U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-KSB

| [X] | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934for the Fiscal Year Ended December 31, 2001       |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|
| [ ] | Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934for the Transition Period From ________ to ________ |

Commission File No. 1-15383

| USURF America, Inc.                            |
|------------------------------------------------|
| (Name of Small Business Issuer in its Charter) |

| Nevada                                                        |   |   | 91-2117796                          |
|---------------------------------------------------------------|--------|--------|-------------------------------------|
| (State or Other Jurisdiction ofIncorporation or Organization) |   |   | (IRS Employer IdentificationNumber) |

| 8748 Quarters Lake Road, Baton Rouge, Louisiana 70809        |
|--------------------------------------------------------------|
| (Address of Principal Executive Offices, Including Zip Code) |

| (225) 922-7744                                         |
|--------------------------------------------------------|
| (Issuer’s Telephone Number, Including Area Code) |

Securities Registered under Section 12(b) of the Exchange Act:

| 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

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 past 90days.  Yes [X]  No [  ]

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’s knowledge,in definitive proxy or information statements incorporated by reference in Part III of this Form10-KSB or any amendment to this Form 10-KSB. [     ]

Registrant’s revenues for its most recent fiscal year were $7,446.

The aggregate market value of the voting stock held by non-affiliates computed based on theclosing price of such stock as of April 10, 2002, was approximately $2,295,000.

The number of shares outstanding of the issuer’s common equity as of April 10, 2002, was36,955,370 shares of common stock, par value $.0001.

Documents Incorporated by Reference: Current Report on Form 8-K, date of event: February 6,2002; and Current Report on Form 8-K, date of event: April 5, 2002.

Transitional Small Business Disclosure Format (check one):  Yes [     ]    No [  X  ]

PART I

Item 1.  Description of Business

History

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.”, to act as a holding company in the wireless cable and community (lowpower) television industries.  Due to current market conditions in the wireless cable industry, wehave abandoned efforts to develop our wireless cable properties.  We now focus on theexploitation of our Quick-Cell wireless Internet access products.  In furtherance of this plan, weassigned all of our community (low power) television properties to New Wave Media Corp.

Current Overview

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

Our dial-up Internet access business has lost all of its customers and, for the foreseeable future,we have abandoned development of our e-commerce business.

Recent Developments

In April 2002, we entered into a securities purchase agreement with a third party, EvergreenVenture Partners, LLC, whereby we are to issue 3,125,000 units of our securities, each unitconsisting of one share of our common stock, one common stock purchase warrant to purchaseone share at an exercise price of $.15 per share and one common stock purchase warrant topurchase one share at an exercise price of $.30 per share, for cash in the amount of $250,000payable in two equal increments at the initial closing (scheduled for April 15, 2002) and 60 daysthereafter.  Also pursuant to this agreement, we will hire a new president and chief executiveofficer, Douglas O. McKinnon, who will also become a director, and, receive 2,000,000 shares ofcommon stock, as a bonus; our current president, David M. Loflin, will become Chairman of theBoard, reduce the term of his remaining term of employment from approximately 4 years to sixmonths, waive the payment of all accrued and unpaid salary and waive the repayment of all loansmade by him to us, in consideration of 2,000,000 shares of common stock being issued to him;two of our vice presidents will reduce the terms of their remaining terms of employment fromapproximately 4 years to six months and one year to six months, respectively, and waive thepayment of all accrued and unpaid salary, in consideration of 2,000,000 shares of common stockbeing issued to each of them; and our other vice president will terminate his employment with us.Also, upon the final closing under this agreement, Evergreen will name two persons to becomedirectors of USURF America.

In September 2001, we began Quick-Cell operations in Del Rio, Texas, and have agreementswith two resellers there.  We have approximately 50 customers online, but our growth there hasbeen slowed significantly due to our lack of capital.  We cannot predict the number of customerswe will secure in any specific time frame, due to our lack of capital.  In Del Rio, we have chosento make sustained slow progress in customer acquisition, rather than to have begun full-scalemarketing activities only to suspend them soon after their start due to our lack of capital.Currently, we are adding one or two customers per week.  With the funds derived from theEvergreen agreement and, should we begin to derive greater funds under our agreement withFusion Capital (described below), of which there is no assurance, we plan to construct additionalQuick-Cell systems during the remainder of 2002.

We have also completed engineering efforts in four other South Texas towns, but will not beginmarketing our Quick-Cell service in these towns until we stabilize our working capital situation.We cannot predict our future capital position.

On September 29, 2000, an involuntary bankruptcy petition was filed against CyberHighway, ourwholly-owned subsidiary, in the Idaho Federal Bankruptcy Court.  The petition was brought byProPeople Staffing, CTC Telecom, Inc. and Hawkins-Smith.  CyberHighway’s bankruptcyproceeding was not dismissed upon such a motion, because some of CyberHighway’s creditorsbelieve that CyberHighway’s as-yet unasserted damage claims against the original petitioningcreditors and their law firm represent CyberHighway’s most valuable assets.  These objectingcreditors desire that these claims be adjudicated in the bankruptcy court.  It is likely that, at sometime in the future, a final order of bankruptcy will be entered with respect to CyberHighway.  Noprediction of the timing of such an order can be made, although we believe that such an orderwould come only after the final adjudication of the claims described above.

Due primarily to the involuntary bankruptcy proceeding, CyberHighway lost all of its customers.We do not expect that CyberHighway will resume operations.

On May 9, 2001, we executed a common stock purchase agreement with Fusion Capital Fund II,LLC, which replaced a similar agreement dated October 9, 2000.  Under this agreement, FusionCapital may purchase up to $10 million of our common stock over a period of up to 25 months.We have not obtained the maximum funding amount possible under this agreement.   AtDecember 31, 2001, we had received only $340,000 under our agreement with Fusion Capital.Fusion Capital has not purchased the maximum shares possible under this agreement, which hassignificantly impeded our ability to expand our Quick-Cell business operations..  At December31, 2001, we had advanced 1,321,200 shares in consideration of the buyer’s advance of $80,176,in expectation that a settlement will take place in the near future.  We will remain in this positionunless and until our stock price increases significantly or we secure funding from a source otherthan Fusion Capital, of which there is no assurance.

The Fusion Capital Transaction

General.  On May 9, 2001, we entered into an amended and restated common stock purchaseagreement with Fusion Capital, which replaced a similar agreement dated October 9, 2000, andamended by letter agreement on December 27, 2000, pursuant to which Fusion Capital agreed topurchase up to $10 million of our common stock. The selling price of the shares will be equal toa price based upon the future market price of the common stock without any fixed discount to themarket price.

Purchase of Shares Under the Fusion Capital Agreement.  Under the Fusion Capital agreement,on each trading day during the term of the agreement, Fusion Capital is obligated to purchase aspecified dollar amount of our common stock.  Subject to our right to suspend Fusion Capital’spurchases at any time and our right to terminate the Fusion Capital agreement at any time, FusionCapital will purchase on each trading day during the term of the agreement $20,000 of ourcommon stock.  The daily purchase amount may be decreased by us at any time.  We also havethe right to increase the daily purchase amount of $20,000 any time the market price of ourcommon stock is above $5.00 per share for five consecutive trading days.  The selling price pershare is equal to the lesser of:                                                                            

|   | - | the lowest sale price of our common stock on the purchase date; or                                                                                                            |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | the average of the three lowest closing sale prices of our common stock duringthe 15 consecutive trading days prior to the date of submission of a purchase byFusion Capital. |

The selling price will be adjusted for any reorganization, recapitalization, non-cash dividend,stock split or other similar transaction occurring during the fifteen (15) trading days in which theclosing bid price is used to compute the purchase price.  Even though the Fusion CapitalAgreement restricts Fusion Capital from owning more than 9.9% of our stock at any one time,this restriction does not prevent Fusion Capital from selling a portion of its holdings and laterpurchasing additional shares.  Thus, it is possible that the total number of shares purchased byFusion Capital would be greater than 9.9% of the then-outstanding common stock.  Because thisrestriction on ownership may be waived by us and Fusion Capital, it is possible that FusionCapital could own more than 9.9% of our common stock at any one time.

The following table sets forth the number of shares of our common stock that would be sold toFusion Capital upon our sale of common stock under the Fusion Capital agreement at varyingpurchase prices:

| Assumed Per SharePurchase Price | Total Shares IssuableUpon Purchase ofRemaining SharesUnder the FusionCapital Agreement | Gross Proceeds   | Percent of OurCommon StockOutstanding AfterGiving Effect to theIssuance to FusionCapital |
|---------------------------------|----------------------------------------------------------------------------------------|------------------|------------------------------------------------------------------------------------------|
| ________________                | ________________                                                                       | ________________ | ________________                                                                         |
| $.09(1)                         | 6,000,000(2)                                                                           | $500,000(2)      | 16.23%                                                                                   |
| $1.50                           | 6,000,000(2)                                                                           | $6,500,000(2)    | 16.23%                                                                                   |
| $2.00                           | 6,000,000(2)                                                                           | $8,500,000       | 16.23%                                                                                   |
| $5.00                           | 3,500,000(2)                                                                           | $10,000,000      | 9.47%                                                                                    |
| $10.00                          | 2,500,000(2)                                                                           | $10,000,000      | 6.76%                                                                                    |
| _________                       |                                                                                   |             |                                                                                     |

(1) Closing price on April 10, 2002, as reported by AMEX.

(2) Estimate.

Under the Fusion Capital agreement, as of December 31, 2001, we had received only $340,000.This does not represent the maximum amount of funds under the Fusion Capital agreement, andhas significantly impeded our ability to expand our Quick-Cell business operations.  AtDecember 31, 2001, the Company had advanced 1,321,200 shares in consideration of the buyer’sadvance of $80,176, in expectation that a settlement will take place in the near future.  We maynever realize the maximum amount of proceeds under the Fusion Capital agreement.

Since we only plan to sell up to 6,000,000 shares to Fusion Capital under the Fusion Capitalagreement, the selling price of our stock sold to Fusion Capital will need to average $1.67 pershare for us to receive the maximum proceeds of $10 million under that agreement.  Given thecurrent and sustained depressed price for our common stock, it appears unlikely that we willobtain $10 million under the Fusion Capital agreement, although we cannot predict the ultimateamount that we will obtain under that agreement.  However, should our stock price remain at ornear its current level, we would be able to obtain only approximately $500,000, unless we chooseto issue more than 6,000,000 shares, which we have the right to do.

Our Right to Suspend Purchases.  At any time or from time to time, we have the unconditionalright to prevent any purchases by Fusion Capital effective upon one trading day’s prior notice.Any suspension would remain in effect until our revocation of the suspension.  To the extent weneed to use the cash proceeds of the sales of common stock under the Fusion Capital agreementfor working capital or other business purposes, we do not intend to restrict purchases under theFusion Capital agreement.

Our Right to Increase and Decrease the Daily Purchase Amount.  We have the unconditionalright to decrease the daily amount to be purchased by Fusion Capital at any time for any reason,effective upon one trading day’s notice.  We also have the right to increase the $20,000 dailypurchase amount any time the market price of our common stock is above $5.00 per share forfive consecutive trading days.  For any trading day that the market price of our common stock isbelow $5.00, the daily purchase amount shall not be greater than $20,000.

To date, we have not obtained the maximum amount of funds under the Fusion Capitalagreement, which has significantly impeded our ability to expand our Quick-Cell businessoperations.  We may never realize the maximum amount of proceeds under the Fusion Capitalagreement.

Our Termination Rights.  We have the unconditional right at any time for any reason to givenotice to Fusion Capital terminating the common stock purchase agreement.  Such notice shall beeffective one trading day after Fusion Capital receives such notice.

Effect of Performance of the Fusion Capital Agreement on our Shareholders.  All shares issuedto Fusion Capital have been registered for resale and will be freely tradable. It is anticipated thatthese shares will be sold over a period of up to 25 months from July 2001. The sale of asignificant amount of these shares at any given time could cause the trading price of our commonstock to decline and to be highly volatile. Fusion Capital may ultimately purchase all of theshares of common stock issuable under the Fusion Capital agreement, and it may resell some,none or all of the shares of common stock it acquires upon purchase. Therefore, the purchasesunder the Fusion Capital agreement may result in substantial dilution to the interests of otherholders of our common stock. However, we have the right at any time for any reason to: (1)reduce the daily purchase amount, (2) suspend purchases of the common stock by Fusion Capitaland (3) terminate the Fusion Capital agreement.

No Short-Selling or Hedging by Fusion Capital.  Fusion Capital has agreed that neither it nor anyof its affiliates will engage in any direct or indirect short-selling or hedging of our common stockduring any time prior to the termination of the Fusion Capital agreement.

