersand directors is set forth below. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | DOUGLAS O. MCKINNON |   |
|--------|---------------------|--------|

|   | Mr. McKinnon became president and chief executive officer of the Company in April2002.  During the five years prior to his joining the Company, he served as chiefexecutive officer of IP Services, Inc., a next-generation communications services providerusing broadband Internet Protocol (IP) and Asynchronous Transfer Mode (ATM) basednetworks; executive vice president and chief financial officer of AVIRNEXCommunications Group, Inc., a provider of retail telecommunications service includingdomestic and international long distance and enhanced services to small and medium-sized business customers; and vice-president of ICG Communications, Inc, one of thecountry’s largest competitive local exchange carriers offering local, long distance, ATMand frame relay services with a nationwide fiber optic infrastructure. Mr. McKinnon is aformer practicing CPA with the SEC practice section of Coopers & Lybrand. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | DAVID M. LOFLIN |   |
|--------|-----------------|--------|

|   | Mr. Loflin has served as an executive officer of the Company, since its inception in 1996.From inception to April 2002, Mr. Loflin served as president.  Since that time, he hasserved as Chairman of the Board. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | RICHARD E. WILSON |   |
|--------|-------------------|--------|

|   | Mr. Wilson was co-founder of The Association of Communications Enterprises(ASCENT) (formerly the Telecommunications Resellers Association), a leading tradegroup representing entrepreneurial and small business communications companies. Heserved on that organization’s board in 1992 and 1993 and is currently Chairman Emeritusof ASCENT. At present, Mr. Wilson is a principal and executive vice president ofbusiness development of NetPort-Datacom, Inc., a privately-held Mukilteo, Washington-based provider of international voice service. During 2001 and 2002, Mr. Wilson was aprincipal in SigBioUSA, LLC, a Mulkiteo, Washington-based telecommunicationsconsulting firm with expertise in both wireline and wireless telecommunicationsapplications. From May 2000 to April 2001, Mr. Wilson was president and chiefexecutive officer of Open Telecommunications North America, a wholly-ownedsubsidiary of Open Telecommunications Australia (OT), a publicly-traded company inAustralia that provides telecommunications-network-infrastructure related products andservices. Also, from 2000 through January 2002, Mr. Wilson served as a director ofGlobalNet International Telecommunications, Inc., an Illinois-based provider of globaltelecommunications services. GlobalNet was publicly traded under the symbol GBNE,until acquired by Titan Corporation. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ROSS S. BRAVATA |   |
|--------|-----------------|--------|

|   | Mr. Bravata has, since 1981, worked for Novartis (formerly Ciba Corporation), in variouspositions, and currently serves as a Senior Control Systems Technician.  In such capacity,Mr. Bravata supervises the service and maintenance of electronic instrumentation. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | KENNETH J. UPCRAFT |   |
|--------|--------------------|--------|

|   | Mr. Upcraft joined the Company in August 2002.  For more than the five years prior tothat time, he owned and operated Pantel, a consultancy focused on providing professionalservices to telecommunications and Internet service providers, including wireless Internetaccess providers. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | CHRISTOPHER K.BRENNER |   |
|--------|-----------------------|--------|

|   | Mr. Brenner earned a BBA degree in accounting from Baylor University, Waco, Texas,and a JD degree from the University of Houston Law Center.  Prior to his joining theCompany in February 2003, Mr. Brenner served as chief financial officer and generalcounsel for Southern Colorado Telecommunications Company, a privately-held, ColoradoCity, Colorado-based telecommunications company.  Prior to that, from January 2000 toNovember 2001, Mr. Brenner was an associate in the law firm of Martin, Disiere,Jefferson & Wisdom, LLP, Houston, Texas.  From August 1996 to December 1999, Mr.Brenner was an associate in the law firm of Bracewell & Patterson, LLP, Houston, Texas.He is licensed to practice law in the states of Colorado and Texas and is a formerpracticing CPA. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Board of Directors |   |
|--------|--------------------|--------|

|   | There currently exist two vacancies on our board of directors, one of which vacancies is tobe filled by a person named by Evergreen Venture Partners, LLC, pursuant to a stockpurchase agreement. (This agreement with Evergreen Venture Partners, LLC is discussedbelow under “Item 12. Certain Relationships and Related Transactions”.)   We are makingour best effort to locate additional qualified persons who are willing to fill such vacancies.To date, no such person has committed to join the board. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Our full board did not meet during 2002; however, it took action by unanimous writtenconsent in lieu of a meeting on forty occasions. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | Executive Committee |   |
|--------|---------------------|--------|

|   | Our board of directors created an executive committee to facilitate management betweenmeetings of the full board of directors.  The executive committee is composed of David M.Loflin (chairman), Douglas O. McKinnon and Richard E. Wilson. Pursuant to our bylaws,between meetings of the full board, the executive committee has the full power andauthority of the board in the management of our business and affairs, except to the extentlimited by Nevada law. Pursuant to the bylaws of the executive committee, as adopted bythe full board, the executive committee has the authority to exercise all powers of theboard, except the power: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to declare dividends; |
|---|-----------------------|

| - | to sell or otherwise dispose of all or substantially all of our assets; |
|---|-------------------------------------------------------------------------|

| - | to recommend to our shareholders any action requiring their approval; and |
|---|---------------------------------------------------------------------------|

| - | to change the membership of any committee, fill the vacancies thereon or dischargeany committee. |
|---|--------------------------------------------------------------------------------------------------|

|   | During 2002, the Executive Committee did not meet; however, it took action by unanimouswritten consent in lieu of a meeting on nineteen occasions. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Audit Committee |   |
|--------|-----------------|--------|

|   | The audit committee of our board of directors is composed of Douglas O. McKinnon(chairman), Richard E. Wilson and Ross S. Bravata. Our board appointed Messrs.McKinnon, Wilson and Bravata to the audit committee effective as of March 28, 2003. Thepurposes of the audit committee are: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to oversee the quality and integrity of the financial statements and other financialinformation we provide to any governmental body or the public; |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to oversee the independent auditors’ qualifications and independence; |
|---|-----------------------------------------------------------------------------|

| - | to oversee the performance of our independent auditors; |
|---|---------------------------------------------------------|

| - | to oversee our systems of internal controls regarding finance, accounting, legalcompliance and ethics that management and the board have established or willestablish in the future; |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to establish procedures for the receipt, retention and treatment of complaintsregarding accounting, internal controls, and other auditing matters and for theconfidential, anonymous submission by our employees of concerns regardingquestionable accounting or auditing matters; |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to provide an open avenue of communication among the independent auditors,financial and senior management, the internal auditing department, and the board,always emphasizing that the independent auditors are accountable to the auditcommittee; and |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to perform such other duties as are directed by the board. |
|---|------------------------------------------------------------|

|   | In March 2003, our board approved the amendment and restatement of the audit committeecharter. The board has determined that the audit committee meets the current requirementsof AMEX and applicable rules and regulations of the SEC.  Due to resignations by two ofour independent directors and our inability to attract qualified replacements, the auditcommittee was comprised of only one member, Mr. Loflin, during nearly all of 2002. Mr.Loflin, in his position as a member of the audit committee, approved the dismissal of ourformer independent auditors, Postlethwaite & Netterville, and the engagement of Hein +Associates, LLP as our auditors of our financial statements for the year ended December31, 2002. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Management Council |   |
|--------|--------------------|--------|

|   | In addition to its executive and audit committees, our board has established a managementcouncil.  While the management council has no power to authorize any corporate action , itwas created by the board to promote communication between and among our variousoperating divisions as our operations expand.  It is expected that the management councilwill begin to hold regular meetings during the second quarter of 2003. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Compensation of Directors |   |
|--------|---------------------------|--------|

|   | Non-employee directors do not receive annual payments for their service as directors, norhas our board established a per-meeting stipend.  At such time as our cash positionimproves, it is likely that the board will begin to compensate non-employee directors.However, no determination of the amount of any such payment amounts has been made.Directors who are also employees receive no additional compensation for their service onthe board and its committees. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | During 2002, one of our directors, Ross S. Bravata, received, as a bonus for his service as adirector, 200,000 shares of our common stock, valued at $.06 per share, the closing priceon the date of award, as reported by AMEX, an aggregate value of $12,000.  Also, inMarch 2003, in connection with his agreeing to become a board member, Richard E.Wilson was awarded a bonus of 200,000 shares of our common stock, valued at $.05 pershare, the closing price on the date of award, as reported by AMEX, an aggregate value of$10.000. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Indemnification of Directors and Officers |   |
|--------|-------------------------------------------|--------|

|   | Article X of the Articles of Incorporation of USURF America provides that no director orofficer shall be personally liable to USURF America or its shareholders for damages forbreach of fiduciary duty as a director officer; provided, however, that such provision shallnot eliminate or limit the liability of a director or officer for (1) acts or omissions whichinvolve intentional misconduct, fraud or a knowing violation of law or (2) the payment ofdividends in violation of law. Any repeal or modification of Article X shall be prospectiveonly and shall not adversely affect any right or protection of a director or officer of USURFAmerica existing at the time of such repeal or modification for any breach covered byArticle X which occurred prior to any such repeal or modification. The effect of Article X isthat directors and officers will experience no monetary loss for damages arising out ofactions taken (or not taken) in such capacities, except for damages arising out of intentionalmisconduct, fraud or a knowing violation of law, or the payment of dividends in violation oflaw. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | As permitted by Nevada law, our bylaws provide that we will indemnify our directors andofficers against expense and liabilities they incur to defend, settle or satisfy any civil,including any action alleging negligence, or criminal action brought against them on accountof their being or having been directors or officers unless, in any such action, they are judgedto have acted with gross negligence or willful misconduct. Insofar as indemnification forliabilities arising under the Securities Act of 1933, as amended, may be permitted todirectors, officers or control persons pursuant to the foregoing provisions, we have beeninformed that, in the opinion of the SEC, such indemnification is against public policy asexpressed in the Securities Act of 1933 and is, therefore, unenforceable. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Compliance with Section 16(a) of the Securities Exchange Act |   |
|--------|--------------------------------------------------------------|--------|

|   | The Company’s executive officers and directors, and beneficial owners of more than 10%of the Common Stock, are required to file initial reports of ownership and reports ofchanges of ownership of the Common Stock with the SEC. The SEC’s rules require suchperson to furnish the Company with copies of all Section 16(a) reports they file.  TheCompany has determined that none of the reports required to have been filed during 2002has been filed.  The Company has requested that all of these persons file the requiredreports. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 10. | Executive Compensation |   |
|----------|------------------------|--------|

|   | Executive Compensation |   |
|--------|------------------------|--------|

|   | The following table sets forth in summary form the compensation received during each ofthe last three completed fiscal years by our Chief Executive Officer and each executiveofficer who received total salary and bonus exceeding $100,000 during any of the last threefiscal years. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | AnnualCompensation |   | Long-TermCompensation |
|--------|--------------------|--------|-----------------------|