Events of Default.  Generally, Fusion Capital may terminate the Fusion Capital agreementwithout any liability or payment to us upon the occurrence of any of the following events ofdefault:

|   | - | if for any legal reason the shares purchased cannot be sold for a period of 10consecutive trading days or for more than an aggregate of 30 trading days inany 365-day period;                                                                                                                                                                                                                                                                              |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | suspension by the American Stock Exchange of our common stock from tradingfor a period of 10 consecutive trading days or for more than an aggregate of 30trading days in any 365-day period;                                                                                                                                                                                                                                                               |
|   | - | our failure to satisfy any listing criteria of the American Stock Exchange for aperiod of 10 consecutive trading days or for more than an aggregate of 30trading days in any 365-day period;                                                                                                                                                                                                                                                               |
|   | - | (1) notice from us or our transfer agent to the effect that we or the transfer agentintends not to comply with a proper request for purchase of shares under theFusion Capital agreement; (2) our failure to promptly confirm to the transferagent Fusion Capital's purchase notice; or (3) the failure of the transfer agent toissue shares of our common stock promptly upon delivery of a purchase noticeor upon delivery of a warrant exercise notice; |
|   | - | any material breach of the representations or warranties or covenants containedin the Fusion Capital agreement or any related agreements which has or whichcould have a material adverse affect on us, subject to a cure period of 10 tradingdays;                                                                                                                                                                                                         |
|   | - | if the number of shares to be issued to Fusion Capital reaches an aggregateamount that would require shareholder approval under our principal marketregulations (to the extent not  previously obtained and then required) orotherwise cause us to breach our principal market rules and regulations;                                                                                                                                                      |
|   | - | a default of any payment obligation of USURF America in excess of $1.0million; or                                                                                                                                                                                                                                                                                                                                                                          |
|   | - | commencement of insolvency or bankruptcy proceedings by or against USURFAmerica.                                                                                                                                                                                                                                                                                                                                                                           |

Shares and Warrants Issued to Fusion Capital.  Under the Fusion Capital agreement, FusionCapital has received 800,000 shares as part of its commitment fee.  These shares may not be soldby Fusion Capital until the earliest of termination of the Fusion Capital agreement, default underthe Fusion Capital agreement or approximately 25 months from July 2001. Under the FusionCapital agreement, we have issued to Fusion Capital, as part of its commitment fee, warrants topurchase 215,000 shares of our common stock at an exercise price of $.25 per share, warrants topurchase 215,000 shares of our common stock at an exercise price of $.35 per share and warrantsto purchase 215,000 shares of our common stock at an exercise price of $.45 per share.  Thesewarrants are exercisable by Fusion Capital for a period of five years from the date of theirissuance.

No Variable-Priced Financings.  Until the termination of the Fusion Capital agreement, we haveagreed not to issue, or enter into any agreement with respect to the issuance of, any variable-priced equity or variable-priced "equity-like" securities, unless we have obtained Fusion Capital'sprior written consent.

Holdings of Fusion Capital Upon Termination of the Offering.  Because Fusion Capital may sellall, some or none of the common stock issued to it, no estimate can be given as to the amount ofcommon stock that will be held by Fusion Capital upon early termination of the offering.

Registration Rights Agreement.  In connection with the execution of the Fusion Capitalagreement, we executed a registration rights agreement with Fusion Capital, which relates to theshares of our stock issued or to be issued under the Fusion Capital agreement.  We are requiredunder the registration rights agreement to register all such shares of our common stock pursuantto a registration statement and to keep such registration statement current for purposes of Rule424 under the Securities Act, for a period of up to five years.  We are currently in compliancewith this provision.

Finder’s Fee.  Pursuant to the transactions contemplated by the Fusion Capital agreement, wehave issued to our investment banker, Gruntal & Co., L.L.C., as a finder’s fee, 200,000 shares ofour common stock and a total of 161,250 warrants.  All of the warrants issued to Gruntal & Co.are exercisable for a period of five years from the date of their issuance.

In addition to the shares and warrants to be issued to Gruntal & Co., we are obligated to pay toGruntal & Co., as a further finder’s fee, a sum of cash equal to 8% of the gross proceeds obtainedby us pursuant to the Fusion Capital agreement.

Industry Background

Growth of the Internet; the World Wide Web.  The Internet, commonly known as the WorldWide Web, or simply the Web, is a collection of connected computer systems and networks thatlink millions of public and private computers to form, essentially, the largest computer networkin the world.  The Internet has experienced rapid growth in recent years and is expected tocontinue its growth.

Internet Access.  Internet access services represent the means by which ISPs interconnectbusiness and consumer users to the Internet's resources.  Access services vary from dial-upmodem access, like that previously provided by our CyberHighway subsidiary, for individualsand small businesses to high-speed dedicated transmission lines for broadband access by largeorganizations to wireless Internet access systems, like our Quick-Cell wireless Internet accesssystem.

Wireless Internet Access

What is Wireless Internet?  “Wireless Internet” is a new type of communications spectrumrecently designated by the FCC.  Wireless Internet access requires a transmission facilitymaintained by an ISP employing a wireless system and the user’s modem (a transmitter/receivermodem) equipped with an antenna.  Wireless Internet capability allows users to access theInternet from a stationary computer or, in some situations, from a mobile, lap-top computer.

What is Quick-Cell?  “Quick-Cell” is the brand name of our proprietary wireless Internet accesssystem.  Each Quick-Cell system is comprised of one or more server modems, or cells.  Servermodems, which are less than one cubic foot in size, are mounted on tall structures, towers, tallbuildings or billboards, for example.  The space needed for mounting the server modems can beleased for an average monthly payment of about $500.  Each server modem relays transmitteddata directly into the Internet via a T1, or larger, telephone line.  The monthly charge for each T1line ranges from $600 to $2,000, depending on the market.

Installed customer modems, which are slightly larger in size than a deck of playing cards,transmit data to, and receive data from, a server modem.  Each customer modem is installed inthe customer’s computer and connected by a thin cable to a small antenna that is mounted on theoutside of the customer’s place of business or home, as the case may be.  The installation processfor customer modems is quite similar to that of cable television: the installation crew installs thecustomer modem in the computer, mounts the antenna outside, connects the modem and antennawith the cable and tests the connection.  Depending on the market, each customer installation isexpected to cost between $40 and $80.

The number of Quick-Cell server modems needed for a particular system depends on a fewfactors:

|   | - | the geographic size of the city to be served - each server modem’s signal coversan area approximately seven miles in diameter;                                                                                      |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | the population density of the city to be served - since each server modem iscapable of handling up to approximately 4,000 customers, the greater thepopulation density, the greater the number of server modems required; |
|   | - | the terrain of the city to be served - the hillier the terrain, the greater the numberof server modems required; and                                                                                                      |
|   | - |  the density of foliage of the city to be served - more densely foliated areasrequire a greater number of server modems.                                                                                             |

Within a particular system, each additional server modem is configured to share transmitted datawith the other server modems, so as to provide an uninterrupted connection to the Internet.  In aQuick-Cell system with multiple server modems, the server modems are geographically locatedin a honeycomb fashion, for technical reasons.

Data transmission speeds remain constant within a Quick-Cell system’s transmission radius,regardless of the distance from the server modem.  On the fringes of a Quick-Cell system’stransmission radius, a customer’s connection may fade in and out, similar to the reception ofdistant AM radio stations.  To avoid this circumstance, we will attempt to avoid installing acustomer modem within the fringe areas.

Quick-Cell Equipment and Facilities.  Until February 2001, all of our Quick-Cell modems weremanufactured for us by OTC Telecom, San Jose, California, using off-the-shelf circuit boardsand other parts.  These modems cost approximately $300 each, because we lacked capital topurchase large quantities at a reduced per-modem cost.

In February 2001, we completed the design and testing of our own modem circuit board.  Thisadvancement has freed us from our dependence on OTC Telecom for modems.  We now are ableto solicit competitive bids from circuit board manufacturers and other parts suppliers, thenassemble the modems in our new facility located in Baton Rouge, Louisiana.  With thesechanges, our future modem cost will be approximately $180 per modem.

In June 2001, we completed development of a new configuration of our Quick-Cell servermodem which will permit each server modem to serve approximately 4,000 users, or twice asmany users as earlier server modem configurations.  Because we will be required to constructfewer server modem sites as we build-out a particular Quick-Cell market, this advancement isexpected to reduce our future Quick-Cell system build-out costs by approximately 20%.

We will not construct towers on which to mount server modems.  Instead, we will lease towerspaces, rooftop spaces or spaces on other tall structures.  We have renegotiated our prior towerlease arrangement with SBA Communications Corporation, a Boca Raton, Florida-based towercompany, reducing the number of single tower leases from 23 to three, two towers in Del Rio andone tower in Santa Fe.  We are currently negotiating with other tower companies for similaragreements in other cities.  Based on our management’s experience, securing adequate locationsto mount the server modems is not expected to impede Quick-Cell system construction in anymarket.

In each market, we will obtain the necessary fiber-optic telephone line connections to the Internetfrom one of the many telecommunications companies capable of providing an adequate Internetconnection.  Based on our past experience, we do not believe that we will encounter anydifficulty in obtaining needed connections to the Internet at acceptable prices.

Quick-Cell System Control Software.  We have developed software that enables us to control thedata transmission speed of each customer modem within each Quick-Cell system, all from asingle location.  With this software, we are able to increase or decrease a customer’s datatransmission speed in just a few minutes’ time.  This software also permits us to monitor easilyeach Quick-Cell server modem’s bandwidth usage, which will enable us to add a server modemto a Quick-Cell system that is approaching maximum capacity prior to the time that systembecomes overloaded and its transmission speed slows.  This capability will enhance our ability toprovide our customers data transmission service at speeds for which they contracted.

Current Markets.  In September 2001, we began company-owned Quick-Cell operations in DelRio, Texas, and have agreements with two resellers there.  We have approximately 50 customersin Del Rio and customer response has been excellent, but our growth has been slowedsignificantly by a lack of capital.  In Del Rio, we have chosen to make sustained slow progress incustomer acquisition, rather than to have begun full-scale marketing activities only to suspendthem soon after their start due to our lack of capital.  In Del Rio, we charge residential customers$50 per month and business customers $100 per month for our Quick-Cell service.

We have also completed engineering efforts in four other South Texas towns, but will not beginmarketing our Quick-Cell service in these towns, until we stabilize our working capital situation.We cannot predict our future capital position.

We also have a Quick-Cell system in Santa Fe, New Mexico.  Because we have been unable tocomplete a system upgrade there, our customer base diminished from approximately 120customers to a few that remain.  We expect that, if and when capital becomes available, we willcomplete the system upgrade and begin to increase our customer base there.

Reseller Agreements.  In April 2001, we entered into a Quick-Cell reseller agreement withWireless WebConnect!, Inc., a Florida-based wireless Internet access reseller.  Prior to thedemise of Metricom, Inc. of San Jose, California, formerly the purveyor of a nationally-knownwireless Internet access service, know as “RicochetTM”, WebConnect acted primarily as areseller of the“RicochetTM” service.  Our reseller agreement with WebConnect is for an initialterm of 10 years.   However, due to issues within WebConnect that were beyond our control, todate, we have not derived any benefit from this agreement.  After recent discussions withWebConnect, we expect to begin to implement our agreement during 2002, as it appears thatWebConnect’s internal issues have been resolved to a point that it is now in a position toparticipate as a Quick-Cell reseller.  It is possible that the terms of our agreement withWebConnect might be amended in the future, but we cannot predict if or when such anamendment would occur.

We have entered into reseller agreements with two entities in Del Rio, Texas.

Currently, our Del Rio resellers’ sales efforts have been impeded significantly by our inability toobtain needed equipment, including customer modems, due to our severe lack of capital, orability to hire and train qualified installation crews.  We may never be able to take full advantageof our resellers’ abilities, thereby limiting potential profits.

Other Quick-Cell Marketing Strategies.  In the middle of 2000, we began marketing our Quick-Cell systems to local exchange telephone companies, independent telephone companies, digitalsubscriber line resellers and Internet service providers.  We sold three Quick-Cell systems in ashort time.  Due to a lack of capital, we have suspended this marketing effort.

These Quick-Cell systems were sold to companies located in Brownwood, Texas, Wheeling,West Virginia, and San Juan, Puerto Rico.  No paying customers use these systems, due tocircumstances involving these companies that are beyond our control.  We are unsure if andwhen the owners of these Quick-Cell systems will begin to offer service to the public.

In 1999, we licensed five small Internet service providers to operate our Quick-Cell system.Three of these companies never acted on the granted licenses and they expired.  A licensedQuick-Cell system in Casper, Wyoming, operated for three months, but was discontinued due tothe sale of the licensee’s business.  The Santa Fe, New Mexico, licensee was acquired by us inJune 1999.

Quick-Cell Sales and Marketing.  In cities in which we construct company-owned Quick-Cellsystems, we intend to employ telephone marketing as the initial means for acquiring customers,primarily business customers.  As a particular market begins to mature, we will employ massmedia, including radio advertising.  In conjunction with our mass media advertising, we willemploy a sales force that will focus primarily on potential business customers.  This focus onbusiness customers is based on our management’s informal study of Internet usage by businessesversus home users that revealed businesses’ higher demand for high-speed Internet access.  Ourmanagement’s decision may prove to have been incorrect, which would significantly impair ourability to earn a profit.

Without additional capital, we will not be able to construct another company-owned Quick-Cellsystem.

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

Competitive Features of Quick-Cell.  While we believe Quick-Cell possesses some competitiveadvantages over other Internet access modes, it currently has three significant competitivedisadvantages:

|   | - | No wide-spread brand name recognition;                                                                                                                |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | Professional installation usually required; and                                                                                                       |
|   | - | Internet access only available locally, compared to dial-up Internet access that isavailable from virtually any telephone in any geographic location. |

It is possible that we could overcome the first two listed disadvantages, after a lengthy period ofmarketing and product research and development.  However, we currently lack capital toovercome either disadvantage.  Further, it is likely that we will never overcome the thirddisadvantage, due to the inherent broadcast limitations of wireless technologies.

We believe Quick-Cell offers the following competitive advantages:

|   | - | Speed: our Quick-Cell system is capable of data transmission speeds of up to10 Mbs; we expect that most of our customers’ connections will transmit dataat the rate of 256 kbs, the wireless equivalent of the well-publicized digitalsubscriber line (DSL) hard wire Internet access method; our Quick-Cell systemoffers far greater data transmission speeds than cellular telephone-basedInternet access methods; |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | Lower Cost: we expect that our Quick-Cell service will be offered at costsbetween 15% and 60% less than available hard-wire Internet access, dependingon the particular market, that is, less than the sum of monthly Internet serviceprovider charges and monthly telephone line charges; Quick-Cell will also bepriced competitively with cellular-telephone-based and other wireless Internetaccess methods;            |
|   | - | No Telephone Company Involvement: our Quick-Cell customers will not berequired to incur the expense of a hard-wire telephone line through which toaccess the Internet;                                                                                                                                                                                                                                                     |
|   | - | Security/Encryption: our Quick-Cell system is capable of encrypting, orscrambling, its broadcast signal, thereby offering a high degree of security tocustomers; and                                                                                                                                                                                                                                                       |
|   | - | Mobility: our Quick-Cell system is able to permit service personnel of abusiness to file contemporaneous reports, request and receive technicalassistance and perform other computer-based functions from a customer’s placeof business or from a service vehicle, as long as the personnel remain within theQuick-Cell system’s coverage area.                                                                |

Dial-up Internet Access

As recently as September 2000, our CyberHighway subsidiary provided dial-up Internet serviceto about 25,000 customers, approximately 8,500 directly and 16,500 through affiliate-Internetservice providers.  By the end of February 2001, we had lost all of our dial-up customers.  Thisrapid demise of CyberHighway’s business was due primarily to three factors:

|   | - | In September 2000, we sold our affiliate-ISP business, due to its lack ofprofitability;                                                                         |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | In September 2000, an involuntary bankruptcy petition was filed againstCyberHighway - we estimate that we lost at least 6,000 customers due to thisevent; and   |
|   | - | Our November 2000 switch-over to a contracted Internet service company’snetwork - we estimate that we lost at least 2,000 customers to due to this event. |

The remainder of lost customers is attributable to CyberHighway’s normal customer attritionrate, in light of the fact that CyberHighway ceased to advertise its services following theinvoluntary bankruptcy filing.

We do not intend to commit any resources towards the revitalization of the business ofCyberHighway.

Customers and Markets.  We have lost all of our dial-up Internet access customers.  We do notexpect that we will ever reclaim any dial-up customers.

Sales and Marketing.  CyberHighway has ceased all sales and marketing activities.  We do notexpect that these activities will be resumed.

Affiliate-ISP Program.  From its inception, CyberHighway employed an affiliate marketingprogram, a technique designed to generate rapid expansion of CyberHighway’s subscriber base,which it did. However, the affiliate-ISP program was terminated during 1999.  In September2000, this business was sold, due to its continuing monthly losses.

Customer Service and Support

We are committed to the highest levels of customer satisfaction.  We believe that maintaininghigh levels of customer satisfaction will remain as a key competitive factor.  Currently, weprovide wireless Internet access customer support during normal business hours.  Our customersupport operations can be expected to expand, if and when we obtain needed capital.

Competition

We believe that the primary competitive factors determining success as an Internet accessprovider are: a reputation for reliability and high-quality service; effective customer support;access speed; pricing; effective marketing techniques for customer acquisition; ease of use; andscope of geographic coverage.  We believe that we will be able to address adequately all of thesefactors, except that we will not be able to offer scope of geographic coverage for the foreseeablefuture.  It is also possible that we will not address any of these competitive factors successfully.Should we fail to do so, our business would likely never earn a profit.  We currently lack capitalnecessary to compete effectively.

We face severe competition from other wireless Internet access providers, as well as large,national providers of cellular telephone service providers.

The market for the provision of dial-up Internet access services, in which our Quick-Cell wirelessInternet access service will compete, is extremely competitive and highly fragmented.  Currentand prospective competitors include many large, nationally-known companies that possesssubstantially greater resources, financial and otherwise, market presence and brand namerecognition than do we.  We currently compete, or expect to compete, for the foreseeable future,with the following: national Internet service providers, numerous regional and local Internetservice providers, most of which have significant market share in their markets; establishedon-line information service providers, such as America Online, which provide basic Internetaccess, as well as proprietary information not available through public Internet access; providersof web hosting, co-location and other Internet-based business services; computer hardware andsoftware and other technology companies that provide Internet connectivity with their products;telecommunications companies, including global long distance carriers, regional Bell operatingcompanies and local telephone companies; operators that provide Internet access throughtelevision cable lines; electric utility companies; communications companies; companies thatprovide television or telecommunications through participation in satellite systems; and, to alesser extent, non-profit or educational Internet access providers.

With respect to potential competitors, we expect that manufacturers of computer hardware andsoftware products, as well as media and telecommunications companies will continue to enter theInternet services market, which will serve to intensify competition.  In addition, as moreconsumers and businesses increase their Internet usage, we expect existing competitors toincrease further their emphasis on Internet access and electronic commerce initiatives, resultingin even greater competition.  The ability of competitors or others to enter into businesscombinations, strategic alliances or joint ventures, or to bundle their services and products withInternet access, could place us at a significant competitive disadvantage.  We currently lackcapital necessary to compete effectively and we may never obtain enough capital to permit us tocompete effectively in our markets.

Moreover, we expect to face competition in the future from companies that provide connectionsto consumers' homes, such as telecommunications providers, cable companies and electricalutility companies. For example, recent advances in technology have enabled cable televisionoperators to offer Internet access through their cable facilities at significantly higher speeds thanexisting analog modem speeds. These types of companies could include Internet access in theirbasic bundle of services or offer such access for a nominal additional charge.  Any suchdevelopments could reduce our market share, thereby impairing our ability to earn a profit.

Regulation

Quick-Cell Wireless Internet Access.  Our Quick-Cell wireless Internet access products operatein unregulated spectra, the 900 MHz and 2400 MHz spectra (primarily the 2400 MHz spectrum),and we expect that such spectra will remain unregulated.

Regulation of Internet Access Services.  We provide Internet access, in part, usingtelecommunications services provided by third-party carriers. Terms, conditions and prices fortelecommunications services are subject to economic regulation by state and federal agencies.As an Internet access provider, we are not currently subject to direct economic regulation by theFCC or any state regulatory body, other than the type and scope of regulation that is applicable tobusinesses generally.  In April 1998, the FCC reaffirmed that Internet access providers should beclassified as unregulated "information service providers" rather than regulated"telecommunications providers" under the terms of the Federal Telecommunications Act of1996.  As a result, we are not subject to federal regulations applicable to telephone companiesand similar carriers merely because we provide our services using telecommunications servicesprovided by third-party carriers.  To date, no state has attempted to exercise economic regulationover Internet access providers.

Governmental regulatory approaches and policies to Internet access providers and others that usethe Internet to facilitate data and communication transmissions are continuing to develop and, inthe future, we could be exposed to regulation by the FCC or other federal agencies or by stateregulatory agencies or bodies.  In this regard, the FCC has expressed an intention to considerwhether to regulate providers of voice and fax services that employ the Internet, or IP, switchingas "telecommunications providers", even though Internet access itself would not be regulated.The FCC is also considering whether providers of Internet-based telephone services should berequired to 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 as applicableto regulated telecommunications providers. To the extent that we engage in the provision ofInternet or Internet protocol-based telephony or fax services, we may become subject toregulations promulgated by the FCC or states with respect to such activities.  We cannot assureyou that these regulations, if adopted, would not adversely affect our ability to offer certainenhanced business services in the future.

Regulation of the Internet.  Due to the increasing popularity and use of the Internet by broadsegments of the population, it is possible that laws and regulations may be adopted with respectto the Internet pertaining to content of Web sites, privacy, pricing, encryption standards,consumer protection, electronic commerce, taxation, and copyright infringement and otherintellectual property issues.  No one is able to predict the effect, if any, that any future regulatorychanges or developments may have on the demand for our Internet access or other Internet-related services.  Changes in the regulatory environment relating to the Internet access industry,including the enactment of laws or promulgation of regulations that directly or indirectly affectthe costs of telecommunications access or that increase the likelihood or scope of competitionfrom national or regional telephone companies, could materially and adversely affect ourbusiness, operating results and financial condition.

Employees

We have six employees, including four officers.  All of our officers have entered intoemployment agreements.

None of our employees is covered by any collective bargaining agreement, nor have we everexperienced a work stoppage.  Our management believes employee relations to be good.  Muchof our future success will depend, in large measure, upon our ability to continue to attract andretain highly skilled technical, sales, marketing and customer support personnel.

Risk Factors Concerning Us and Our Common Stock

Because we have a short operating history, there is a limited amount of information about usupon which you can evaluate our business and potential for future success.

We were incorporated in 1996 and have only a limited operating history upon which you canevaluate our business and prospects.  You must consider the risks and uncertainties frequentlyencountered by early stage companies in new and rapidly evolving markets, such as the marketfor wireless Internet access services.  Some of these risks and uncertainties relate to our abilityto:

|   | - | gain access to sufficient capital with which to support anticipated growth;         |
|--------|---|-------------------------------------------------------------------------------------|
|   | - | achieve customer acceptance of our Quick-Cell wireless Internet accessproducts;     |
|   | - | expand our wireless Internet access subscriber base and subscriber-relatedrevenues; |
|   | - | 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 and uncertainties.

Our independent auditor has expressed substantial doubt about our ability to continue as a goingconcern.

In its opinion on our financial statements for the year ended December 31, 2001, our independentauditor, Postlethwaite & Netterville, expressed substantial doubt about our ability to continue asa going concern.  This means that, when issuing its opinion relating to our December 31, 2001,financial statements, given our then-current and historical lack of capital, our independent auditorhas substantial doubt that we will be able to continue as a going business concern.  Please reviewthe Independent Auditor’s Report and Note 16 to the consolidated financial statements appearingelsewhere herein.

Unless we obtain $300,000 in new capital, we will be unable to remain in business.

During the next twelve months, we will need approximately $300,000 just to continue ouroperations at their current levels.  Absent this amount of funding, we will be unable to continueour operations.

Some of our shareholders may have rights of rescission, due to potential violations by us ofSection 5 of the Securities Act.

Since January 2000, a total of 4,906,549 shares of our common stock with an aggregate assignedvalue of $5,090,252 may have been issued in violation of Section 5 of the Securities Act.4,751,985 of these shares were issued in payment of services or as bonuses to employees and130,000 of these shares were issued for cash or underlie currently exercisable warrants, whichwere sold or will be sold for at total of $650,000 in cash.  At December 31, 2001, 2,138,726shares of our common stock with an aggregate assigned value of $1,192,700 were subject topotential rescission claims.  At March 31, 2002, 524,564 of these shares, with an aggregate valueof $220,998, remain subject to potential claims for rescission.  We do not possess capital withwhich to pay any such claims, if asserted.

We had an accumulated deficit of $37,000,628 as of December 31, 2001, and we expect tocontinue to incur losses for the foreseeable future.

We have had substantial losses since our inception and our operating losses may continue in thefuture.

We have incurred annual operating losses since our inception. As a result, at December 31, 2001,we had an accumulated deficit of $37,000,628.  Our gross revenues for the years endedDecember 31, 2001 and 2000, were $7,446 and $1,872,629, respectively, with losses fromoperations of $2,954,189 and $15,248,909, respectively.  Our net losses for the years endedDecember 31, 2001 and 2000, were $2,498,468 and $21,885,330, respectively.  We cannot assureyou that we will experience revenue growth, or that we will be profitable in the future.

As we pursue full-scale sales and installation of our Quick-Cell wireless Internet products, weexpect our operating expenses to increase significantly, especially in the areas of sales andmarketing.  As a result of these expected cost increases, we will need to generate increasedrevenues to become profitable.  Accordingly, we cannot assure you that we will ever become orremain profitable.  If our revenues fail to grow at anticipated rates or our operating expensesincrease without a commensurate increase in our revenues, our financial condition will beadversely affected.  Our inability to become profitable on a quarterly or annual basis would havea materially adverse effect on our business and financial condition.  Also, the market price forour stock could fall.