| Name, PrincipalPosition |   | FiscalYear |   | Salary $ |   | Bonus $ |   | OtherAnnualCom-pen-sation$ |   | SecuritiesUnderlyingOptions# |   | Allothercom-pen-sation$ |
|-------------------------|--------|------------|--------|----------|--------|---------|--------|----------------------------|--------|------------------------------|--------|-------------------------|

| Douglas O.McKinnon[President and ChiefExecutive Officer] |   | 200220012000 |   | $127,500(1) NOTE(A) NOTE(A) |   | $310,456(1) |   | $-0- |   | -0- |   | $-0- |
|----------------------------------------------------------|--------|--------------|--------|-----------------------------|--------|-------------|--------|------|--------|-----|--------|------|

| David M. Loflin[Chairman of theBoard and formerPresident] |   | 200220012000 |   | $150,000(2)$150,000(3)$150,000(4) |   | $200,000(2)$133,000(5) $-0- |   | $-0-$-0-$-0- |   | $-0-$-0-$-0- |   | $-0-$-0-$-0- |
|-----------------------------------------------------------|--------|--------------|--------|-----------------------------------|--------|-----------------------------|--------|--------------|--------|--------------|--------|--------------|

| Waddell D. Loflin[former VicePresident andSecretary] |   | 200220012000 |   | $79,167(6)$100,000(7)$100,000(8) |   | $200,000(9)$18,000(10)$48,000(11) |   | $-0-$-0-$-0- |   | $-0-$-0-$-0- |   | $-0-$-0-$-0- |
|------------------------------------------------------|--------|--------------|--------|----------------------------------|--------|-----------------------------------|--------|--------------|--------|--------------|--------|--------------|

| James Kaufman[former VicePresident -CorporateDevelopment] |   | 200220012000 |   | $95,000(12)$120,000(13)$120,000(14) |   | $200,000(15) $-0-$72,000(16) |   | $-0-$-0-$-0- |   | $-0-$-0-$-0- |   | $-0-$-0-$-0- |
|-----------------------------------------------------------|--------|--------------|--------|-------------------------------------|--------|------------------------------|--------|--------------|--------|--------------|--------|--------------|

| Kenneth J. Upcraft[Executive VicePresident] |   | 200220012000 |   | $62,500(17) NOTE(B) NOTE(B) |   | $58,220(17) |   | $-0- |   | -0- |   | $-0- |
|---------------------------------------------|--------|--------------|--------|-----------------------------|--------|-------------|--------|------|--------|-----|--------|------|

| (A) | Mr. McKinnon was not employed by us during this fiscal year. |
|-----|--------------------------------------------------------------|

| (B) | Mr. Upcraft was not employed by us during this fiscal year. |
|-----|-------------------------------------------------------------|

| (1) | $91,044 of Mr. McKinnon’s salary amount and $10,456 of his bonus amount were paidby the issuance of 1,450,000 shares of our common stock, a per share value of $.07 pershare, the last closing price of our common stock, as reported by AMEX, on the date ofissuance. $300,000 of Mr. McKinnon’s bonus amount was paid by the issuance of3,000,000 shares of our common stock, upon his executing his employment agreement,which shares were valued at $.10 per share, the last closing price of our common stock,as reported by AMEX, on the date of issuance. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | $42,750 of Mr. Loflin’s salary amount was accrued; Mr. Loflin waived payment of thisamount, in connection with the Evergreen transaction (described elsewhere herein).$107,250 of Mr. Loflin’s salary amount was paid by the issuance of 618,000 shares ofour common stock, a per share value of $.173 per share, a per share price higher thanthe market price that was negotiated by us with Mr. Loflin.  Mr. Loflin’s bonus amountwas paid by the issuance of 2,000,000 shares of our common stock, upon his executingan amendment to his employment agreement, which shares were valued at $.10 pershare, the last closing price of our common stock, as reported by AMEX, on the date ofissuance. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | $53,612 of this amount was accrued; Mr. Loflin waived payment of this amount, inconnection with the Evergreen transaction (described elsewhere herein). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | $34,083 of this amount was accrued; Mr. Loflin waived payment of this amount, inconnection with the Evergreen transaction (described elsewhere herein). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | This bonus was paid by the issuance of 700,000 shares to Mr. Loflin, which werevalued at $.19 per share, the last closing price of the Common Stock, as reported byAMEX, prior to their issuance. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | $29,167 of Mr. Loflin’s salary amount was accrued; Mr. Loflin waived payment of thisamount, in connection with the Evergreen transaction (described elsewhere herein).$50,000 of Mr. Loflin’s salary amount was paid by the issuance of 600,000 shares ofour common stock, a per share value of $.083 per share, a per share price higher thanthe market price that was negotiated by us with Mr. Loflin. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | $24,423 of Mr. Loflin’s salary amount was accrued; Mr. Loflin waived payment of thisamount, in connection with the Evergreen transaction (described elsewhere herein). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | $35,417 of Mr. Loflin’s salary amount was accrued; Mr. Loflin waived payment of thisamount, in connection with the Evergreen transaction (described elsewhere herein). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | This bonus was paid by the issuance of 2,000,000 shares to Mr. Loflin in connectionwith the Evergreen transaction (described elsewhere herein), which shares were valuedat $.10 per share, the last closing price of the Common Stock, as reported by AMEX,prior to their issuance. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | This bonus was paid by the issuance of 200,000 shares to Mr. Loflin, which shares werevalued at $.09 per share, the last closing price of the Common Stock, as reported byAMEX, prior to their issuance. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | This bonus was paid by the issuance of 200,000 shares to Mr. Loflin, which shares werevalued at $.24 per share, the last closing price of the Common Stock, as reported byAMEX, prior to their issuance. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | $35,000 of Mr. Kaufman’s salary amount was accrued; Mr. Kaufman waived paymentof this amount, in connection with the Evergreen transaction (described elsewhereherein). $60,000 of Mr. Kaufman’s salary amount was paid by the issuance of 600,000shares of our common stock, a per share value of $.10 per share, a per share pricehigher than the market price that was negotiated by us with Mr. Kaufman. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (13) | $106,270 of this amount was accrued; $96,000 of this amount was payable in shares ofour common stock.  In connection with the Evergreen transaction (described elsewhereherein), Mr. Kaufman waived payment of this amount. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (14) | $26,667 of this amount was accrued; $96,000 of this amount was payable in shares ofour common stock.  In connection with the Evergreen transaction (described elsewhereherein), Mr. Kaufman waived payment of this amount. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (15) | This bonus was paid by the issuance of 2,000,000 shares to Mr. Kaufman in connectionwith the Evergreen transaction (described elsewhere herein), which shares were valuedat $.10 per share, the last closing price of the Common Stock, as reported by AMEX,prior to their issuance. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (16) | This bonus was paid by the issuance of 300,000 shares to Mr. Kaufman, which shareswere valued at $.24 per share, the last closing price of the Common Stock, as reportedby AMEX, prior to their issuance. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (17) | $47,500 of Mr. Upcraft’s salary amount and $22,220 of his bonus amount were paid bythe issuance of 996,000 shares of our common stock, a per share value of $.07 pershare, the last closing price of our common stock, as reported by AMEX, on the date ofissuance. $36,000 of Mr. Upcraft’s bonus amount was paid by the issuance of 600,000shares of our common stock, upon his executing his employment agreement, whichshares were valued at $.06 per share, the last closing price of our common stock, asreported by AMEX, on the date of his executing his employment agreement. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Employment Contracts and Termination of Employment andChange-in-Control Agreements |   |
|--------|------------------------------------------------------------------------------------|--------|

|   | Each of our current executive officers has entered into an employment agreement.  Thefollowing table summarizes certain provisions of the employment agreements. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Name of Officer       |   | Position(s)                                                                      |   | Term    |   | AnnualSalary |   | Date                  |
|-----------------------|--------|----------------------------------------------------------------------------------|--------|---------|--------|--------------|--------|-----------------------|
| Douglas O.McKinnon    |   | President and ChiefExecutive Officer                                             |   | 3 years |   | $180,000     |   | 4/15/02               |
| David M. Loflin       |   | Chairman of the Board                                                            |   | 6months |   | $150,000     |   | 6/1/99,amended4/15/02 |
| Kenneth J. Upcraft    |   | Executive Vice President                                                         |   | 3 years |   | $150,000(1)  |   | 7/31/02               |
| Christopher K.Brenner |   | Vice President of Financeand Administration, ChiefFinancial Officer andSecretary |   | 2 years |   | $120,000(1)  |   | 2/4/03                |

|  (1) | 80% of this officer’s salary may be paid with shares of our common stock, in ourdiscretion. |
|-----------|---------------------------------------------------------------------------------------------------|

|   | In connection with each of their respective employment agreements, the executive officersentered into confidentiality agreements and agreements not to compete with the Companyduring the term of employment and for a period of one year thereafter. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Under Mr. McKinnon’s employment agreement, should the Company (1) experience achange in control or (2) change Mr. McKinnon’s responsibilities with the Company, Mr.McKinnon has the right, in his sole discretion, to terminate his employment with theCompany and the Company would be liable for all compensation remaining to be paidduring the then-current term of his employment agreement, plus an additional period of oneyear. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Under each employment agreement, if the executive is terminated by the Company otherthan for cause, he will be entitled to continue to receive his base salary for the unexpiredterm of his employment contract. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Option/SAR Grants in Last Fiscal Year |   |
|--------|---------------------------------------|--------|

|   | 2002 Stock Ownership Plan |   |
|--------|---------------------------|--------|

|   | In March 2002, our board adopted a stock ownership plan for our officers, directorsand consultants known as the 2002 Stock Ownership Plan, as amended and restated inDecember 2002. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The 2002 Plan was established by the board as a means to promote our success andenhance our value by linking the personal interests of participants to our shareholders,and by providing participants with an incentive for outstanding performance. The 2002Plan is further intended to aid us in attracting and retaining the services of persons uponwhose judgment, interest and special efforts our successful operation and oursubsidiaries’ operations is dependent.  Persons who are either officers, directors orconsultants are eligible to participate in the 2002 Plan.  The board may, at any time andfrom time to time, grant shares of our common stock in such amounts and upon suchterms and conditions as it may determine, to include the granting of shares of theCommon Stock and the granting of options to purchase shares of the common stock.11,000,000 shares of our common stock have been reserved for issuance under the2002 Plan and a registration statement on Form S-8 (SEC File No. 333-102167)relating to the 2002 Plan, as amended, has been filed with the SEC.  Under the 2002Plan, to date, 4,150,000 shares of our common stock have been issued to consultantsand options to acquire a total of 500,000 shares of our common stock have beengranted to consultants and remain unexercised. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Stock Appreciation Rights |   |
|--------|---------------------------|--------|

|   | We have never granted any stock appreciation rights (SARs), nor do we expect to grantany SARs in the foreseeable future. |
|--------|--------------------------------------------------------------------------------------------------------------------------|

| Item 11. | Security Ownership of Certain Beneficial Owners and Management |   |
|----------|----------------------------------------------------------------|--------|