You will suffer substantial dilution in the net tangible 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 our common stockcompared to the purchase price per share of our common stock.  We cannot predict your actualdilution, because dilution will depend on the price at which you purchase our common stock.

The market price of our common stock will continue to be extremely volatile, and it may dropunexpectedly.

The market price of our common stock has fluctuated significantly in the past and we expect thisvolatility to continue in the future.  Since January 2000, trading prices for our common stockhave ranged from $.06 per share to $11.00 per share.  The closing price of our common stock onApril 10, 2002, was $.09.  It is possible that the market price of our common stock could fallbelow the price you paid for your shares of our common stock. 

The stock prices for many high technology companies, especially those that base their businesseson the Internet, recently have experienced wide fluctuations and extreme volatility.  Thisvolatility has often been unrelated to the operating performance of such companies, so our stockprice could decline even if our wireless Internet access business is successful.  Also, followingperiods of volatility in the market price of a company’s securities, securities class action claimsfrequently are brought against the subject company.  To the extent that the market price of ourshares falls dramatically in any period of time, shareholders may bring claims, with or withoutmerit, against us.  Such litigation would be expensive to defend and would divert managementattention and resources regardless of outcome.

We have not obtained the maximum amount of funds under the Fusion Capital agreement; wemay not obtain enough funds under the Fusion Capital agreement to achieve two of our businessobjectives.

Since the commencement of the Fusion Capital agreement in July 2001, we have not obtained themaximum funding amount possible under this agreement.  At December 31, 2001, we hadreceived only $340,000 under our agreement with Fusion Capital.  Fusion Capital has notpurchased the maximum shares possible under this agreement, which has significantly impededour ability to expand our Quick-Cell business operations..  At December 31, 2001, we hadadvanced 1,321,200 shares in consideration of the buyer’s advance of $80,176, in expectationthat a settlement will take place in the near future.  We will remain in this position unless anduntil our stock price increases significantly or we secure funding from a source other than FusionCapital, of which there is no assurance.

We must obtain approximately $1.2 million under the Fusion Capital agreement, or from othersource, in order to achieve the first two objectives of our business plan:

|   | - | placing at least 20,000 customers on our Quick-Cell systems; and                    |
|--------|---|-------------------------------------------------------------------------------------|
|   | - | proving the commercial viability of our Quick-Cell wireless Internet accessservice. |

It is a distinct possibility that we will not obtain the $1.2 million amount we need to achievethese objectives.  Should this occur, it is possible that we would not be able to developsuccessfully our wireless Internet access business.

Our common stock could be delisted from the American Stock Exchange.

Currently, we are not in compliance with the continued listing guidelines of AMEX.  During thesecond quarter of 2001, AMEX inquired with respect to our plan for achieving compliance withits continued listing guidelines.  Our response to AMEX included an explanation of ouranticipated future funding under the Fusion Capital agreement and the positive effects thisfunding would likely have on our business and financial condition, particularly in increasing ourtotal assets and shareholders’ equity.  We have not received further communication from AMEXin this matter.  Should our common stock be delisted from AMEX, it is very likely that themarket price for our stock could drop dramatically.  We cannot assure you that we will be able tomaintain our listing on AMEX.

In addition, should our stock be delisted from AMEX, we would be in default under the FusionCapital agreement and unable to obtain funding thereunder.  In this circumstance, it is likely thatwe would not have access to capital necessary to sustain our operations.

If we are unable to maintain our AMEX listing, our common stock would likely begin to trade onthe NASD’s OTC Bulletin Board and become a “penny stock”, as long as it trades below $5.00per share.  Broker-dealer practices in connection with transactions in penny stocks are regulatedby penny stock rules adopted by the SEC.  The penny stock rules require a broker-dealer, prior toa transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized riskdisclosure statement prepared by the SEC that provides information about penny stocks and thenature and level of risks in the penny stock market.  The broker-dealer also must provide thecustomer with current bid and offer quotations for the penny stock, the compensation of thebroker-dealer and its salesperson in the transaction, as well as the monthly account statementsshowing the market value of each penny stock held in the customer’s account.  In addition, thepenny stock rules require that, prior to a transaction in a penny stock not otherwise exempt fromsuch rules, the broker-dealer must make a special written determination that the penny stock is asuitable investment for the purchaser and receive the purchaser’s written agreement to thetransaction.

These disclosure requirements may have the effect of reducing the level of trading activity in thesecondary market for a stock that becomes subject to the penny stock rules.  Should our commonstock return to trading on the OTC Bulletin Board, it can be expected that investors in ourcommon stock may find it more difficult to profit on their investments in our stock.

The resale of shares purchased by Fusion Capital could cause the price of our stock to decline,which could impair our ability to obtain needed capital in the future.

All of the shares of our common stock issuable to Fusion Capital, up to 6,800,000 shares in total,are or will be freely tradable, except that Fusion Capital has agreed that it will not sell orotherwise transfer 800,000 shares issued to it as part of its commitment fee until the earlier of thetermination of the Fusion Capital agreement, our default under that agreement or approximatelyJuly 31, 2003.  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 impair our abilityto accomplish our Quick-Cell-related business objectives, due to a potential lack of capital.

The lower our stock price at the time Fusion Capital makes a purchase, the more shares of stockFusion Capital will receive.

Fusion Capital will receive more shares at the time it makes a purchase, the lower the price of ourstock, since the shares covered under the Fusion Capital agreement are issuable at a floating ratebased on our stock price.

Given the low market price of our common stock since the commencement date of the FusionCapital agreement, it appears likely that we will be unable to obtain $10 million under thatagreement, unless we elect to issue more than the 6,000,000 shares reserved for issuance underthat agreement, which we have the right, but not the obligation, to do, or the market price of ourcommon stock increases significantly in the near future.  We cannot assure you that the marketprice of our common stock will increase at all.

Fusion Capital may purchase more than 9.9% of our common stock.

Even though the Fusion Capital agreement restricts Fusion Capital from owning any more than9.9% of our stock at any one time, this restriction does not prevent Fusion Capital from selling aportion of its holdings and later purchasing additional shares.  Thus, it is possible that the totalnumber of shares purchased by Fusion Capital would be greater than 9.9% of the then-outstanding common stock.

The existence of our agreement with Fusion Capital could cause downward pressure on themarket price of our common stock.

Simply the existence of the Fusion Capital agreement could cause holders of our common stockto sell their shares, which could cause the market price of our common stock to decline.  Also,prospective investors anticipating future downward pressure on the price of our common stockdue to the shares that may be available for sale by Fusion Capital could refrain from purchases oreffect sales in anticipation of a decline of the market price.

We may be unable to obtain sufficient capital to sustain our business or pursue our growthstrategy.

Currently, we do not have sufficient financial resources to implement our business plan or growour operations. Therefore, excluding any funding that we might receive from Fusion Capital inthe future, we will need additional funds to continue our operations and to grow our business.Assuming we do not receive any further funding from Fusion Capital, there is no assurance thatwe will be able to generate revenues that are sufficient to sustain our operations and we wouldrequire additional sources of financing in order to satisfy our working capital needs.  Shouldneeded financing be unavailable or prohibitively expensive when we require it, it is possible thatwe would be forced to cease operations.

We have designed a very aggressive growth strategy for the commercial exploitation of ourQuick-Cell wireless Internet access products.  This strategy is expected to place a significantstrain on our managerial, operational and financial resources.  In particular, our planned wirelessInternet expansion will require significant capital with which to purchase equipment necessaryfor the construction and implementation of systems.  If we are unable to secure enough capital,we will be unable to achieve our growth objectives.  We cannot assure you that we will be able toobtain enough capital for our growth needs.

Even if we are able to access significant funds under the Fusion Capital agreement, we will needadditional capital to implement fully our growth plans.

We may not be able to secure enough Quick-Cell customer installation personnel to keep up withdemand.

It is possible that we will be unable to secure Quick-Cell installation crews, either throughindependent contractors or directly hiring personnel, in large enough numbers that will allow usto install new Quick-Cell customers in a timely manner.  Any unreasonable delays in installationcan cause customers to cancel their orders.  We may not be able to overcome this potentialbarrier to market penetration.  Our failure to do so would restrict our growth in revenues andseverely impair our ability to earn a profit.

Because we depend heavily on outside suppliers, our business may suffer, should our suppliersfail to perform in a timely manner.

We depend on third-party suppliers of hardware components and telecommunications carriers toprovide equipment and communications capacity.  The failure of one or more of our suppliers toperform in a timely manner could cause a significant disruption in our business.  In particular,should our manufacturer of Quick-Cell modem circuit boards fail to deliver circuit boards whenneeded, it is possible that we would be forced to suspend our wireless Internet business for anindeterminate period of time.

We have not purchased insurance that covers our Quick-Cell wireless Internet access operations.

We have not purchased any insurance that would cover property loss or loss of income withrespect to any of our Quick-Cell operations.  Damage to our Quick-Cell equipment, or the towersto which it is affixed, could cause an interruption in our Wireless Internet access service.  It ispossible that we would be unable to afford to repair any items of damaged equipment, due to ourextreme lack of capital.

Our failure to manage future growth would hinder our efforts in earning a profit.

Without additional capital, we will be unable to expand significantly our operations.  As weobtain additional funds under the Fusion Capital agreement or from other sources, we will beginto serve new geographic markets.  This expected expansion will place a significant strain on ourmanagement and operating systems.  In order to accommodate this sort of growth, we will needto hire and retain appropriate management personnel.  We may not be able to hire and retainenough qualified managers.  This circumstance would likely hinder our growth and reduce ourchance of earning a profit.

If and when we experience our anticipated rapid growth, we may encounter difficulties indeveloping and implementing needed internal systems, including our recruiting and managementsystems.  Our failure to do so will reduce the likelihood that we will earn a profit.

Our Quick-Cell wireless Internet access products are new and consumer acceptance may not beachieved.

Our Quick-Cell wireless Internet access products are new and do not enjoy wide-spread namerecognition among consumers.  If we are unable to achieve consumer acceptance of our products,it is unlikely that we would be able to earn a profit.

We could fail to overcome the severe competition for Internet access customers, which wouldimpair our ability to earn a profit and cause our overall financial condition to deteriorate.

The market for Internet access services is extremely competitive and highly fragmented.  Asthere are no significant barriers to entry, we expect that competition will intensify over time.

Our competitors include many large, nationally-known companies, such as America Online andEarthlink.  These and other companies possess greater resources, particularly access to capitalsources, market presence and brand name recognition than do we.  In addition, we will facecompetition from other wireless Internet access providers and larger, national cellular telephoneservice providers.  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.

Our directors and executive officers own enough of our common stock effectively to controldirectors’ elections and thereby control our management policies.

Our directors and executive officers own approximately 20.5% of our currently outstandingcommon stock.  Two of our directors, as well as three other persons, have entered into a votingagreement relating to the voting in elections of directors.  Currently, approximately 22% of ouroutstanding shares of common stock are subject to this voting agreement.  These shareholdersmay be able effectively to control the outcome of corporate actions requiring shareholderapproval by majority action.  Their stock ownership may have the effect of delaying, deferring orpreventing a change in control of USURF America.

Our business plan is not based on independent market studies, so we cannot assure you that ourstrategy will be successful.

We have not commissioned any independent market studies concerning the extent to whichcustomers will utilize our services and products.  Rather, our plans for implementing ourbusiness strategy and achieving profitability are based on the experience, judgment andassumptions of our key management personnel, and upon other available information concerningthe communications industry.  If our management’s assumptions prove to be incorrect, we willnot be successful in establishing our wireless Internet access business.

We may not be able to protect our intellectual property rights, which could dramatically reduceour ability to earn a profit.

We currently rely on common law principles for the protection of our copyrights and trademarksand trade secret laws to protect our proprietary intellectual property rights.  We do not intend tofile patent applications relating to our Quick-Cell wireless Internet access products, untilcompletion of future generations of the products.  We have not filed trademark applicationsrelating to the “Quick-Cell”, “Quick-Cell Broadband Internet” and “USURF Wireless Internet”brand names.

Without patent or trademark protection, the existing trade secret and copyright laws afford usonly limited protection.  Third parties may attempt to disclose, obtain or use our technologies.Others may independently develop and obtain patents or copyrights for technologies that aresimilar or superior to our technologies.  If that happens, we may need to license thesetechnologies and we may not be able to obtain licenses on reasonable terms, if at all, therebycausing great harm to our 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 are eligible forresale to the public.  This amount of common stock represents a significant overhang on themarket for our common stock.  The sale of a significant amount of these shares at any given timecould cause the trading price of our common stock to decline and to be highly volatile.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-KSB contains “forward-looking statements” within the meaningof Section 27A of the Securities Act of 1933, as amended, and Section 21E of the SecuritiesExchange Act of 1934.  All statements above, other than statements of historical facts included inthis Annual Report on Form 10-KSB, including those under “THE FUSION CAPITALTRANSACTION” AND “WIRELESS INTERNET ACCESS”, are forward looking in nature.These statements are subject to risks and uncertainties, including:

|   | - | our ability to obtain additional capital when we need it and at the times we needit;                |
|--------|---|-----------------------------------------------------------------------------------------------------|
|   | - | changes in prices or demand for our products as a result of competitive actionsor economic factors; |
|   | - | changes in the cost of equipment; and                                                               |
|   | - | unexpected changes in operating costs.                                                              |

Should one or more of these risks or uncertainties, among others, materialize, our actualoperating results may vary materially from those estimated, anticipated or projected.  Althoughwe believe that the expectations reflected by these forward-looking statements are reasonablebased on information currently available to us, we cannot assure you that our expectations willprove to have been correct.  All forward-looking statements included in this Annual Report onForm 10-KSB and all subsequent oral forward-looking statements attributable to us or personsacting on our behalf are expressly qualified in their entirety by these cautionary statements.

Item 2.  Description of Property

General.  We own all of the equipment necessary for the operation of a network operationscenter.  We intend to utilize this equipment in facilitating the expected growth of our wirelessInternet access business.  In addition, we own office equipment necessary to conduct ourbusiness.

In Baton Rouge, Louisiana, we lease approximately 1,250 square feet for our executive offices,for a monthly rental of approximately $1,800, and a 1,600 square foot modem assembly facility,for a monthly rental of approximately $720.

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, and Astoria, Oregon.  We have abandoned our efforts to develop these wirelesscable properties, due to current market conditions.  Rather, because our Quick-Cell system can beadapted for use on the wireless cable frequencies, 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 ourcopyrights and trademarks and trade secret laws to protect our proprietary intellectual propertyrights.  We do not intend to file patent applications relating to our Quick-Cell wireless Internetaccess products, until completion of future generations of the products.  We have not filedtrademark applications relating to the “Quick-Cell”, “Quick-Cell Broadband Internet” and the“USURF Wireless Internet” brand names.

We have received authorization to use the products of each manufacturer of software that isbundled 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 for Internetaccess services subscribers are shareware that we have obtained permission to distribute or thatare otherwise in the public domain and freely distributable, certain other applications included inour start-up kit have been licensed where necessary.  We currently intend to maintain or negotiaterenewals of all existing software licenses and authorizations as necessary.  We may also enterinto licensing arrangements for other applications, in the future.

Item 3.  Legal Proceedings

CyberHighway Involuntary Bankruptcy

On September 29, 2000, an involuntary bankruptcy petition was filed against CyberHighway inthe Idaho Federal Bankruptcy Court, styled In Re: CyberHighway, Inc., Case No. 00-02454.  Thepetitioning creditors were ProPeople Staffing, CTC Telecom, Inc. and Hawkins-Smith.  InDecember 2000, CyberHighway and the petitioning creditors filed a joint motion to dismiss thisproceeding.  The joint motion to dismiss was denied because the creditors believe thatCyberHighway’s as-yet unasserted damage claims against the original petitioning creditors andtheir law firm and a claim against Dialup USA, Inc. represent CyberHighway’s most valuableassets.  These as-yet unasserted claims include claims for bad faith filing of the originalbankruptcy petition as to the original petitioning creditors and their law firm, as well as claim fortortious interference with beneficial business relationships as to Dialup USA, Inc.  It is likelythat, at some time in the future, a final order of bankruptcy will be entered with respect toCyberHighway, no prediction of the timing of such an order can be made, although we believethat such an order would come only after the final adjudication of the claims described above.

Other Litigation

In November 2000, CyberHighway requested and received a temporary restraining order againstDarrell Davis, formerly one of our officers, and his wife, Deanna Davis.  We have alleged thatthe Davises have diverted dial-up customers from CyberHighway to a company controlled byhim, all while he was an employee of USURF America.  We expect that a hearing for our motionfor a permanent injunction will occur in the future.  In addition, we are seeking monetarydamages in this action.  No prediction as to its final outcome can be made.  This case is styled:CyberHighway, Inc. versus Deanna Davis, individually and d/b/a Cyber-Trail, Inc., and DarrellD. Davis, 19th Judicial District Court, Parish of East Baton Rouge, State of Louisiana, Case No.478320.

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

Possible Claim

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

Potential Legal Proceeding

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

Item 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 the fiscalyear ended December 31, 2001.

PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

Market Information

Beginning on October 15, 1999, our common stock began to be traded on the American StockExchange, under the symbol “UAX”.  The table below sets forth, for the period indicated, thehigh and low sales prices for our common stock, as reported by the American Stock Exchange:

|   | Quarter/Period Ended   | High      | Low       |   |
|--------|------------------------|-----------|-----------|--------|
|   | ___________________    | _________ | _________ |   |
|   | 10/15/99 thru 12/31/99 | 5.875     | 2.50      |   |
|   |                   |      |      |   |
|   | 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       |   |

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

Holders

On April 10, 2002, the number of record holders of our common stock, excluding nominees andbrokers, was 1,144, holding 36,955,370 shares.

Dividends

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

Our board of directors has declared property dividends, the values of which have been written-offin our financial statements, comprised of common stock of three private companies acquired byus.  These dividends of stock are: 1,500,000 shares of New Wave Media Corp., acquired by us inexchange for all of our community-television-related assets; 400,000 shares of Argo PetroleumCorporation, acquired by us in exchange for 10,000 shares of our common stock; and 800,000shares of Woodcomm International, Inc., acquired by us in exchange for 7,500 shares of ourcommon 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 Results ofOperations |
|---------|--------------------------------------------------------------------------------------------|

Background

We have determined to commit all of our available resources to the exploitation of our Quick-Cell wireless Internet access products.  We currently lack the capital necessary to do so.

We were organized to operate in the wireless cable and community (low power) televisionindustries.  Due to existing market conditions, we have abandoned our wireless cable business.Because our Quick-Cell wireless Internet access system can be adapted for use on the wirelesscable frequencies, we believe our frequencies possess future value.  However, these frequencieswill not be of value to us, unless and until the FCC approves two-way communications on them.Due to this circumstance, our wireless-cable-related assets have become impaired and their$188,091 book value was written off in 2000.

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

Since 1998, we have acquired seven dial-up Internet service providers, including CyberHighway,the business of www.e-tail.com and a web design firm, none of which was an affiliated companynor were any  acquired from an affiliate.  All but one of these acquisitions were made for sharesof our stock.  In making these acquisitions, we issued a total of 2,587,063 shares, which werevalued at $18,759,500, in the aggregate.  All of these acquisitions were accounted for as apurchase, which means that we did not include past operations of the acquired businesses in ourhistorical statements of operations.  Also in connection with these acquisitions, we recorded largeamounts of amortizable customer base and goodwill values, approximately $25,764,000, as aresult of the acquisitions’ valuations exceeding the values of the tangible net assets.  AtDecember 31, 2000, all of these values were written off, due to the demise of CyberHighway’sbusiness.  Please see the discussion under “CyberHighway Bankruptcy” below.

Current Overview

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

In May 2001, we entered into an amended and restated common stock purchase agreement withFusion Capital Fund II, LLC, which replaced a similar agreement entered into in October 2000.Pursuant to the agreement,  Fusion Capital may purchase up to $10 million of our common stock.The shares of our common stock being issued under this agreement are the subject of an effectiveregistration statement.  At December 31, 2001, we had received only $340,000 under ouragreement with Fusion Capital.  Fusion Capital has not purchased the maximum shares possibleunder this agreement.  At December 31, 2001, the Company had advanced 1,321,200 shares inconsideration of the buyer’s advance of $80,176, in expectation that a settlement will take placein the near future.  This lack of significant funding has impeded our ability to expand our Quick-Cell business operations.  We will remain in this position unless and until (1) our stock priceincreases significantly or (2) we secure funding from a source other than Fusion Capital, ofwhich there is no assurance.  Please see the discussion under the heading “Management’s PlansRelating to Future Liquidity”, for a more thorough explanation of the impact this agreementcould have on our business.  Should we obtain more substantial funding, we would be able tobegin to pursue our wireless Internet business plan.  In October 2001, we began company-ownedQuick-Cell operations in Del Rio, Texas, and have agreements with two resellers there.  We haveapproximately 50 customers in Del Rio, and consumer response has been excellent.  However,our customer growth will continue to be slowed by a lack of capital.  We have also completedengineering efforts in four other South Texas towns.  We will not begin marketing our Quick-Cell service in these towns, until we stabilize our working capital situation.

As the level of funding under the Fusion Capital agreement has been lower than we had earlieranticipated, from November 2001 through March 31, 2002, we have obtained additional fundsthrough sales of our common stock, as follows:

|   | - | $57,500 (2001) from the sale of 575,000 shares of our common stock and atotal of 1,150,000 warrants;                                              |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | $30,000 (2002) from the exercise of outstanding warrants - 200,000 shares at$.15 per share;                                                       |
|   | - | $12,500 (2002) from the exercise of outstanding warrants - 156,250 shares at$.08 per share; and                                                   |
|   | - | $98,000 (2002) from the exercise of options - 2,000,000 shares at $.049 pershare (a 38.75% discount to the market price on the date of exercise). |

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

We will continue to need capital, as we continue to expand our wireless Internet business.  Wemay never possess enough capital to permit us to earn a profit.

In April 2002, we entered into a securities purchase agreement with a third party, EvergreenVenture Partners, LLC, whereby we are to issue 3,125,000 units of our securities, each unitconsisting of one share of our common stock, one common stock purchase warrant to purchaseone share at an exercise price of $.15 per share and one common stock purchase warrant topurchase one share at an exercise price of $.30 per share, for cash in the amount of $250,000payable in two equal increments at the initial closing (scheduled for April 15, 2002) and 60 daysthereafter.  Also pursuant to this agreement, we will hire a new president and chief executiveofficer, Douglas O. McKinnon, who will also become a director, and who will receive, as asigning bonus, 2,000,000 shares of our common stock; our current president, David M. Loflin,will become Chairman of the Board, reduce the term of his remaining term of employment fromapproximately 4 years to six months, waive the payment of all accrued and unpaid salary andwaive the repayment of all loans made by him to us, in consideration of 2,000,000 shares ofcommon stock being issued to him; two of our vice presidents will reduce the terms of theirremaining terms of employment from approximately 4 years to six months and one year to sixmonths, respectively, and waive the payment of all accrued and unpaid salary, in consideration of2,000,000 shares of common stock being issued to each of them; and our other vice presidentwill terminate his employment with us.  Also, upon the final closing under this agreement,Evergreen will name two persons to become directors of USURF America.

We expect that the funds derived from the Evergreen agreement will enable us to begin to pursueour business plan more aggressively.  However, we cannot assure you that we will ever earn aprofit.

CyberHighway Bankruptcy

On September 29, 2000, an involuntary bankruptcy petition was filed against CyberHighway inthe Idaho Federal Bankruptcy Court, styled In Re: CyberHighway, Inc., Case No. 00-02454, byProPeople Staffing, CTC Telecom, Inc. and Hawkins-Smith.  A joint motion to dismiss thebankruptcy proceeding was unsuccessful because some of CyberHighway’s creditors believe thatCyberHighway’s as-yet unasserted damage claims against the original petitioning creditors andtheir law firm and a claim against Dialup USA, Inc. represent CyberHighway’s most valuableassets.  These as-yet unasserted claims include claims for bad faith filing of the originalbankruptcy petition as to the original petitioning creditors and their law firm, as well as a claimfor tortious interference with beneficial business relationships as to Dialup USA, Inc.  Thesecreditors desire that these claims be adjudicated in the bankruptcy court.  It is likely that, at sometime in the future, a final order of bankruptcy will be entered with respect to CyberHighway.  Noprediction of the timing of such an order can be made, although we believe that such an orderwould come only after the final adjudication of the claims described above.

The January 1999 acquisition of CyberHighway fundamentally altered our company.  Our annualrevenues went from nearly zero to about $2.5 million.  Beginning in the last half of 1999,operating losses at CyberHighway, primarily personnel costs and leased telephone-line charges,steadily increased, while revenues began to decrease slightly each quarter.  This trend continuedthrough 2000, until September 2000.

However, the involuntary bankruptcy proceeding caused the demise of CyberHighway’sbusiness.  CyberHighway’s company-owned dial-up customer base went from approximately8,500 to none.  The filing of the involuntary bankruptcy and CyberHighway’s switch-over to thenetwork of Dialup USA were the primary causes of CyberHighway’s customer base demise.  Wewill not apply any available future capital to the revitalization of our dial-up Internet accessbusiness.

This sudden and permanent demise of CyberHighway’s customer base rendered our intangibleassets relating to those customers worthless.  The write-off of these intangible assets totalled$4,814,272, net of deferred taxes, as reflected in our December 31, 2000, financial statements.Due to this change in operating environment, monthly revenues decreased substantially, and,accordingly, goodwill was impaired.  The write-down of goodwill totaled $4,425,037, asreflected in our December 31, 2000, financial statements.  Please see the discussion below underthe heading “Liquidity and Capital Resources” for more information on this topic.

Shareholder Loans - Conversion to Equity

In August 2000, our president, David M. Loflin, converted all loan amounts owed to him,including accrued interest, into a total of 774,162 shares of our common stock.  The total amountof indebtedness converted to common stock was $967,703.  Since August 2000, Mr. Loflin hasmade small loans to us to ease periods of restricted cash flow.  At December 31, 2001, we owedMr. Loflin $18,521.