| As of April 10, 2002, there were 77,797,203 shares of our common stock issued andoutstanding. The following table sets forth certain information regarding the current beneficialownership of our common stock, by (1) persons known to be beneficial owners of more than5% of our common stock, (2) each our officers and directors and (3) our officers and directors,as a group. Unless otherwise noted, the address of the listed persons is 6005 Delmonico Drive,Suite 140, Colorado Springs, Colorado 80919. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Name andAddress ofBeneficialOwner |   |   | Number ofSharesBeneficiallyOwned |   | Percentageof SharesBeneficiallyOwned |   |
|--------|-----------------------------------|--------|--------|----------------------------------|--------|--------------------------------------|--------|

| Douglas O. McKinnon |   | 4,450,000 |   | 4.87% |   |
|---------------------|--------|-----------|--------|-------|--------|

| David M. Loflin(2) |   | 5,868,960 |   | 6.43% |   |
|--------------------|--------|-----------|--------|-------|--------|

| Richard E. Wilson(3) |   | 200,000 |   | * |   |
|----------------------|--------|---------|--------|---|--------|

| Ross S. Bravata(4) |   | 342,500(5) |   | * |   |
|--------------------|--------|------------|--------|---|--------|

| Kenneth J. Upcraft |   | 1,596,000 |   | 1.74% |   |
|--------------------|--------|-----------|--------|-------|--------|

| Christopher K. Brenner |   | 540,000 |   | * |   |
|------------------------|--------|---------|--------|---|--------|

| All executive officer and directorsas a group (6 persons) |   | 12,797,460(6) |   | 14.02% |   |
|-----------------------------------------------------------|--------|---------------|--------|--------|--------|

| Fusion Capital Fund II, LLC(7) |   | 4,577,641(8) |   | 5.01% |   |
|--------------------------------|--------|--------------|--------|-------|--------|

| Evergreen Investment Partners,LLC(9) |   | 3,183,333(10) |   | 3.49% |   |
|--------------------------------------|--------|---------------|--------|-------|--------|

|  * | Represents beneficial ownership of less than 1%. |
|---------|--------------------------------------------------|

| (1) | Based on 91,283,453 shares outstanding, including a total of 13,486,250 sharesunderlying currently outstanding and exercisable warrants and options. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Mr. Loflin’s address is 7635 Jefferson Highway, Suite 309, Baton Rouge, Louisiana70809. |
|-----|-----------------------------------------------------------------------------------------------|

| (3) | Mr. Wilson’s address is P.O. Box 2844, Kirkland, Washington 98083. |
|-----|--------------------------------------------------------------------------|

| (4) | Mr. Bravata’s address is 7635 Jefferson Highway, Suite 309, Baton Rouge, Louisiana70809. |
|-----|------------------------------------------------------------------------------------------------|

| (5) | 75,000 of these shares have not been issued, but underlie currently exercisable warrants. |
|-----|-------------------------------------------------------------------------------------------|

| (6) | 75,000 of these shares have not been issued, but underlie currently exercisable warrants. |
|-----|-------------------------------------------------------------------------------------------|

| (7) | Fusion Capital’s address 222 Merchandise Mart Plaza, Suite 9-112, Chicago, Illinois60654. |
|-----|-------------------------------------------------------------------------------------------------|

| (8) | 2,500,000 of these shares may not be sold by Fusion Capital until the earliest of thetermination of a common stock purchase agreement, default thereunder orapproximately 30 months from the date hereof. 645,000 of these shares have not beenissued, but underlie currently exercisable warrants. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Douglas O. McKinnon is a manager of Evergreen and may be deemed to be a beneficialowner of all of the shares owned by Evergreen.  Mr. McKinnon disclaims any beneficialownership of the securities owned by Evergreen. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | 408,333 of these shares have been issued; 2,775,000 of these shares have not beenissued, but underlie currently exercisable warrants. |
|------|---------------------------------------------------------------------------------------------------------------------------------------|

| Item 12. | Certain Relationships and Related Transactions |   |
|----------|------------------------------------------------|--------|

|   | Evergreen Transactions |   |
|--------|------------------------|--------|

|   | On April 15, 2002, we entered into a securities purchase agreement with EvergreenVenture Partners, LLC, whereby we issued securities for cash in the amount of $250,000.We sold  Evergreen a total of 3,645,833 shares of our common stock, 3,125,000 commonstock purchase warrants to purchase a like number of shares at an exercise price of $.15 pershare and 3,125,000 common stock purchase warrants to purchase a like number of sharesat an exercise price of $.30 per share.  Also, under the Evergreen agreement, Evergreen hasthe right to name two persons to become directors.  To date, Evergreen has exercised thisright as to one person, Richard E. Wilson, but has not yet named another person as adirector.  Mr. McKinnon is a manager of Evergreen. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Stock Issuances Pursuant to Evergreen Transactions |   |
|--------|----------------------------------------------------|--------|

|   | Pursuant to the Evergreen agreement, on April 15, 2002, the following occurred: |
|--------|---------------------------------------------------------------------------------|

| - | We hired Douglas O. McKinnon as our new president and chief executive officer;Mr. McKinnon also became a director.  In consideration of Mr. McKinnon’sexecuting his employment agreement, we issued him 3,000,000 shares of ourcommon stock.  These shares were valued at $300,000, which amount was chargedagainst our earnings during the second quarter of 2002.                                                                                                                                                                                                                   |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| - | Our former president, David M. Lofin, became chairman of the board, reduced theterm of his remaining term of employment from approximately four years to sixmonths, waived the payment of all accrued and unpaid salary and waived therepayment of all loans made to us by him.  In consideration of Mr. Loflin’sexecuting an amendment to his employment agreement that reflected the foregoingprovisions, we issued him 2,000,000 shares of our common stock.  These shareswere valued at $200,000, which amount was charged against our earnings duringthe second quarter of 2002. |
| - | Our former vice president and secretary, Waddell D. Loflin, reduced the term of hisremaining term of employment from approximately four years to six months andwaived the payment of all accrued and unpaid salary.  In consideration of Mr.Loflin’s executing an amendment to his employment agreement that reflected theforegoing provisions, we issued him 2,000,000 shares of our common stock.  Theseshares were valued at $200,000, which amount was charged against our earningsduring the second quarter of 2002.                                                             |
| - | Our former vice president of corporate development, James Kaufman, reduced theterm of his remaining term of employment from one year to six months and waivedthe payment of all accrued and unpaid salary.  In consideration of Mr. Kaufman’sexecuting an amendment to his employment agreement that reflected the foregoingprovisions, we issued him 2,000,000 shares of our common stock.  These shareswere valued at $200,000, which amount was charged against our earnings duringthe second quarter of 2002.                                                                     |

|   | Share Issuances in Payment of Accrued Salary |   |
|--------|----------------------------------------------|--------|

|   | In 2002, we issued shares of our common stock in payment of accrued salary of certain ofits executive officers, which shares were valued at $.07 per share, the closing price of ourcommon stock, as reported by AMEX, on the date of issuance, as follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Name of Officer |   | Accrued Salary Paid withShares |   | No. of Shares Issued inPayment |   |
|--------|-----------------|--------|--------------------------------|--------|--------------------------------|--------|

|   | Douglas O. McKinnon |   | $91,044 |   | 1,450,000(1) |   |
|--------|---------------------|--------|---------|--------|--------------|--------|

|   | David M. Loflin |   | $43,123 |   | 618,000 |   |
|--------|-----------------|--------|---------|--------|---------|--------|

|   | Kenneth J. Upcraft |   | $63,500 |   | 996,000 |   |
|--------|--------------------|--------|---------|--------|---------|--------|

|   | Christopher K.Brenner(2) |   | $11,250 |   | 140,000 |   |
|--------|--------------------------|--------|---------|--------|---------|--------|

|   | James Kaufman(3) |   | $48,000 |   | 600,000 |   |
|--------|------------------|--------|---------|--------|---------|--------|

|   | Waddell D. Loflin(4) |   | $34,533 |   | 600,000 |   |
|--------|----------------------|--------|---------|--------|---------|--------|

|   | (1) | Included in this number of shares and in addition to the payment of accrued salary,Mr. McKinnon received a $10,456 bonus. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------|

|   | (2) | At the time of the issuance of shares to Mr. Brenner, Mr. Brenner was serving as aconsultant to the Company. |
|--------|-----|--------------------------------------------------------------------------------------------------------------|

|   | (3) | Mr. Kaufman is a former vice president of the Company. |
|--------|-----|--------------------------------------------------------|

|   | (4) | Mr. Loflin resigned as an officer and director of the Company in March 2003. |
|--------|-----|------------------------------------------------------------------------------|

|   | Conversion of Loans to Stock by Officer |   |
|--------|-----------------------------------------|--------|

|   | As of August 21, 2000, we owed Mr. Loflin a total of $967,703 ($916,045 in principal,$51,658 in interest), the result of cash loans made to us by Mr. Loflin during the pastapproximately two years. The proceeds of these loans were used primarily for operatingexpenses and purchases of equipment. On August 21, 2000, we entered into a letteragreement with our president, David M. Loflin, whereby Mr. Loflin agreed to convert allsums owed to him into shares of our common stock. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Pursuant to the letter agreement, Mr. Loflin received one share of common stock for every$1.25 of debt converted, for a total of 774,162 shares. The $1.25 price was agreed upon asthat price was the low sale price for our common stock on Friday, August 18, 2000, asreported by AMEX. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Our board of directors, in authorizing the transaction described above, found thetransaction to be in the best interest of USURF America, as it would significantly improveour financial condition, potentially making it more attractive to prospective investors. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Stock Bonuses |   |
|--------|---------------|--------|

|   | In May 2000, one of our former vice presidents, Robert A. Hart IV, was issued 250,000shares of our common stock as an employment agreement signing bonus. These shareswere valued at $750,000, or $3.00 per share, pursuant to the terms of the Mr. Hart'semployment agreement. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In December 2000, two of our vice presidents, Waddell D. Loflin and James Kaufman,were issued shares of our common stock as a bonus. Mr. Loflin was issued 200,000 sharesand Mr. Kaufman was issued 300,000 shares. These shares were valued at $119,000, or$.24 per share, which was the closing sale price of our common stock on the dayimmediately preceding their issuance. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In October 2001, our President, David M. Loflin, was issued shares of our common stockas a bonus. Mr. Loflin was issued 700,000 shares. These shares were valued at $133,000,or $.19 per share, which was the closing sale price of our common stock on the dateimmediately preceding their issuance. When this issuance was approved by our board ofdirectors, Mr. Loflin abstained from the voting. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Employment Agreements |   |
|--------|-----------------------|--------|