Results of Operations

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

Until the involuntary bankruptcy was filed against CyberHighway in September 2000, ourrevenues for 2000 were approximately 10% below 1999's nine-month results.  Our revenues forthe last three months of 2000 diminished rapidly.  Since January 2001, we have derived norevenue from CyberHighway’s business.

For all of 2001, our small amount of revenues were derived from the operations of our Quick-Cell wireless Internet access systems in Del Rio, Texas, and Santa Fe, New Mexico. With thedemise of CyberHighway, any future revenues will be derived from sales of our Quick-Cellwireless Internet access service.  We currently lack the capital necessary to pursue our Quick-Cell business plan, and we may never possess enough capital with which to exploit fully ourQuick-Cell products.  In this circumstance, it is likely that we would never earn a profit.

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

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

In September 2001, we began Quick-Cell operations in Del Rio, Texas.  We have approximately50 customers online, but our growth there has been slowed significantly due to our lack ofcapital.  We cannot predict the number of customers we will secure in any specific time frame,due to our lack of capital.  In Del Rio, we have chosen to make sustained slow progress incustomer acquisition, rather than to have begun full-scale marketing activities only to suspendthem soon after their start due to our lack of capital.  Should we begin to derive greater amountsof funds under the Fusion Capital agreement, of which there is no assurance, we plan to constructadditional Quick-Cell systems throughout 2002.

In the middle of 2000, we began marketing our Quick-Cell systems to local exchange telephonecompanies, independent telephone companies, digital subscriber line resellers and Internetservice providers.  We sold three Quick-Cell systems in a short time, and received approximately200 additional indications of interest via e-mail and telephone from other telecommunicationscompanies and others, 25% of which our management considered to be of a serious nature.  Dueto a lack of capital, however, this marketing effort was suspended before we investigated thenature of the other inquiring companies.  No paying customers use these systems, due tocircumstances involving these companies that are beyond our control.  For all of 2001, wederived no significant revenues from customer modem sales to these Quick-Cell purchasers, andwe do not expect to do so during the first half of 2002.

In cities in which we construct company-owned Quick-Cell systems, we intend to employtelephone marketing as the initial means for acquiring customers and, later, mass media.  We willemploy a sales force that will focus primarily on potential business customers.  This focus onbusiness customers is based on our management’s informal study of Internet usage by businessesversus home users that revealed businesses’ higher demand for high-speed Internet access.  Ourmanagement’s decision may prove to have been incorrect, which would significantly impair ourability to earn a profit.  Our management believes, based on its collective business experience,that effective marketing techniques can overcome Quick-Cell’s lack of name recognition,although this belief may also prove to have been incorrect.  Our Quick-Cell business will not beable to succeed without additional capital.

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

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

Our revenues for all of 2001 were significantly below those of 2000, since we no longer deriverevenues from the operations of CyberHighway and we have lacked capital with which toimplement a full-scale implementation of our Quick-Cell business plan.  In 2002, we willproduce significant revenues only if we are able to be successful in placing Quick-Cell servicecustomers online, of which there is no assurance, due to the uncertainty surrounding our level ofcapitalization to be derived under the Fusion Capital agreement.

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

Potential Rescission Claims.  At December 31, 2001, 2,138,726 shares of our common stockwith an aggregate assigned value of $1,192,700 were subject to potential rescission claims.  AtMarch 31, 2002, 524,564 shares of our common stock with an aggregate assigned value of$220,998 may have been issued in violation of Section 5 of the Securities Act.  It is possible thateach of the issuees of these shares has a potential claim for rescission of their respective issuancetransactions. We do not possess capital with which to pay any such claims, if asserted, and, ifsuch claims are asserted, it is possible that our then-available capital would become impaired andour future operating results would likely suffer. 

Year Ended December 31, 2001, versus Year Ended December 31, 2000.  During 2000, all of ourrevenues were generated by CyberHighway’s dial-up Internet access operations.  We derived ourrevenues from monthly customer payments for dial-up Internet access, which averagedapproximately $18 per customer.  Also, until September 2000, we derived revenue from per-customer royalty payments from our CyberHighway affiliate-ISPs, which averagedapproximately $1.75 per customer.  During 2001, our small amount of revenues were derivedfrom our Quick-Cell wireless Internet access operations.  We charge residential customers $50and business customers $100 in monthly Internet access fees.

Due to the demise of CyberHighway, our revenues for 2001 were significantly below our revenuelevels of 2000.  Due to the uncertainty of our obtaining additional capital, we cannot predict ourrevenues for all of 2002.

Our operating results for 2001 and 2000 are summarized in the following table:

|   |                                     | 2001             | 2000             |
|--------|------------------------------------------|------------------|------------------|
|   |                                     | ________________ | ________________ |
|   | Revenues                                 | $7,446           | $1,872,629       |
|   | Internet Access Costs, Cost of GoodsSold | 109,525          | 2,145,955        |
|   | Gross Profit (Loss)                      | (102,079)        | (273,326)        |
|   | Operating Expenses                       | 2,852,110        | 14,975,583       |
|   | Loss From Operations                     | (2,954,189)      | (15,248,909)     |
|   | Other Income (Expense)                   | (34,184)         | (9,193,281)      |
|   | Extraordinary Items                      | 489,905          | 961,436          |
|   | Income Tax Benefit                       | 0                | 1,595,424        |
|   | Net Loss                                 | (2,498,468)      | (21,855,330)     |

In general, our 2001 statement of operations reflects the demise of the business ofCyberHighway.  It also reflects a $97,526 charge against our earnings, which is attributable to awrite-down of the value of certain inventory items.

In 2001, we recorded a gain on debt forgiveness of $489,905, which arose from a reduction in theliabilities of CyberHighway, pursuant to the bankruptcy proceedings.  At December 31, 2001, ourbalance sheet included $953,561 in “permitted claims” against CyberHighway, the total claimssubmitted by creditors of CyberHighway during 2001, including the statutory notification period.This notification period began on December 6, 2001, and ended on March 6, 2002.  The$489,905 reduction in CyberHighway’s liabilities from 2000 to 2001 is reflected in ourconsolidated statements of operations as an extraordinary item.

Our 2000 statement of operations reflects the following significant charges against our earnings:

|   | - | each of the following amounts relates to the demise of the business ofCyberHighway: |
|--------|---|-------------------------------------------------------------------------------------|

|   |   | - | $4,814,272 - amount of intangible assets written off attributable toacquired customers bases, net of deferred taxes; and |
|--------|--------|---|--------------------------------------------------------------------------------------------------------------------------|
|   |   | - | $4,425,037 - amount of intangible assets written off attributable togoodwill.                                            |

|   | - | $875,000 - 750,000 shares of our common stock were issued to three vicepresidents, 250,000 shares as an employment agreement signing bonus valuedat $3.00 per share and 500,000 shares as employment bonuses valued at$125,000 - this expense is included in the “Salary and Commissions” statementof operations line item. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Certain statements of operations line items changed significantly from 2000 to 2001.  Thesechanges are summarized below:

|   | - | Revenues and Internet Access Costs, Cost of Goods Sold - our revenuesdecreased from $1,872,629 in 2000 to $7,446 in 2001.  This decrease is due tothe demise of the business of CyberHighway.  Likewise, our substantiallyreduced internet access costs and cost of goods sold is attributable to the demiseof the business of CyberHighway. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | Inventory Write-down - as we determined that certain items of our inventoryhad become impaired, we recorded a write-down of these items of inventory inthe amount of $97,526.                                                                                                                                                                |
|   | - | Depreciation and Amortization - the large reduction in this line item from 2000to 2001 is due to the write-down of all intangible assets associated withCyberHighway caused by the demise of the business of CyberHighway.                                                                                                                   |
|   | - | Professional Fees - the reduced total of professional fees, $1,803,751 in 2001compared to $4,168,610 in 2000, is due to the lower market price of our stock,inasmuch as substantially all of our professional fees were paid by issuingshares of stock.                                                                                      |
|   | - | Rent - our substantially reduced rent expense for 2001 is attributable to thedemise of the business of CyberHighway and the abandonment of theCyberHighway facilities in Boise, Idaho.                                                                                                                                                       |
|   | - | Salaries and Commissions - our salaries and commissions were substantiallyreduced from 2000 to 2001 due to the dramatic reduction in staff caused by thedemise of the business of CyberHighway.                                                                                                                                              |

Due to our severe lack of capital during 2000 and 2001, during both years, we issued a largenumber of shares of our stock to consultants in payment of their services.  The fair value of theshares issued to consultants is included in our statements of operations under the “ProfessionalFees” line item.  Issuing stock was the only means by which we could obtain the consultants’services.  The value of the consulting services received by us under each agreement has beenexpensed in equal monthly amounts over their respective terms:

|   | - | in 2001, we issued 3,539,500 shares of our common stock under consultingagreements; these shares were valued for financial accounting purposes at$892,360, in the aggregate.  This amount is being expensed in equal monthlyamounts over periods based on the terms of the consulting agreements.  Nearlyall of this total amount was expensed during 2001. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | in 2000, we issued 2,262,166 shares of our common stock under consultingagreements; these shares were valued for financial accounting purposes at$3,110,000, in the aggregate.  This amount is being expensed in equal monthlyamounts over periods ranging from four months to one year.  Nearly all of thistotal amount was expensed during 2000.          |

Our net loss for 2001 is attributable to several large non-standard items:

|   | - | $97,526 is attributable to a write-down of the value of certain inventory items;                                                                                                                                        |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | $1,803,751 in professional fees, substantially all of which is attributable tostock issuances under various consulting agreements;                                                                                      |
|   | - | $856,124 in salary and commissions was expensed, $303,947 of which waspaid or is payable in shares of our common stock; and                                                                                             |
|   | - | Offsetting a portion of our net loss was a $489,905 “Gain on debt forgiveness”,which is the result of a reduction of CyberHighway liabilities determinedpursuant to the CyberHighway bankruptcy proceeding. |

Our net loss for 2000 is attributable to several large non-standard items:

|   | - | the depreciation and amortization of acquired customer bases, goodwill andother intangibles of $7,618,755;                                          |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | $4,168,610 in professional fees, substantially all of which is attributable tostock issuances under various consulting agreements;                  |
|   | - | $2,060,528 in salary and commissions was expensed, $875,000 of which is theresult of stock bonuses to three officers; and                           |
|   | - | $9,239,310 in impairment loss relating to the demise of CyberHighway’sbusiness and the associated write off of all related intangible assets. |

In October 2000, the prior acquisition of Net 1, Inc. was rescinded.  Included in the terms of thesettlement agreement was the return to us of the 250,000 shares issued by us in the originaltransaction. We then issued 250,000 shares of our stock in settlement of the arbitration.  Thesettlement agreement also called for one of the former owners of Net 1 to assume a $50,000liability, that was recorded by us upon the acquisition. The total gain on the recission of the Net 1transaction, $961,436, has been recorded in our statement of operations for 2000 under the “Gainon Rescission” heading.

For 2000, our statement of operations reflects an income tax benefit of $1,595,424, resultingfrom the difference in the bases of the acquired customer bases for book versus tax purposes.Due to the demise of the business of CyberHighway, our statement of operations for 2001 doesnot contain a similar tax benefit.

Wireless Cable Segment.  The wireless cable segment has had no operating activity since 1997.As described above, we have ceased, for the foreseeable future, our wireless cable activities.

Liquidity and Capital Resources

General.  Since our inception, we have had a significant working capital deficit.  Prior to ourJanuary 1999 acquisition of CyberHighway, we had no material revenues and we operated from aseverely illiquid position.  Following the CyberHighway acquisition and until the recent demiseof CyberHighway’s business, we generated significant monthly revenues, yet continued to have aworking capital deficit.  Currently, we are substantially illiquid, although we do possess enoughcash to continue our current level of business activities, the result of recent securities sales.  Asthe level of funding under the Fusion Capital agreement has been lower than we had earlieranticipated, during the last two months of 2001 and the first three months of 2002, we haveobtained additional funds through sales of our common stock, as follows:

|   | - | $57,500 (2001) from the sale of 575,000 shares of our common stock and atotal of 1,150,000 warrants;                                              |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | $30,000 (2002) from the exercise of outstanding warrants - 200,000 shares at$.15 per share;                                                       |
|   | - | $12,500 (2002) from the exercise of outstanding warrants - 156,250 shares at$.08 per share; and                                                   |
|   | - | $98,000 (2002) from the exercise of options - 2,000,000 shares at $.049 pershare (a 38.75% discount to the market price on the date of exercise). |

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

Without additional capital, it is possible that we would be forced to cease operations.

Our Capital Needs.  To sustain our current level of operations for the next twelve months, wewill require additional capital of approximately $300,000.  To accomplish our goals of expandingour Quick-Cell business, we will require at least $1.2 million.  If we are unable to obtain thisneeded capital, we could be forced to cease our operations.

Currently we do not possess enough capital to accomplish our goals for our Quick-Cell wirelessInternet access business, including the construction of Quick-Cell systems.  When we refer to theconstruction of a Quick-Cell system in any city, that process requires the following expenditures:

|   | - | A single Quick-Cell cell site, including a Quick-Cell server modem, parts andconfiguration - projected average cost: $25,000; |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------|
|   | - | Tower lease site - projected average cost: $500 per month;                                                                    |
|   | - | Direct T1 telephone line connection to the Internet - projected average cost:$2,000 per month; and                            |
|   | - | Initial inventory of customer modems - approximate cost: $70,000.                                                             |

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

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

In light of the relatively small amount of capital required to construct each Quick-Cell cell site,we believe that the expected funding under the Fusion Capital agreement would provide us withenough capital to construct the initial Quick-Cell cell site and commence marketing activities inapproximately 60 markets.  With the Quick-Cell construction permitted by this amount ofcapital, we will be able to determine whether our Quick-Cell wireless Internet access business isa viable business, as presently offered.  However, the funds expected under the Fusion Capitalagreement will not be adequate for us to pursue our complete Quick-Cell business plan, and wecannot assure you that we will be able to obtain capital when needed.  Our inability to obtainfurther capital when needed would lessen our chance of earning a profit, as we would becomeilliquid.

Proceeds from the Fusion Capital Agreement.  Beginning in July 2001, we began to receive thefirst funds of up to $10 million under our agreement with Fusion Capital.  At December 31,2001, we had received only $340,000 under this agreement.  Fusion Capital has not purchasedthe maximum funding amount possible under this agreement.  At December 31, 2001, theCompany had advanced 1,321,200 shares in consideration of the buyer’s advance of $80,176, inexpectation that a settlement will take place in the near future.  This lack of significant fundinghas impeded our ability to expand our Quick-Cell business operations.  We will remain in thisposition unless and until (1) our stock price increases significantly or (2) we secure funding froma source other than Fusion Capital, of which there is no assurance.  Assuming we receive theentire $10 million under that agreement, of which there is no assurance, we anticipate that wewill apply these funds as follows:

|   | Purchase of Quick-Cell Equipment    | $6,000,000  |   |
|--------|-------------------------------------|-------------|--------|
|   | Construction of Quick-Cell Systems  | 1,300,000   |   |
|   | Marketing                           | 1,000,000   |   |
|   | General and Administrative Expenses | 200,000     |   |
|   | Finder’s Fee                  | 800,000     |   |
|   | Working Capital                     | 700,000     |   |
|   |                                | ___________ |   |
|   | Total                               | $10,000,000 |   |
|   |                                | ==========  |   |

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

Should all of our outstanding warrants, including all of the warrants to be issued in connectionwith the Fusion Capital agreement, be exercised, we would receive cash proceeds ofapproximately $2,000,000.  Funds received from the exercise of warrants would be used topurchase Quick-Cell equipment, to construct Quick-Cell systems, to market our Quick-Cellwireless Internet access service and for working capital.  Please see the discussion under “Use ofProceeds”.

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

Potential Rescission Claims.  Because we lack the capital to pay any potential claims forrescission that may be asserted by some of our shareholders, any such claim made against uscould negatively impact our ability to continue in business.  At December 31, 2001, 2,138,726shares of our common stock with an aggregate assigned value of $1,192,700 were subject topotential rescission claims.  At March 31, 2002, 524,564 of these shares, with an aggregate valueof $220,998, remain subject to potential claims for rescission.  We do not possess capital withwhich to pay any such claims, if asserted, and, if such claims are asserted, it is possible that wewould be forced to cease operations, as our then-available capital could become severelyimpaired.

December 31, 2001.  At December 31, 2001, our working capital deficit was $1,254,897, whichis less than our deficit at December 31, 2000, of  $1,517,164.

The following table sets forth our current assets and current liabilities at December 31, 2001 and2000:

|                |                         | 2001         | 2000         |
|---------------------|------------------------------|--------------|--------------|
|                |                         | ____________ | ____________ |
| Current Assets      | Cash                         | $10          | $1,088       |
|                | Inventory                    | 134,756      | 246,721      |
|                |                         |         |         |
| Current Liabilities | Accounts payable             | 1,034,619    | 1,472,030    |
|                | Accrued payroll              | 265,978      | 158,262      |
|                | Other current liabilities    | 54,996       | 41,824       |
|                | Property dividends payable   | 0            | 43,750       |
|                | Notes payable to stockholder | 18,521       | 6,638        |

Certain balance sheet line items changed significantly from 2000 to 2001.  These changes aresummarized below:

|   | - | Liabilities - our liabilities decreased to $1,034,619 from $1,472,030 in 2000.This decrease is due to a final determination in the CyberHighway bankruptcyproceeding of allowed claims, which claims were $489,905 less than theamount recorded for 2000.                                                                                                                                                                                                                                                                         |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | - | Subscriptions Receivable - the 2001 amount of $165,750 arises from the factthat shares issuable as of December 31, 2001, were not, in fact, issued untilJanuary 2002; the 2000 amount of $933,514 arises from our president’sconverting his loans into shares of our stock; this entry appears due to the factthat the shares issued in that transaction were not actually issued until afterDecember 31, 2000, due to an administrative oversight.                                                                         |
|   | - | Stockholders’ Equity (Deficit) - at December 31, 2001, we had a stockholders’deficit of $2,352,825; at December 31, 2000, we had a stockholders’ deficit of$4,678,209.  This improvement is due to (1) the value of shares no longersubject to potential rescission claims being moved from “Redeemable CommonStock” and restored to “Shareholders’ Equity” and (2) the reduction inliabilities of CyberHighway, as determined pursuant to the CyberHighwaybankruptcy proceeding. |

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

Our accrued payroll at December 31, 2001, as well as at December 31, 2000, is primarilyattributable to accrued salary of our president and two of our vice presidents.

In August 2000, our president, David M. Loflin, converted the entire amount owed to him,including accrued interest, into a total of 774,162 shares of our common stock.  The total amountof indebtedness converted to common stock was $967,703.  Mr. Loflin received one share foreach $1.25 owed him - $1.25 was the low sale price for our common stock on the AmericanStock Exchange on August 18, 2000, the last trading day prior to the conversion.  Untilconverted, all of the loans from Mr. Loflin were payable on demand, with interest accruing at 8%per annum.  The funds loaned by Mr. Loflin were used primarily for operating expenses,including expenses of CyberHighway, corporate overhead and the construction of our Quick-Cellsystem in Santa Fe, New Mexico.  Subsequent to the conversion transaction, Mr. Loflin hasloaned us small sums.  At December 31, 2001, we owed Mr. Loflin $18,521.  All sums owed toMr. Loflin are payable on demand, with interest accruing at 8% per annum.   We cannot assureyou that Mr. Loflin will continue to loan us money when we need it.

During 2001, we obtained funds from private sales of our securities in the total amount of$359,750.  In these transactions, we issued a total of 1,545,000 shares of our common stock and3,318,000 common stock purchase warrants.

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

Cash Flows from Operating Activities.  During the year ended December 31, 2001, ouroperations used $707,569 in cash compared to cash used of $953,112 during 2000.  In both years,the use of cash in operations was a direct result of the lack of revenues compared to our operatingexpenses, particularly our Internet access costs and salary and commissions in 2000.  The demiseof the business of CyberHighway served to reduce substantially our ongoing operating expenses;however, its demise also reduced our revenues to insubstantial amounts.  The effects of thedemise of CyberHighway became apparent in our financial statements for 2001.

For the year ended December 31, 2000, our operations would have used approximately $750,000more in cash, had we not determined to defer payment of nearly all of our accounts payable formost of the year, due to our lack of working capital.

Cash Flows from Investing Activities.  During the year ended December 31, 2001, our investingactivities used cash of $12,681 compared to $85,150 in 2000.  During 2000, in our investingactivities, purchases of equipment used cash.  We purchased a small amount of equipment during2001.  Because we lack working capital, we cannot predict our cash flows from investingactivities for 2002.

Cash Flows from Financing Activities.  For 2001, our financing activities provided $719,172 incash, primarily from sales of securities, including receipt of subscriptions receivable of $359,750and receipt of cash on sales of securities of $340,000.  For 2000, our financing activities provided$964,037 in cash.  Of this amount, $568,571 is attributable to loans from our president and$370,000 is attributable to sales of securities.  We continue to seek capital and cannot, therefore,predict future levels of cash flows from financing activities.

Non-Cash Investing and Financing Activities.  During the year ended December 31, 2001, weissued a total of 3,539,500 shares of common stock under consulting agreements; these shareshave been valued at $892,360 in the aggregate.

In December 2001, we awarded 200,000 shares of our common stock as a bonus to one of ourvice presidents, which were valued at $.09 per share, the last closing price of our common stockprior to the award, a value of $18,000.

Management’s Plans Relating to Future Liquidity

To sustain our current level of operations for the next twelve months, we will require additionalcapital of approximately $300,000.  To accomplish our goals of expanding our Quick-Cellbusiness, we will require at least $1.2 million.

Our best opportunity for obtaining needed funds is pursuant to the Fusion Capital agreement.However, at December 31, 2001, we had received only $340,000 under our agreement withFusion Capital.  Fusion Capital has not purchased the maximum shares possible under thisagreement.  At December 31, 2001, the Company had advanced 1,321,200 shares inconsideration of the buyer’s advance of $80,176, in expectation that a settlement will take placein the near future.

Since we only plan to sell up to 6,000,000 shares to Fusion Capital under the Fusion Capitalagreement, the selling price of our stock sold to Fusion Capital will need to average $1.67 pershare for us to receive the maximum proceeds of $10 million under that agreement.  Assuming aselling price of $.09 per share, the closing sale price of the common stock on April 10, 2002, andthe purchase by Fusion Capital of the full amount of shares purchasable under the Fusion Capitalagreement, proceeds to us would only be approximately $500,000, unless we choose to issuemore than 6,000,000 shares, which we have the right to do.

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

|   | - | Placing at least 20,000 customers on our Quick-Cell systems during the nextyear; and |
|--------|---|--------------------------------------------------------------------------------------|
|   | - | proving the commercial viability of our Quick-Cell wireless Internet accessservice.  |

We cannot assure you that we will accomplish these objectives.

Currently, we have no other sources for funding on the scale of the Fusion Capital transaction.

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

Capital Expenditures

During 2001, we made minimal capital expenditures.  During 2000, we made approximately$125,000 in equipment purchases, approximately 15% for wireless Internet equipment andapproximately 85% for needed equipment in our network operations center.  We currently haveno capital with which to make any significant capital expenditures.  Should we obtain fundingunder the Fusion Capital agreement, we will be able to make major expenditures on Quick-Cell-related equipment.  However, without additional 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 of thisAnnual Report on Form 10-KSB.  An index to our financial statements is also included below inItem 13(a).

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

None.

PART III

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

Directors and Executive Officers

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

|   | Name                 | Age    | Position(s)                                           |
|--------|----------------------|--------|-------------------------------------------------------|
|   | __________________   | _____  | ___________________________________                   |
|   | David M. Loflin(1)   | 44     | President, Acting Chief Financial Officer andDirector |
|   | Waddell D. Loflin(1) | 52     | Vice President, Secretary and Director                |
|   | Robert A. Hart IV(2) | 54     | Vice President of Technology                          |
|   | James Kaufman        | 37     | Vice President of Corporate Development               |
|   | Ross S. Bravata      | 43     | Director                                              |
|   | _________            |   |                                                  |

|   | (1) | David M. Loflin and Waddell D. Loflin are brothers.                                      |
|--------|-----|------------------------------------------------------------------------------------------|
|   | (2) | Upon consummation of the Evergreen agreement, Mr. Hart’s employment willterminate. |

Our current officers and directors serve until the next annual meeting of our board of directors oruntil their respective successors are elected and qualified.  All officers serve at the discretion ofour board of directors.  Family relationships between our officers and directors are noted above.Certain information regarding the backgrounds of each of the officers and directors is set forthbelow.

David M. Loflin, President and Director, has, for more than the past five years, owned andoperated Gulf Atlantic Communications, Inc., a Baton Rouge, Louisiana-based wirelesstechnology firm specializing in development of wireless cable systems and broadcast televisionstations.  Gulf Atlantic has designed, constructed and operated two wireless cable systems: (1)Baton Rouge, Louisiana, and (2) Selma, Alabama.  Mr. Loflin developed and currently operatesone television station, WTVK-TV11, Inc. (a Warner Brothers Network affiliate), Channel 11 inBaton Rouge, Louisiana.  Mr. Loflin is a member of the Wireless Cable Association Internationaland the Community Broadcasters Association.