|   | Each of our current officers has entered into an employment agreement.  The followingtable summarizes certain provisions of the employment agreements. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| Name of Officer       |   | Position(s)                                                                      |   | Term    |   | AnnualSalary |   | Date                  |
|-----------------------|--------|----------------------------------------------------------------------------------|--------|---------|--------|--------------|--------|-----------------------|
| Douglas O.McKinnon    |   | President and ChiefExecutive Officer                                             |   | 3 years |   | $180,000     |   | 4/15/02               |
| David M. Loflin       |   | Chairman of the Board                                                            |   | 6months |   | $150,000     |   | 6/1/99,amended4/15/02 |
| Kenneth J. Upcraft    |   | Executive Vice President                                                         |   | 3 years |   | $150,000(1)  |   | 7/31/02               |
| Christopher K.Brenner |   | Vice President of Financeand Administration, ChiefFinancial Officer andSecretary |   | 2 years |   | $120,000(1)  |   | 2/4/03                |

|  (1) | 80% of this officer’s salary may be paid with shares of our common stock, in ourdiscretion. |
|-----------|---------------------------------------------------------------------------------------------------|

|   | In connection with each of their respective employment agreements, our officers enteredinto confidentiality agreements and agreements not to compete with us during the term ofemployment and for a period of one year thereafter. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Under Mr. McKinnon’s employment agreement, should we (1) experience a change incontrol or (2) change Mr. McKinnon’s responsibilities, Mr. McKinnon has the right, in hissole discretion, to terminate his employment with us and we would be liable for allcompensation remaining to be paid during the then-current term of his employmentagreement, plus an additional period of one year. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Under each employment agreement, if the officer is terminated by us other than for cause,he will be entitled to continue to receive his base salary for the unexpired term of hisemployment contract. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Voting Agreement |   |
|--------|------------------|--------|

|   | On January 29, 1999, David W. Loflin, Waddell D. Loflin, Julius W. Basham, David W.Brown and Wm. Kim Stimpson entered into a voting agreement, whereby all of thesepersons are required to vote all shares owned by them for David M. Loflin and Waddell D.Loflin in all elections of directors of USURF America. Currently, approximately 8,458,960shares are subject to this voting agreement. This amount of stock represents approximately11% of our currently outstanding shares. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Fusion Capital Consulting Agreements |   |
|--------|--------------------------------------|--------|

|   | In January 2001, we entered into a one-year consulting agreement with Fusion Capital,pursuant to which Fusion Capital agreed to provide operational and strategic consultingservices. Fusion Capital received a total of 120,000 shares of our common stock during theterm of this agreement and reimbursement for expenses. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In January 2002, we entered another into a one-year consulting agreement with FusionCapital, pursuant to which Fusion Capital agreed to provide operational and strategicconsulting services. Fusion Capital received 120,000 shares of our common stock pursuantto this agreement and is to be reimbursed for expenses. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 13. | Exhibits and Reports on Form 8-K |   |
|----------|----------------------------------|--------|

|   | (a)(1) Financial Statements |   |
|--------|-----------------------------|--------|

|   | Index to Financial Statements of USURFAmerica |   |
|--------|-----------------------------------------------|--------|

|   | Independent Auditor's Report |
|--------|------------------------------|

|   | Consolidated Balance Sheets as of December 31, 2002 and 2001 |
|--------|--------------------------------------------------------------|

|   | Consolidated Statements of Operations for the Years Ended December 31, 2002and 2001 |
|--------|-------------------------------------------------------------------------------------|

|   | Consolidated Statements of Changes in Stockholders' Equity for the Years EndedDecember 31, 2002 and 2001 |
|--------|----------------------------------------------------------------------------------------------------------|

|   | Consolidated Statements of Cash Flows for the Years Ended December 31, 2002and 2001 |
|--------|-------------------------------------------------------------------------------------|

|   | Notes to Consolidated Financial Statements |
|--------|--------------------------------------------|

|   | (a)(2) Exhibits |   |
|--------|-----------------|--------|

|   | None. |
|--------|-------|

|   | (b) Reports on Form 8-K |   |
|--------|-------------------------|--------|

|   | During the three months ended December 31, 2002, we did not file a Current Report onForm 8-K. |
|--------|-----------------------------------------------------------------------------------------------|

|   | Subsequent to December 31, 2002, we have filed three Current Reports on Form 8-K: |
|--------|-----------------------------------------------------------------------------------|

| - | Date of event: January 16, 2003, wherein we reported a change in independent auditors; |
|---|----------------------------------------------------------------------------------------|

| - | Date of event: March 10, 2003, wherein we reported our entering into a financingtransaction with a third party; and |
|---|---------------------------------------------------------------------------------------------------------------------|

| - | Date of event: March 31, 2003, wherein we reported (1) a change in the location of ourexecutive offices and (2) the resignation of one of our directors. |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| SIGNATURES |
|------------|

| In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this reportto be signed on its behalf by the undersigned, thereunto duly authorized. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | USURF AMERICA, INC. |
|--------|---------------------|

|   |   |   |
|--------|--------|--------|

|   | By: | /s/ DOUGLAS O MCKINNON |   |
|--------|-----|------------------------|--------|

|   | Douglas O.McKinnon Presidentand Chief ExecutiveOfficer |   |
|--------|--------------------------------------------------------|--------|

| In accordance with the Exchange Act, this report has been signed below by the followingpersons on behalf of the Registrant and in the capacities and on the dates indicated. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                   |   |                                                                           |   |           |
|------------------------|--------|--------------------------------------------------------------------------------|--------|----------------|
| /s/ DOUGLAS O MCKINNON |   |                                                                           |   | April 15, 2003 |
| Douglas O. McKinnon    |   | President and Chief ExecutiveOfficer (Principal ExecutiveOfficer) and Director |   |           |

|                |   |                  |   |           |
|---------------------|--------|-----------------------|--------|----------------|
| /s/ DAVID M. LOFLIN |   |                  |   | April 15, 2003 |
| David M. Loflin     |   | Chairman of the Board |   |           |

|                |   |     |   |           |
|---------------------|--------|----------|--------|----------------|
| /s/ ROSS S. BRAVATA |   |     |   | April 15, 2003 |
| Ross S. Bravata     |   | Director |   |           |

|                  |   |     |   |           |
|-----------------------|--------|----------|--------|----------------|
| /s/ RICHARD E. WILSON |   |     |   | April 15, 2003 |
| Richard E. Wilson     |   | Director |   |           |

|                      |   |                                                                                                           |   |           |
|---------------------------|--------|----------------------------------------------------------------------------------------------------------------|--------|----------------|
| /s/ CHRISTOPHER K.BRENNER |   |                                                                                                           |   | April 15, 2003 |
| Christopher K. Brenner    |   | Vice President of Finance andAdministration, Chief FinancialOfficer (Principal FinancialOfficer) and Secretary |   |           |

|                   |   |                     |   |           |
|------------------------|--------|--------------------------|--------|----------------|
| /s/ KENNETH J. UPCRAFT |   |                     |   | April 15, 2003 |
| Kenneth J. Upcraft     |   | Executive Vice President |   |           |

| Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of theExchange Act by Non-reporting Issuers. |
|------------------------------------------------------------------------------------------------------------------------------------|

| As of the date of this Annual Report on Form 10-KSB, no annual report or proxy material hasbeen sent to security holders of USURF America. It is anticipated that an annual report andproxy material will be furnished to security holders subsequent to the filing of this AnnualReport on Form 10-KSB. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | INDEX TO FINANCIAL STATEMENTS OF USURFAMERICA, INC. |   |
|--------|-----------------------------------------------------|--------|

|   | Consolidated Balance Sheets as of December 31, 2002 (unaudited) and 2001 |   |
|--------|--------------------------------------------------------------------------|--------|

|   | Consolidated Statements of Operations for the Years Ended December 31, 2002(unaudited) and 2001 |   |
|--------|-------------------------------------------------------------------------------------------------|--------|

|   | Consolidated Statements of Changes in Stockholders' Equity for the Years EndedDecember 31, 2002 (unaudited) and 2001 |   |
|--------|----------------------------------------------------------------------------------------------------------------------|--------|

|   | Consolidated Statements of Cash Flows for the Years Ended December 31, 2002(unaudited) and 2001 |   |
|--------|-------------------------------------------------------------------------------------------------|--------|

|   | Notes to Consolidated Financial Statements |   |
|--------|--------------------------------------------|--------|

|   | USURF AMERICA, INC. ANDSUBSIDIARIES COLORADOSPRINGS, COLORADO |   |
|--------|---------------------------------------------------------------|--------|

|   | CONSOLIDATED BALANCE SHEETSDECEMBER 31, 2002 AND 2001 |   |
|--------|-------------------------------------------------------|--------|

|   | ASSETS |   |
|--------|--------|--------|

|   | 2002(unaudited) |   |   |   | 2001(audited) |   |
|--------|-----------------|--------|--------|--------|---------------|--------|

| CURRENT ASSETS |   |   |   |
|----------------|--------|--------|--------|

|   | Cash and cash equivalents | $111,568 |   | $10 |
|--------|---------------------------|----------|--------|-----|

|   | Accounts receivable | 20,224 |   | $10 |
|--------|---------------------|--------|--------|-----|

|   | Inventory | 2,715 |   | 134,746 |
|--------|-----------|-------|--------|---------|

|   | 134,507 |   | 134,756 |
|--------|---------|--------|---------|

| PROPERTY AND EQUIPMENT |   |   |   |
|------------------------|--------|--------|--------|

|   | Cost | 73,359 |   | 203,141 |
|--------|------|--------|--------|---------|

|   | Less: accumulated depreciation | (7,336) |   | (125,036) |
|--------|--------------------------------|---------|--------|-----------|

|   | 66,023 |   | 78,105 |
|--------|--------|--------|--------|

| INTANGIBLES | 201,604 |   | 0 |
|-------------|---------|--------|---|

| OTHER ASSETS |   |   |   |
|--------------|--------|--------|--------|

|   | Prepaid consulting | 0 |   | 0 |
|--------|--------------------|---|--------|---|

|   | Other | 4,942 |   | 16,667 |
|--------|-------|-------|--------|--------|

|   | 4,942 |   | 16,667 |
|--------|-------|--------|--------|

| TOTAL ASSETS | $407,077 |   | $229,528 |
|--------------|----------|--------|----------|

|                                                             |
|------------------------------------------------------------------|
| The accompanying notes are an integral part of these statements. |

|   | LIABILITIES AND STOCKHOLDERS’EQUITY |   |
|--------|-------------------------------------------|--------|

| CURRENT LIABILITIES |   |   |   |
|---------------------|--------|--------|--------|

|   | Disbursements in excess of cash balances | 0 |   | $15,539 |
|--------|------------------------------------------|---|--------|---------|

|   | Accounts payable | 1,145,765 |   | 1,089,615 |
|--------|------------------|-----------|--------|-----------|

|   | Note Payable | 87,604 |   | 0 |
|--------|--------------|--------|--------|---|

|   | Accrued payroll | 0 |   | 265,978 |
|--------|-----------------|---|--------|---------|

|   | Notes payable to stockholder | 1,000 |   | 18,521 |
|--------|------------------------------|-------|--------|--------|

|   | 1,234,369 |   | 1,389,653 |
|--------|-----------|--------|-----------|

| LONG-TERM LIABILITIES | 0 |   | 0 |
|-----------------------|---|--------|---|

| REDEEMABLE COMMON STOCK |   |   |   |
|-------------------------|--------|--------|--------|

|   | Common stock subject to rescission, -0- sharesoutstanding at December 31, 2002, and 2,138,726shares outstanding at December 31, 2001, $.0001par value per share | 0 |   | 1,192,700 |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|---|--------|-----------|

| STOCKHOLDERS’ DEFICIT |   |   |   |
|-----------------------------|--------|--------|--------|

|   | Common stock, $.0001 par value; Authorized:100,000,000 shares; Issued and outstanding:70,880,338 in 2002 and 23,848,108 in 2001 | 7,088 |   | 2,385 |
|--------|---------------------------------------------------------------------------------------------------------------------------------|-------|--------|-------|

|   | Additional paid-in capital | 40,343,123 |   | 35,642,817 |
|--------|----------------------------|------------|--------|------------|

|   | Accumulated deficit | (40,807,504) |   | (37,000,628) |
|--------|---------------------|--------------|--------|--------------|

|   | Subscriptions receivable | 0 |   | 165,750 |
|--------|--------------------------|---|--------|---------|

|   | Deferred consulting | (370,000) |   | (1,163,149) |
|--------|---------------------|-----------|--------|-------------|

|   |   | (827,293) |   | (2,352,825) |
|--------|--------|-----------|--------|-------------|

| TOTAL LIABILITIES AND STOCKHOLDERS’DEFICIT | $407,077 |   | $229,528 |
|--------------------------------------------------|----------|--------|----------|

|                                                             |
|------------------------------------------------------------------|
| The accompanying notes are an integral part of these statements. |

|   | USURF AMERICA, INC. ANDSUBSIDIARIES COLORADOSPRINGS, COLORADO |   |
|--------|---------------------------------------------------------------|--------|

|   | CONSOLIDATED STATEMENTS OFOPERATIONS YEARS ENDED DECEMBER31, 2002 AND 2001 |   |
|--------|----------------------------------------------------------------------------|--------|

|   | 2002(unaudited) |   |   |   | 2001(audited) |   |
|--------|-----------------|--------|--------|--------|---------------|--------|

| REVENUES |   |   |   |
|----------|--------|--------|--------|

|   | Revenues | $19,683 |   | $7,446 |
|--------|----------|---------|--------|--------|

|   | Internet access costs, cost of goods sold | (14,100) |   | (11,999) |
|--------|-------------------------------------------|----------|--------|----------|

|   | Inventory write-down | (134,746) |   | (97,526) |
|--------|----------------------|-----------|--------|----------|

|   | Gross profit | (129,162) |   | (102,079) |
|--------|--------------|-----------|--------|-----------|

| OPERATING EXPENSES |   |   |   |
|--------------------|--------|--------|--------|

|   | Depreciation and amortization | 7,336 |   | 70,105 |
|--------|-------------------------------|-------|--------|--------|

|   | Professional fees | 2,379,416 |   | 1,803,751 |
|--------|-------------------|-----------|--------|-----------|

|   | Rent | 20,051 |   | 28,528 |
|--------|------|--------|--------|--------|

|   | Salaries and commission | 899,967 |   | 856,124 |
|--------|-------------------------|---------|--------|---------|

|   | Other | 174,486 |   | 93,602 |
|--------|-------|---------|--------|--------|

|   |   | 3,481,257 |   | 2,852,110 |
|--------|--------|-----------|--------|-----------|

| LOSS FROM OPERATIONS | (3,610,419) |   | (2,954,189) |
|----------------------|-------------|--------|-------------|

| OTHER INCOME (EXPENSE) |   |   |   |
|------------------------|--------|--------|--------|

|   | Other income | 11 |   | 0 |
|--------|--------------|----|--------|---|

|   | Litigation settlement | (101,695) |   | 0 |
|--------|-----------------------|-----------|--------|---|

|   | Impairment loss | (94,772) |   | (31,118) |
|--------|-----------------|----------|--------|----------|

|   | Interest expense | 0 |   | (3,066) |
|--------|------------------|---|--------|---------|

|   |   | (196,456) |   | (34,184) |
|--------|--------|-----------|--------|----------|

| LOSS BEFORE EXTRAORDINARY ITEMS | (3,806,876) |   | (2,988,373) |
|---------------------------------|-------------|--------|-------------|

| EXTRAORDINARY ITEMS |   |   |   |
|---------------------|--------|--------|--------|

|   | Gain on debt forgiveness | 0 |   | 489,905 |
|--------|--------------------------|---|--------|---------|

| LOSS BEFORE INCOME TAX | (3,806,876) |   | (2,498,468) |
|------------------------|-------------|--------|-------------|

| INCOME TAX BENEFIT | 0 |   | 0 |
|--------------------|---|--------|---|

| NET LOSS | (3,806,876) |   | $(2,498,468) |
|----------|-------------|--------|--------------|

|   |   |   |   |
|--------|--------|--------|--------|

| Net loss per common share | $(0.08) |   | $(0.13) |
|---------------------------|---------|--------|---------|

|   |   |   |   |
|--------|--------|--------|--------|

| Weighted average number of shares outstanding | 45,008,651 |   | 18,616,434 |
|-----------------------------------------------|------------|--------|------------|

|                                                             |
|------------------------------------------------------------------|
| The accompanying notes are an integral part of these statements. |

|   | USURF AMERICA, INC. ANDSUBSIDIARIES COLORADO SPRINGS,COLORADO |   |
|--------|---------------------------------------------------------------|--------|

|   | CONSOLIDATED STATEMENTS OF CHANGES INSTOCKHOLDERS’ DEFICIT YEARS ENDED DECEMBER 31, 2002(UNAUDITED), 2001 AND 2000 |   |
|--------|--------------------------------------------------------------------------------------------------------------------------|--------|

|   |   | Shares |   | CommonStock |   | Paid-inCapital |   | Accumulated Deficit |   | SubscriptionsReceivable |   | DeferredConsulting |   | Total |
|--------|--------|--------|--------|-------------|--------|----------------|--------|---------------------|--------|-------------------------|--------|--------------------|--------|-------|

| Balance at12/31/1999 |   | 12,786,116 |   | $1,279 |   | $28,918,638 |   | $(12,616,830) |   | $(860) |   | $(1861918) |   | $14,440,309 |
|----------------------|--------|------------|--------|--------|--------|-------------|--------|---------------|--------|--------|--------|------------|--------|-------------|

| Issuance of commonstock for futureservices |   | 425,227 |   | 42 |   | 958,138 |   | 0 |   | 0 |   | (958,180) |   | 0 |
|--------------------------------------------|--------|---------|--------|----|--------|---------|--------|---|--------|---|--------|-----------|--------|---|

| Issuance of commonstock for cash |   | 400,000 |   | 40 |   | 79,960 |   | 0 |   | (10,000) |   | 0 |   | 70,000 |
|----------------------------------|--------|---------|--------|----|--------|--------|--------|---|--------|----------|--------|---|--------|--------|

| Issuance ofsubscriptionagreement |   | 0 |   | 0 |   | 0 |   | 0 |   | (25,000) |   | 0 |   | (25,000) |
|----------------------------------|--------|---|--------|---|--------|---|--------|---|--------|----------|--------|---|--------|----------|

| Issuance of stockper employmentagreement |   | 19,642 |   | 2 |   | 115,080 |   | 0 |   | 0 |   | 0 |   | 115,082 |
|------------------------------------------|--------|--------|--------|---|--------|---------|--------|---|--------|---|--------|---|--------|---------|

| Expenses paid byissuance of commonstock |   | 290,000 |   | 29 |   | 214,871 |   | 0 |   | 0 |   | 0 |   | 214,900 |
|-----------------------------------------|--------|---------|--------|----|--------|---------|--------|---|--------|---|--------|---|--------|---------|

| Conversion of debtto equity |   | 0 |   | 0 |   | 0 |   | 0 |   | 969,374 |   | 0 |   | 969,374 |
|-----------------------------|--------|---|--------|---|--------|---|--------|---|--------|---------|--------|---|--------|---------|

| Amortization ofdeferred consulting |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 1,422,456 |   | 1,422,456 |
|------------------------------------|--------|---|--------|---|--------|---|--------|---|--------|---|--------|-----------|--------|-----------|

| Net loss |   | 0 |   | 0 |   | 0 |   | (21,885,330) |   | 0 |   | 0 |   | (21,885,330) |
|----------|--------|---|--------|---|--------|---|--------|--------------|--------|---|--------|---|--------|--------------|

| Balance at12/31/2000 |   | 13,920,985 |   | 1,392 |   | 30,286,687 |   | (34,502,160) |   | 933,514 |   | (1,397,642) |   | (4,678,209) |
|----------------------|--------|------------|--------|-------|--------|------------|--------|--------------|--------|---------|--------|-------------|--------|-------------|

| Plus: shares subjectto rescission |   | 2,767,826 |   | 277 |   | 3,897,275 |   | 0 |   | 0 |   | (574,000) |   | 3,323,552 |
|-----------------------------------|--------|-----------|--------|-----|--------|-----------|--------|---|--------|---|--------|-----------|--------|-----------|

| Balance at12/31/2000 |   | 16,688,811 |   | 1,669 |   | 34,183,962 |   | (34,502,160) |   | 933,514 |   | (1,971,642) |   | (1,354,657) |
|----------------------|--------|------------|--------|-------|--------|------------|--------|--------------|--------|---------|--------|-------------|--------|-------------|

| Issuance of commonstock for futureservices |   | 2,005,000 |   | 201 |   | 365,049 |   | 0 |   | 0 |   | (365,250) |   | 0 |
|--------------------------------------------|--------|-----------|--------|-----|--------|---------|--------|---|--------|---|--------|-----------|--------|---|

| Professional feespaid by issuance ofcommon stock |   | 1,534,500 |   | 154 |   | 526,956 |   | 0 |   | 0 |   | 0 |   | 527,110 |
|--------------------------------------------------|--------|-----------|--------|-----|--------|---------|--------|---|--------|---|--------|---|--------|---------|

| Compensationpaid/payable byissuance of commonstock |   | 819,361 |   | 82 |   | 180,865 |   | 0 |   | 96,000 |   | 0 |   | 276,947 |
|----------------------------------------------------|--------|---------|--------|----|--------|---------|--------|---|--------|--------|--------|---|--------|---------|

| Issuance of commonstock for cash |   | 2,500,000 |   | 250 |   | 340,000 |   | 0 |   | 0 |   | 0 |   | 340,250 |
|----------------------------------|--------|-----------|--------|-----|--------|---------|--------|---|--------|---|--------|---|--------|---------|

| Stock issuance costs |   | 0 |   | 0 |   | (19,200) |   | 0 |   | 0 |   | 0 |   | (19,200) |
|----------------------|--------|---|--------|---|--------|----------|--------|---|--------|---|--------|---|--------|----------|

| Exercise of warrants |   | 100,000 |   | 10 |   | 14,900 |   | 0 |   | (15,000) |   | 0 |   | 0 |
|----------------------|--------|---------|--------|----|--------|--------|--------|---|--------|----------|--------|---|--------|---|

| Stock issued fordebt conversion |   | 774,162 |   | 77 |   | 943,437 |   | 0 |   | (943,514) |   | 0 |   | 0 |
|---------------------------------|--------|---------|--------|----|--------|---------|--------|---|--------|-----------|--------|---|--------|---|

| Issuance ofsubscriptionagreement |   | 1,545,000 |   | 154 |   | 291,846 |   | 0 |   | (292,000) |   | 0 |   | 0 |
|----------------------------------|--------|-----------|--------|-----|--------|---------|--------|---|--------|-----------|--------|---|--------|---|

| Subscriptionagreement for stockbonus |   | 0 |   | 0 |   | 0 |   | 0 |   | 27,000 |   | 0 |   | 27,000 |
|--------------------------------------|--------|---|--------|---|--------|---|--------|---|--------|--------|--------|---|--------|--------|

| Proceeds onsubscriptionreceivable |   | 0 |   | 0 |   | 0 |   | 0 |   | 359,750 |   | 0 |   | 359,750 |
|-----------------------------------|--------|---|--------|---|--------|---|--------|---|--------|---------|--------|---|--------|---------|

| Issuance of commonstock for settlement |   | 20,000 |   | 2 |   | 7,398 |   | 0 |   | 0 |   | 0 |   | 7,400 |
|----------------------------------------|--------|--------|--------|---|--------|-------|--------|---|--------|---|--------|---|--------|-------|

| Amortization ofdeferred consulting |   | 0 |   | 0 |   | 0 |   | 0 |   | 0 |   | 1,173,743 |   | 1,173,743 |
|------------------------------------|--------|---|--------|---|--------|---|--------|---|--------|---|--------|-----------|--------|-----------|

| Net loss |   | 0 |   | 0 |   | 0 |   | (2,498,468) |   | 0 |   | 0 |   | (2,498,468) |
|----------|--------|---|--------|---|--------|---|--------|-------------|--------|---|--------|---|--------|-------------|

| Balance at12/31/2001 |   | 25,986,834 |   | 2,599 |   | 36,835,303 |   | (37,000,628) |   | 165,750 |   | (1,163,149) |   | (1,160,125) |
|----------------------|--------|------------|--------|-------|--------|------------|--------|--------------|--------|---------|--------|-------------|--------|-------------|

| Less: shares subjectto rescission |   | (2,138,726) |   | (214) |   | (1,192,486) |   |   |   |   |   |   |   | (1,192,700) |
|-----------------------------------|--------|-------------|--------|-------|--------|-------------|--------|--------|--------|--------|--------|--------|--------|-------------|

| Balance at12/31/2001 |   | 23,848,108 |   | 2,385 |   | 35,642,817 |   | (37,000,628) |   | 165,750 |   | (1,163,149) |   | (2,352,825) |
|----------------------|--------|------------|--------|-------|--------|------------|--------|--------------|--------|---------|--------|-------------|--------|-------------|

| Issuance of commonstock for cash |   | 11,805,968 |   | 1,109 |   | 663,691 |   |   |   |   |   |   |   | 664,800 |
|----------------------------------|--------|------------|--------|-------|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|

| Issuance of commonstock for legal fees |   | 5,975,000 |   | 598 |   | 425,402 |   |   |   |   |   |   |   | 426,000 |
|----------------------------------------|--------|-----------|--------|-----|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|

| Issuance of commonstock for consultingfees |   | 7,349,500 |   | 735 |   | 573,550 |   |   |   |   |   |   |   | 574,285 |
|--------------------------------------------|--------|-----------|--------|-----|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|

| Issuance of commonstock for debtconversion |   | 6,000,000 |   | 600 |   | 599,400 |   |   |   |   |   |   |   | 600,000 |
|--------------------------------------------|--------|-----------|--------|-----|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|

| Issuance of commonstock forcompensation |   | 6,436,000 |   | 644 |   | 593,876 |   |   |   |   |   |   |   | 594,520 |
|-----------------------------------------|--------|-----------|--------|-----|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|

| Issuance of commonstock for exercise ofwarrants |   | 3,500,000 |   | 350 |   | 210,650 |   |   |   |   |   |   |   | 211,000 |
|-------------------------------------------------|--------|-----------|--------|-----|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|

| Issuance of commonstock for services |   | 2,000,000 |   | 200 |   | 142,800 |   |   |   |   |   |   |   | 143,000 |
|--------------------------------------|--------|-----------|--------|-----|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|

| Issuance of commonstock foracquisitions |   | 2,200,000 |   | 220 |   | 113,780 |   |   |   |   |   |   |   | 114,000 |
|-----------------------------------------|--------|-----------|--------|-----|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|

| Issuance of commonstock forsubscriptionsreceivable |   | 347,036 |   | 34 |   | 184,670 |   |   |   | (165,750) |   |   |   | 18,954 |
|----------------------------------------------------|--------|---------|--------|----|--------|---------|--------|--------|--------|-----------|--------|--------|--------|--------|

| Amortization ofdeferred consulting |   |   |   |   |   |   |   |   |   |   |   | 793,149 |   | 793,149 |
|------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|---------|

| Shares no longersubject to rescission |   | 2,138,726 |   | 214 |   | 1,192,486 |   |   |   |   |   |   |   | 1,192,700 |
|---------------------------------------|--------|-----------|--------|-----|--------|-----------|--------|--------|--------|--------|--------|--------|--------|-----------|

| Net loss |   |   |   |   |   |   |   | (3,806,876) |   |   |   |   |   | (3,806,876) |
|----------|--------|--------|--------|--------|--------|--------|--------|-------------|--------|--------|--------|--------|--------|-------------|

| Balance at 12/31/02 |   | 70,880,338 |   | 7,089 |   | 40,343,122 |   | (40,807,504) |   |   |   | (370,000) |   | (827,293) |
|---------------------|--------|------------|--------|-------|--------|------------|--------|--------------|--------|--------|--------|-----------|--------|-----------|

|                                                             |
|------------------------------------------------------------------|
| The accompanying notes are an integral part of these statements. |

|   | USURF AMERICA, INC. ANDSUBSIDIARIES COLORADOSPRINGS, COLORADO |   |
|--------|---------------------------------------------------------------|--------|

|   | CONSOLIDATED STATEMENTS OF CASHFLOWS YEARS ENDED DECEMBER 31, 2002AND 2001 |   |
|--------|----------------------------------------------------------------------------|--------|

|   | 2002(unaudited) |   |   |   | 2001(audited) |   |
|--------|-----------------|--------|--------|--------|---------------|--------|

| CASH FLOWS FROM OPERATING ACTIVITIES |   |   |   |
|--------------------------------------|--------|--------|--------|

|   | Net loss | $(3,806,876) |   | $(2,498,468) |
|--------|----------|--------------|--------|--------------|

|   | Adjustments to reconcile net loss to net cash usedin operating activities |   |   |   |
|--------|---------------------------------------------------------------------------|--------|--------|--------|

|   | Depreciation and amortization | 7,336 |   | 70,105 |
|--------|-------------------------------|-------|--------|--------|

|   | Consulting fees paid with stock | 2,129,635 |   | 1,623,903 |
|--------|---------------------------------|-----------|--------|-----------|

|   | Litigation settlement | 0 |   | 7,400 |
|--------|-----------------------|---|--------|-------|

|   | Impairment loss and write down of assets | 94,772 |   | 128,644 |
|--------|------------------------------------------|--------|--------|---------|

|   | Legal fees paid with stock | 426,000 |   | 66,000 |
|--------|----------------------------|---------|--------|--------|

|   | Compensation expense paid with stock | 594,520 |   | 303,947 |
|--------|--------------------------------------|---------|--------|---------|

|   | Gain on debt forgiveness | 0 |   | (489,905) |
|--------|--------------------------|---|--------|-----------|

|   | Changes in operating assets and liabilities |   |   |   |
|--------|---------------------------------------------|--------|--------|--------|

|   | Accounts receivable | (20,224) |   | 0 |
|--------|---------------------|----------|--------|---|

|   | Inventory | 132,031 |   | 1,398 |
|--------|-----------|---------|--------|-------|

|   | Accounts payable | 56,150 |   | (41,481) |
|--------|------------------|--------|--------|----------|

|   | Accrued payroll | (265,978) |   | 107,716 |
|--------|-----------------|-----------|--------|---------|

|   | Other current liabilities | 0 |   | 13,172 |
|--------|---------------------------|---|--------|--------|

|   | Net cash used in operating activities | (652,634) |   | (707,569) |
|--------|---------------------------------------|-----------|--------|-----------|

| CASH FLOWS FROM INVESTING ACTIVITIES |   |   |   |
|--------------------------------------|--------|--------|--------|

|   | Capital expenditures | 73,359 |   | (12,681) |
|--------|----------------------|--------|--------|----------|

|   | Net cash provided by (used in) investingactivities | (73,359) |   | (12,681) |
|--------|----------------------------------------------------|----------|--------|----------|

| CASH FLOWS FROM FINANCING ACTIVITIES |   |   |   |
|--------------------------------------|--------|--------|--------|

|   | Disbursements in excess of cash balances | (15,539) |   | 15,539 |
|--------|------------------------------------------|----------|--------|--------|

|   | Payments on subscriptions receivable | (186,950) |   | 359,750 |
|--------|--------------------------------------|-----------|--------|---------|

|   | Payments on notes payable - stockholder | 17,521 |   | 11,883 |
|--------|-----------------------------------------|--------|--------|--------|

|   | Issuance of common stock for cash | 664,800 |   | 340,000 |
|--------|-----------------------------------|---------|--------|---------|

|   | Warrants exercised | 211,000 |   | 0 |
|--------|--------------------|---------|--------|---|

|   | Fee for stock issuance | 0 |   | (8,000) |
|--------|------------------------|---|--------|---------|

|   | Net cash provided by financing activities | 690,832 |   | 719,172 |
|--------|-------------------------------------------|---------|--------|---------|

| Net increase (decrease) in cash and cash equivalents | 111,558 |   | (1,078) |
|------------------------------------------------------|---------|--------|---------|

| Cash and cash equivalents, beginning of period | 10 |   | 1,088 |
|------------------------------------------------|----|--------|-------|

| Cash and cash equivalents, end of period | 111,568 |   | 10 |
|------------------------------------------|---------|--------|----|

|                                                             |
|------------------------------------------------------------------|
| The accompanying notes are an integral part of these statements. |

|   | USURF AMERICA, INC. ANDSUBSIDIARIES COLORADOSPRINGS, COLORADO |   |
|--------|---------------------------------------------------------------|--------|

|   | NOTES TO CONSOLIDATED FINANCIALSTATEMENTS |   |
|--------|-------------------------------------------|--------|

| 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES |   |
|---------------------------------------------------------------|--------|

|   | Basis of Presentation |   |
|--------|-----------------------|--------|

|   | USURF America, Inc. (the “Company”), formerly Internet Media Corporation, wasincorporated as Media Entertainment, Inc. in the State of Nevada on November 1, 1996.The Company currently provides telecommunications services to customers in Coloradoand Arizona. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Principles of Consolidation |   |
|--------|-----------------------------|--------|

|   | The accompanying consolidated financial statements include all the accounts of theCompany and all wholly owned subsidiaries. Intercompany transactions and balances havebeen eliminated in the consolidation. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Use of Estimates |   |
|--------|------------------|--------|

|   | The preparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period.  Actual results could differfrom those estimates. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Cash Equivalents |   |
|--------|------------------|--------|

|   | The Company considers all highly liquid investments with original maturities of threemonths or less from the date of purchase to be cash equivalents. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Inventory |   |
|--------|-----------|--------|

|   | Inventories are stated at the lower of cost or market, and represents modems purchasedfrom suppliers.  During 2003 and 2001, the Company determined that certain items of itsinventory had become impaired and recorded a write-down of its inventory in theapproximate amount of $134,746 and $98,000, respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Property and Equipment |   |
|--------|------------------------|--------|

|   | Property and equipment are stated at cost and are depreciated principally by the straight-line method over the estimated useful lives (5 years) of the assets. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Revenue Recognition |   |
|--------|---------------------|--------|

|   | The Company charges its customers monthly service fees and recognizes the revenue in themonth the services are provided or equipment is sold. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | Costs of Access Revenues |   |
|--------|--------------------------|--------|

|   | During 2002 and 2001, costs of access revenues primarily consist of telecommunicationsexpenses inherent in the network infrastructure. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | Income Taxes |   |
|--------|--------------|--------|

|   | Deferred income tax assets and liabilities are computed for differences between financialstatement and tax basis of assets and liabilities that will result in taxable or deductibleamounts in the future based on enacted tax laws and rates applicable to the period in whichthe differences are expected to affect taxable income. Valuation allowances are establishedwhen realization is less than 50% probable. Income tax expense is the tax payable orrefundable for the period adjusted for the change during the period in deferred tax assetsand liabilities. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Financial Instruments and Concentration of Credit Risk |   |
|--------|--------------------------------------------------------|--------|

|   | Financial instruments, which potentially subject the Company to concentrations of creditrisk, consist principally of cash.  The Company maintains its cash in bank deposit accounts,which, at times, may exceed federally insured limits.  The Company has not experienced anylosses in such accounts and believes it is not exposed to any significant credit risk on cash. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Fair Values of Financial Instruments |   |
|--------|--------------------------------------|--------|

|   | The carrying amounts of financial instruments including cash, trade receivables, accountspayable and accrued expenses approximate fair value because of the immediate or short-term maturities of these instruments. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Loss Per Common Share |   |
|--------|-----------------------|--------|

|   | Basic loss per common share has been computed by dividing the net loss by the weightedaverage number of shares of common stock outstanding throughout the period.  Calculationof diluted loss per common share is not presented because the effects of potential commonstock issuable upon exercise of stock options and contingently issuable or redeemableshares would be anti-dilutive. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Goodwill and Other Intangible Assets |   |
|--------|--------------------------------------|--------|

|   | Goodwill and other intangible assets are stated on the basis of cost and are amortized,principally on a straight-line basis, over the estimated future periods to be benefitted(generally 3 years).  Goodwill and other intangible assets were reviewed for impairment toensure they were appropriately valued. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Investments |   |
|--------|-------------|--------|

|   | Investments include minority interests held in three non-public companies.  All of theseinvestments were impaired at December 31, 2001, and were written-down in the totalamount of $24,279.  This impairment was caused by the uncertainty of the value of thesenon-public companies.  The Company has ceased efforts to develop its wireless cable andlow power television businesses and the values of all of the assets associated with themhave been written-down. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Stock for Services |   |
|--------|--------------------|--------|

|   | The Company has issued stock pursuant to various consulting agreements. Deferredconsulting costs, which are valued at the stock price on the date of the agreements, arerecorded as a reduction of stockholders' equity and are amortized over the respective livesof the agreements. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2. PROPERTY AND EQUIPMENT |   |
|---------------------------|--------|

|   | Classifications of property and equipment and accumulated depreciation were as follows atDecember 31, 2002 and 2001: |
|--------|----------------------------------------------------------------------------------------------------------------------|

|                              | 2002    |   | 2001      |
|-----------------------------------|---------|--------|-----------|
| Furniture, fixtures and equipment | $73,359 |   | $203,141  |
| Accumulated depreciation          | (7,336) |   | (125,036) |
| Property and equipment, net       | $66,023 |   | $78,105   |

| 3. INTANGIBLES |   |
|----------------|--------|

|   | Classification of intangibles and accumulated amortization at December 31st were asfollows: |
|--------|---------------------------------------------------------------------------------------------|

|                                        | 2002       |   | 2001       |
|---------------------------------------------|------------|--------|------------|
| Website                                     | $0         |   | $25,000    |
| Intangible assets

Accumulated amortization | 194,000

0 |   | 0

(8,333) |
| Property and equipment, net                 | $194,000   |   | $16,667    |

|   | During 2002, the Company’s website was completely changed and, as a result, thecapitalized costs associated with the old website have been written off.  The balance ofintangible assets at December 31, 2002, is represented by contracts for services as a resultof certain acquisitions. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4. PROPERTY AND EQUIPMENT |   |
|---------------------------|--------|

|   | Property and equipment includes wireless cable station equipment and Internet equipment.Certain equipment was determined to be impaired at December 31, 2002, and its cost ofapproximately $203,000 was written off.  In addition, the Company owns licenses in thewireless cable markets, which operate on the same frequencies and are able to be used inthe wireless Internet market. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5. LICENSES AND RIGHTS TO LEASES OF LICENSES |   |
|----------------------------------------------|--------|

|   | The Company owns licenses or rights to leases of licenses in the following wireless cableand community television markets: |
|--------|----------------------------------------------------------------------------------------------------------------------------|

|   | Wireless Cable Market    |   | Expiration Date   |
|--------|--------------------------|--------|-------------------|
|   | Poplar Bluff, Missouri   |   | October 16, 2006  |
|   | Lebanon, Missouri        |   | October 16, 2006  |
|   | Port Angeles, Washington |   | December 21, 2003 |
|   | Astoria, Oregon          |   | December 21, 2003 |
|   | Sand Point, Idaho        |   | August 09, 2006   |
|   | The Dalles, Oregon       |   | August 09, 2006   |
|   | Fallon, Nevada           |   | August 09, 2006   |

|   | Application for renewal of licenses must be filed within a certain period prior to expiration. |
|--------|------------------------------------------------------------------------------------------------|

| 6. NOTE PAYABLE TO STOCKHOLDER |   |
|--------------------------------|--------|

|                                                                            | 2002   |   | 2001    |
|---------------------------------------------------------------------------------|--------|--------|---------|
| Note payable to stockholder, interest accrues at8%, due on demand and unsecured | $1,000 |   | $18,521 |

| 7. INCOME TAXES |   |
|-----------------|--------|

|   | The significant components of deferred tax assets and liabilities were as follows atDecember 31st: |
|--------|----------------------------------------------------------------------------------------------------|

|   | 2002 |   | 2001 |
|--------|------|--------|------|

|   | Deferred tax assets |   |
|--------|---------------------|--------|

|   | Net operating loss carryforwards | $5,883,404 |   | $4,589,067 |
|--------|----------------------------------|------------|--------|------------|

|   | Less - valuation allowance | (5,883,404) |   | (4,589,067) |
|--------|----------------------------|-------------|--------|-------------|

|   |   | $-0- |   | $-0- |
|--------|--------|------|--------|------|

|   | The net change in the valuation allowance for the periods ended December 31, 2002 and2001 was $1,294,338 and $849,479, respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company has a net operating loss carry forward available to offset future income forincome tax reporting purposes, which will begin to expire in 2012. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8. SOURCES OF SUPPLIES |   |
|------------------------|--------|

|   | The Company relies, in part, on local telephone companies and other companies to providecertain  telecommunications services.  Although management believes alternativetelecommunications facilities could be found in a timely manner, any disruption of theseservices could have an adverse effect on operating results. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9.STOCK COMPENSATION |   |
|----------------------|--------|

|   | In 2001, 700,000 shares were issued to an officer as a bonus for his services as an officer.Compensation expense of approximately $133,000 was recorded based on the fair value ofthe common stock on the date of issue. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Also, in 2001, 200,000 shares were awarded to an officer as a bonus for his services as anofficer.  Compensation expense of approximately $18,000 was recorded based on the fairvalue of the common stock on the date of issue.  These shares were authorized in 2001 andwere issued in 2002. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In 2002, the Company issued a total of 6,436,000 shares in payment of salaries in the totalamount of $594,520, the fair value of the common stock on the respective dates of issue. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10. WARRANTS |   |
|--------------|--------|

|   | Warrants outstanding at December 31, 2002, consist of the following: |
|--------|----------------------------------------------------------------------|

|   | Number ofWarrants |   | Exercise Price |   | Expiration Date |   |
|--------|-------------------|--------|----------------|--------|-----------------|--------|

|   | 56,667 |   | $1.25 |   | May 2003 |   |
|--------|--------|--------|-------|--------|----------|--------|

|   | 56,667 |   | $1.50 |   | May 2003 |   |
|--------|--------|--------|-------|--------|----------|--------|

|   | 12,143 |   | $1.25 |   | May 2004 |   |
|--------|--------|--------|-------|--------|----------|--------|

|   | 60,000 |   | $3.50 |   | December 2004 |   |
|--------|--------|--------|-------|--------|---------------|--------|

|   | 380,000 |   | $.20 |   | December 2003 |   |
|--------|---------|--------|------|--------|---------------|--------|

|   | 840,000 |   | $.15 |   | February 2004 |   |
|--------|---------|--------|------|--------|---------------|--------|

|   | 100,000 |   | $.15 |   | February 2004 |   |
|--------|---------|--------|------|--------|---------------|--------|

|   | 500,000 |   | $.25 |   | March 2004 |   |
|--------|---------|--------|------|--------|------------|--------|

|   | 200,000 |   | $.25 |   | March 2004 |   |
|--------|---------|--------|------|--------|------------|--------|

|   | 268,750 |   | $.25 |   | May 2006 |   |
|--------|---------|--------|------|--------|----------|--------|

|   | 268,750 |   | $.35 |   | May 2006 |   |
|--------|---------|--------|------|--------|----------|--------|

|   | 268,750 |   | $.45 |   | May 2006 |   |
|--------|---------|--------|------|--------|----------|--------|

|   | 223,000 |   | $.20 |   | June 2004 |   |
|--------|---------|--------|------|--------|-----------|--------|

|   | 577,500 |   | $.20 |   | December 2004 |   |
|--------|---------|--------|------|--------|---------------|--------|

|   | 577,500 |   | $.30 |   | December 2004 |   |
|--------|---------|--------|------|--------|---------------|--------|

|   | 160,000 |   | $.10 |   | February 2005 |   |
|--------|---------|--------|------|--------|---------------|--------|

|   | 266,000 |   | $.20 |   | February 2005 |   |
|--------|---------|--------|------|--------|---------------|--------|

|   | 93,000 |   | $.30 |   | February 2005 |   |
|--------|--------|--------|------|--------|---------------|--------|

|   | 200,000 |   | $.049 |   | March 2005 |   |
|--------|---------|--------|-------|--------|------------|--------|

|   | 400,000 |   | $.049 |   | April 2005 |   |
|--------|---------|--------|-------|--------|------------|--------|

|   | 400,000 |   | $.10 |   | March 2005 |   |
|--------|---------|--------|------|--------|------------|--------|

|   | 400,000 |   | $.20 |   | March 2005 |   |
|--------|---------|--------|------|--------|------------|--------|

|   | 1,562,500 |   | $.15 |   | April 2005 |   |
|--------|-----------|--------|------|--------|------------|--------|

|   | 1,562,500 |   | $.30 |   | April 2005 |   |
|--------|-----------|--------|------|--------|------------|--------|

|   | 1,562,500 |   | $.15 |   | June 2005 |   |
|--------|-----------|--------|------|--------|-----------|--------|

|   | 1,562,500 |   | $.30 |   | June 2005 |   |
|--------|-----------|--------|------|--------|-----------|--------|

| Total | 12,558,997 |   |
|-------|------------|--------|

| 11. SIGNIFICANT EQUITY PURCHASE |   |
|---------------------------------|--------|

|   | In April 2002, the Company entered into a securities purchase agreement with a third party,whereby the Company is to issue 3,125,000 units of its securities, each unit consisting ofone share of common stock, one common stock purchase warrant to purchase one share atan exercise price of $.15 per share and one common stock purchase warrant to purchaseone share at an exercise price of $.30 per share, for cash in the amount of $250,000 payablein two equal increments at the initial closing and 60 days thereafter.  Also pursuant to thisagreement, the Company hired a new president and chief executive officer, who became adirector of the Company, and, as a signing bonus, issued him 3,000,000 shares of commonstock; the current president became Chairman of the Board, reduced the term of hisremaining term of employment from approximately four years to six months, waived thepayment of all accrued and unpaid salary and waived the repayment of all loans made byhim to the Company, in consideration of 2,000,000 shares of common stock being issued tohim; two of the Company’s vice presidents reduced the terms of their remaining terms ofemployment from approximately four years to six months and one year to six months,respectively, and waived the payment of all accrued and unpaid salary, in consideration of2,000,000 shares of common stock being issued to each of them; and the other vicepresident of the Company terminated his employment with the Company. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 12. STOCK ISSUANCES IN PAYMENT OF ACCRUED SALARY |   |
|--------------------------------------------------|--------|

|   | In 2002, the Company issued a total of 4,404,000 shares of common stock in payment of atotal of $291,450 in accrued salary of certain of its officers and former officers, whichshares were valued at $.07 per share, the closing price of the Common Stock, as reportedby AMEX, on the date of issuance. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13. 2002 STOCK OWNERSHIP PLAN |   |
|-------------------------------|--------|

|   | In March 2002, the Board adopted a stock ownership plan for officers, directors andconsultants of the Company known as the 2002 Stock Ownership Plan, as amended andrestated in December 2002 (the “2002 Plan”). |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The 2002 Plan was established by the Board as a means to promote the success andenhance the value of the Company by linking the personal interests of participants to thoseof the Company’s shareholders, and by providing participants with an incentive foroutstanding performance. The 2002 Plan is further intended to aid the Company inattracting and retaining the services of persons upon whose judgment, interest and specialefforts the successful operation of the Company and its subsidiaries is dependent.  Personswho are either officers, directors or consultants of the Company are eligible to participate inthe 2002 Plan.  The Board may, at any time and from time to time, grant shares of theCommon Stock in such amounts and upon such terms and conditions as it may determine,to include the granting of shares of the Common Stock and the granting of options topurchase shares of the Common Stock.  11,000,000 shares of Common Stock werereserved for issuance under the 2002 Plan and a Registration Statement on Form S-8 (SECFile No. 333-102167) relating to the 2002 Plan, as amended, has been filed with the SEC.Under the 2002 Plan, at December 31, 2002, a total of 3,150,000 shares had been issuedand options to acquire a total of 5,850,000 shares had not yet vested, which options willnot vest unless and until the Company’s shareholders (a) ratify the adoption of the 2002Plan and (b) approve an amendment to the Company’s Articles of Incorporation that wouldincrease the number of shares of authorized capital stock. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14. CONTINGENCIES |   |
|-------------------|--------|

|   | Involuntary Bankruptcy |   |
|--------|------------------------|--------|

|   | On September 29, 2000, three creditors of CyberHighway filed an involuntary petitionin the Idaho Federal Bankruptcy Court, styled In Re:CyberHighway, Inc..  In December2000, CyberHighway and the petitioning creditors filed a joint motion to dismiss thisproceeding.  However, some of CyberHighway’s creditors objected to the joint motionto dismiss and the motion failed. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | At December 31, 2002, of the accounts payable reflected on the Company’s balancesheet, approximately $1,015,000 of such amount reflects accounts receivable ofCyberHighway.  This amount of accounts payable will no longer be included in theCompany’s accounts payable, upon the final discharge of CyberHighway’s debts. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | American Stock Exchange Listing |   |
|--------|---------------------------------|--------|

|   | Currently, the Company is not in compliance with the continued listing guidelines ofAMEX.  During the second quarter of 2001, AMEX first inquired with respect to ourplan for achieving compliance with its continued listing guidelines.  Our response toAMEX included an explanation of our anticipated future funding under the FusionCapital agreement and the positive effects this funding would likely have on ourbusiness and financial condition, particularly in increasing our total assets andstockholders’ equity.  In July 2002, we were notified by AMEX that we have fallenbelow the continued listing standards of AMEX.  We have 18 months in which to regaincompliance with AMEX’s continued listing standards.  We have fallen below certain ofAMEX’s continued listing standards: (1) losses from operations in its two most recentfiscal years with shareholders’ equity below $2 million; and (2) sustained losses sosubstantial in relation to the company’s overall operations or its existing financialresources, or its financial condition in relation to its overall operations or its existingfinancial resources, or its financial condition has become so impaired that it appearsquestionable, the opinion of AMEX, as to whether the company will be able to continueoperations and/or meet its obligations as they mature.  After AMEX reviewed our planfor regaining compliance, we were granted an extension of time (18 months) to regaincompliance with the continued listing standards.  We will be subject to periodic reviewby the AMEX staff during the extension period.  Failure to make progress consistentwith the plan or to regain compliance with the continued listing standards by the end ofthe extension period could result in our being delisted from AMEX.  Should ourcommon stock be delisted from AMEX, it is very likely that the market price for ourstock could drop dramatically.  We cannot assure you that we will be able to maintainour listing on AMEX. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15. DEBT FORGIVENESS |   |
|----------------------|--------|

|   | At December 31, 2000, $1,400,997 and $42,469 of CyberHighway’s accounts payable anddisbursements in excess of bank accounts, respectively, were reflected on the Company’sbalance sheet.  At December 31, 2001, the Company’s balance sheet included $953,561 in“permitted claims” against CyberHighway, the total claims submitted by creditors ofCyberHighway during 2001, including the statutory notification period.  This notificationperiod began on December 6, 2001, and ended on March 6, 2002.  A substantial amount ofthe claims were submitted by December 31, 2001; therefore, a reduction in the liabilities atthat date was deemed appropriate. The $489,905 reduction in CyberHighway’s liabilities isreflected in the Company’s consolidated statements of operations as an extraordinary item. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 16. SEGMENT DISCLOSURE |   |
|------------------------|--------|

|   | The Company adopted SFAS No. 131 “Disclosures about Segments of an Enterprise andRelated Information,” during the fourth quarter of 2000.  SFAS No. 131 establishedstandards for reporting information about operating segments in annual financial statementsand requires selected information about operating segments in interim financial reportsissued to stockholders.  It also established standards for related disclosures about productsand services and geographic areas.  Operating segments are defined as components of anenterprise about which separate financial information is available that is evaluated regularlyby chief operating decision makers or decision making groups, in deciding how to allocateresources and in assessing performance.  Through December 31, 2002, the Company’soperations contained no individual segments that are required to be reported pursuant toSFAS 131. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 17. FINANCING TRANSACTION |   |
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|   | In May 2001, the Company signed an amended and restated common stock purchaseagreement with an unrelated company to sell up to 6,000,000 shares of common stock forup to $10,000,000.  This agreement terminated in March 2003, upon the purchase of thelast available shares under the agreement.  During its term, the purchase price of the sharesunder the purchase agreement varied, based on market prices of the Company's commonstock.  The registration statement filed with respect to this financing transaction becameeffective on June 29, 2001.  The commencement date of the purchase agreement was July10, 2001.  The Company received a total of $577,993 in proceeds under the purchaseagreement during 2001, 2002 and 2003, in consideration of 6,000,000 shares. |
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| 18. POTENTIAL RESCISSION CLAIMS |   |
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|   | From January 2000 through June 2001, a total of 4,906,549 shares of the common stock ofthe Company may have been issued in violation of Section 5 of the Securities Act of 1933,as amended.  The aggregate value assigned to these shares upon their issuance totaled$5,090,252.  For a period of one year from issuance, the issuees of these shares have orhad, as the case may be, a potential claim for rescission of their respective issuancetransactions. |
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|   | At December 31, 2001, 2,138,726 of these shares have been reflected under the redeemablestock caption on the accompanying balance sheet with an assigned value of $1,192,700. |
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|   | At December 31, 2002, none of these shares remained under the redeemable stock captionon the accompanying balance sheet. |
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|   | The diminishing number of shares subject to potential rescission claims was caused either bythe expiration of the respective statute of limitations periods or by the transfer of thesubject shares by the original issuees. |
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| 19. NOTE PAYABLE |   |
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|   | In connection with an acquisition made by the Company, the Company’s balance sheetreflects a note payable obligation of the acquired subsidiary.  At December 31, 2002, thebalance of this note was $87,604, due in full in August 2003, with interest accruing at 8%per annum. |
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| 20. SUBSEQUENT EVENTS |   |
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|   | In March 2003, the Company signed a common stock purchase agreement with anunrelated company to sell up to $10,000,000 of Company common stock.  The purchaseprice per share under this purchase agreement varies, based on market prices of theCompany's common stock.  The purchase agreement calls for the Company to meet certainrequirements and maintain certain criteria with respect to its common stock in order toavoid an event of default.  Upon the occurrence of the event of default the buyer is nolonger obligated to purchase any additional shares of common stock.  A registrationstatement is expected to be filed in the near future with respect to this financing transaction.There is no assurance that the Company will benefit from such agreement. |
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