Waddell D. Loflin, Vice President, Secretary and Director, has, for more than the past five years,served as Vice President of Operations and Treasurer of Gulf Atlantic Communications, Inc. andWTVK-TV11, Inc., both in Baton Rouge, Louisiana.  In addition, Mr. Loflin serves asProduction Manager and Film Director for WTVK-TV11, Inc.  Mr. Loflin served as GeneralManager for Baton Rouge Television Company, Baton Rouge, Louisiana, a wireless cablesystem, where he directed the development and launch of such wireless cable system.  Also, Mr.Loflin has devoted over five years to demographic research relating to the wireless cableindustry.  Mr. Loflin is a member of the Wireless Cable Association International and theCommunity Broadcasters Association.  Mr. Loflin holds a B.A. degree in Social Sciences fromOglethorpe University, Atlanta, Georgia.

Robert A. Hart, IV, Vice President of Technology, is a 30-year veteran of thetelecommunications industry as proprietor of Hart Engineers, which provides engineering andconsulting services to BellSouth, numerous independent telephone companies and othercommunications service providers.  Mr. Hart is a graduate of Louisiana State University with aB.S. degree in Electrical Engineering and is a Registered Professional Engineer.  Mr. Hart hasserved on the board of the Small Business Personal Communications Services (PCS)Association, a national trade association focused on small business applications andopportunities for PCs technology (a universal wireless communications technology), and alsoserved this organization as chairman of the lobbying committee.  He is also a past board memberand current member of the Association of Communication Engineers, and current member of theInstitute of Electrical and Electronics Engineers, National Society of Professional Engineers andthe Louisiana Engineering Society.

James Kaufman, Vice President - Corporate Development, received a B.S. degree in Journalismfrom the University of Colorado, Boulder, Colorado. From 1994 to 1995, Mr. Kaufman was aregistered representative with D.E. Fry, a Denver, Colorado-based broker-dealer.  From 1995 to1996, Mr. Kaufman was a registered representative with A.G. Edwards, a St. Louis, Missouri-based broker-dealer.  From 1997 to February 1999, Mr. Kaufman served as Director of CorporateDevelopment for B. Edward Haun & Company, a Denver, Colorado-based investment bankingand research firm.

Ross S. Bravata, Director, has, since 1981, worked for Novartis (formerly Ciba Corporation), invarious positions, and currently serves as a Senior Control Systems Technician.  In such capacity,Mr. Bravata supervises the service and maintenance of electronic instrumentation.  Since 1988,Mr. Bravata has served as a director and principal financial officer of CG Federal Credit Union,Baton Rouge, Louisiana.

Executive Committee

Our board of directors created an Executive Committee to facilitate management betweenmeetings of the full board of directors.  David M. Loflin, Waddell D. Loflin and Ross S. Bravatacomprise the Executive Committee.

Our bylaws provide that the Executive Committee has the authority to exercise all powers of theboard of directors, except the power to:

|   | - | Declare dividends;                                                                            |
|--------|---|-----------------------------------------------------------------------------------------------|
|   | - | Sell or otherwise dispose of all or substantially all of our assets;                          |
|   | - | Recommend to our shareholders any action requiring their approval; and                        |
|   | - | Change the membership of any committee, fill the vacancies thereon ordischarge any committee. |

The Executive Committee, in general, acts on all matters requiring approval of our board ofdirectors.

Audit Committee

In September 1999, our board of directors created an Audit Committee, consisting of threemembers, the majority of whom must be outside directors.  There are two vacancies on thiscommittee, due to the recent resignations of Richard N. Gill and Michael Cohn as directors.  TheAudit Committee has the responsibility to review internal controls, accounting policies andfinancial reporting practices, to review the financial statements, the arrangements for, and scopeof, the independent audit as well as the results of the audit arrangement and to review theservices and fees of the independent auditors, their independence and recommend to the board ofdirectors for its approval and for the ratification by our shareholders the engagement of theindependent auditors to serve the following year in examining our accounts.  The AuditCommittee has held two meetings.

Compensation of Directors

During 2001, no compensation was paid to any of our directors for their services as directors.  Itis possible that our management could begin to pay our directors for meetings attended or grant asmall number of stock options for their services.  However, no specific determination in thisregard has been made.

Indemnification of Directors and Officers

Article X of the Articles of Incorporation of USURF America provides that no director or officershall be personally liable to USURF America or its shareholders for damages for breach offiduciary duty as a director officer; provided, however, that such provision shall not eliminate orlimit the liability of a director or officer for (1) acts or omissions which involve intentionalmisconduct, fraud or a knowing violation of law or (2) the payment of dividends in violation oflaw.  Any repeal or modification of Article X shall be prospective only and shall not adverselyaffect any right or protection of a director or officer of USURF America existing at the time ofsuch repeal or modification for any breach covered by Article X which occurred prior to any suchrepeal or modification.  The effect of Article X is that directors and officers will experience nomonetary loss for damages arising out of actions taken (or not taken) in such capacities, exceptfor damages arising out of intentional misconduct, fraud or a knowing violation of law, or thepayment of dividends in violation of law.

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, includingany action alleging negligence, or criminal action brought against them on account of their beingor having been directors or officers unless, in any such action, they are judged to have acted withgross negligence or willful misconduct.  Insofar as indemnification for liabilities arising underthe Securities Act of 1933, as amended, may be permitted to directors, officers or control personspursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC,such indemnification is against public policy as expressed in the Securities Act of 1933 and is,therefore, unenforceable.

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

We became subject to the provisions of Sections 16(a) of the Securities Exchange Act of 1934 onOctober 14, 1999.  Section 16(a) requires directors, executive officers and persons who ownmore than 10% of our outstanding common stock to file with the SEC an Initial Statement ofBeneficial Ownership of Securities (Form 3) and Statements of Changes of Beneficial Ownershipof Securities (Form 4).  Directors, executive officers and greater-than-10% shareholders arerequired by SEC regulation to furnish copies to us of all Section 16(a) forms they file.

Based on a review of copies of these reports furnished to us, we believe that all of our directors,executive directors and greater-than-10% beneficial owners filed their respective Form 3 reports;all of the Form 3 reports were filed late.  Form 5 reports for the past three years for all officersand directors have not yet been filed.  Form 4 reports for certain of our officers and directors aredue and have not yet been filed.  We have 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 of the lastthree completed fiscal years by our Chief Executive Officer and each executive officer whoreceived total salary and bonus exceeding $100,000 during any of the last three fiscal years.

| Name and PrincipalPosition | Year   | Salary $    | Bonus $     | OtherAnnualCom-pensa-tion | Long-termCompen-sationAwardsof StockOptions | Allothercompen-sation |
|----------------------------|--------|-------------|-------------|---------------------------|---------------------------------------------|-----------------------|
| David M. Loflin            | 2001   | $150,000(1) | 133,000(10) | $-0-                      | 0                                           | $-0-                  |
| President [Principal       | 2000   | $150,000(2) | $-0-        | $-0-                      | 0                                           | $-0-                  |
| Executive Officer]         | 1999   | $150,000(3) | $-0-        | $-0-                      | 0                                           | $-0-                  |
|                       |   |        |        |                      |                                        |                  |
| Waddell D. Loflin          | 2001   | $100,000(4) | $18,000(11) | $-0-                      | 0                                           | $-0-                  |
| [Vice President and        | 2000   | $100,000(5) | $48,000(12) | $-0-                      | 0                                           | $-0-                  |
| Secretary]                 | 1999   | $100,000(6) | $-0-        | $-0-                      | 0                                           | $-0-                  |
|                       |   |        |        |                      |                                        |                  |
| James Kaufman [Vice        | 2001   | $120,000(7) | $-0-        | $-0-                      | 0                                           | $-0-                  |
| [President of Corpor-      | 2000   | $120,000(8) | $72,000(13) | $-0-                      | 0                                           | $-0-                  |
| ate Development]           | 1999   | $120,000(9) | $-0-        | $-0-                      | 0                                           | $-0-                  |
|                       |   |        |        |                      |                                        |                  |
| Julius W. Basham, II       | 2001   | $-0-        | $-0-        | $-0-                      | 0                                           | $-0-                  |
| [Former Chief              | 2000   | $-0-        | $-0-        | $-0-                      | 0                                           | $-0-                  |
| Operating Officer]         | 1999   | $133,762    | $-0-        | $-0-                      | 0                                           | $-0-                  |
|                       |   |        |        |                      |                                        |                  |
| Robert A. Hart, IV         | 2001   | $-0-        | $-0-        | $-0-                      | 0                                           | $-0-                  |
| [Vice President of         | 2000   | $-0-        | $750,000    | $-0-                      | 0                                           | $-0-                  |
| Technology]                | 1999   | $-0-        | $-0-        | $-0-                      | 0                                           | $-0-                  |
| _______________            |   |        |        |                      |                                        |                  |

(1) $53,612 of this amount has been accrued.

(2) $34,083 of this amount has been accrued.

(3) $27,083 of this amount has been accrued.

(4) $24,423 of this amount has been accrued.

(5) $35,417 of this amount has been accrued.

(6) $10,412 of this amount has been accrued.

(7) $106,270 of this amount has been accrued; $96,000 of this amount is payable in shares of ourstock.

(8) $26,667 of this amount has been accrued; $96,000 of this amount is payable in shares of ourstock.

(9) $26,667 of this amount has been accrued; $82,666 of this amount was paid in shares of ourstock.

(10) This bonus was paid by the issuance of 700,000 shares to Mr. Loflin, which were valued at$.19 per share, the last closing price of our common stock prior to the issuance.

(11) This bonus was paid by the issuance of 200,000 shares to Mr. Loflin, which were valued at$.09 per share, the last closing price of our common stock prior to the issuance.

(12) This bonus was paid by the issuance of 200,000 shares to Mr. Loflin, which were valued at$.24 per share, the last closing price of our common stock prior to the issuance.

(13) This bonus was paid by the issuance of 300,000 shares to Mr. Kaufman, which were valuedat $.24 per share, the last closing price of our common stock prior to the issuance.

(14) Mr. Hart received 250,000 shares of our common stock as a signing bonus under the termsof his employment agreement.  These shares were valued at $3.00 per share.

In May 2000, we issued 250,000 shares to Robert A. Hart IV, our vice president of technology, asa bonus, upon the execution of his employment agreement.  These shares were valued at $3.00per share, which was the closing price of our common stock on the day of Mr. Hart’s executionof his employment agreement.

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

In October 2001, our president, David M. Loflin, was issued 700,000 shares of our commonstock as a bonus.  These shares were valued at $.19 per share, which was the closing sale price ofour common stock on the day immediately preceding their issuance.

In December 2001, one of our vice presidents, Waddell D. Loflin, was awarded 200,000 sharesof our common stock as a bonus.  These shares were valued at $.09 per share, which was theclosing sale price of our common stock on the day immediately preceding their award.  Theseshares were issued in January 2002.

Employment Contracts and Termination of Employment and Change-in-Control Agreements

Each of our officers have entered into employment agreement, as well as confidentialityagreements and agreements not to compete.

| Name of Officer   | Position(s)                            | Term               | Salary      | Date    |
|-------------------|----------------------------------------|--------------------|-------------|---------|
| _____________     | _______________________                | __________         | ___________ | _______ |
| David M. Loflin   | President                              | 7 years (1)        | $150,000(5) | 6/1/99  |
| Waddell D. Loflin | Vice President and Secretary           | 7 years (2)        | $100,000(6) | 6/1/99  |
| Robert A. Hart IV | Vice President of Technology           | 3 years (3)        | $90,000(7)  | 5/25/00 |
| James Kaufman     | Vice President of CorporateDevelopment | 1 year(4)renewable | $120,000(8) | 3/22/00 |
| _____________     |                                   |               |        |    |

(1) Term to be reduced to six months, renewable for one six month period, upon theconsummation of the Evergreen agreement.

(2) Term to be reduced to six months, upon the consummation of the Evergreen agreement.

(3) To be terminated, upon the consummation of the Evergreen agreement.

(4) Term to be reduced to six months, upon the consummation of the Evergreen agreement.

(5) Mr. Loflin has agreed to defer payment of a portion of his salary until we are able to pay it.As at December 31, 2001, we owed Mr. Loflin deferred salary in the amount of $87,695.

(6) Mr. Loflin has agreed to defer payment of a portion of his salary until we are able to pay it.As at December 31, 2001, we owed Mr. Loflin deferred salary in the amount of $59,840.

(7) Mr. Hart will begin to receive salary payments at such time as we obtain a significant capitalinvestment.  Mr. Hart received 250,000 shares of our stock as a signing bonus, which shares werevalued at $750,000.  The value of these shares was derived from the closing price for our stockon the date of execution of his employment agreement.

(8) Mr. Kaufman has agreed to defer payment of a portion of his salary until we are able to pay it.As at December 31, 2001, we owed Mr. Kaufman deferred salary in the amount of $252,937,80% of which is payable in shares of our stock.  In 2000, we issued Mr. Kaufman a total of34,536 shares of our stock valued at $154,667 in payment of the stock portion of his salary.

We have no compensatory plan or arrangement that results or will result from the resignation,retirement or any other termination of an executive officer’s employment or from a change incontrol or a change in an executive officer’s responsibilities following a change-in-control.

Option/SAR Grants in Last Fiscal Year

We did not grant any options to any person during the fiscal year ended December 31, 2001.  InMarch 2002, we adopted a stock ownership plan for consultants and employees.  To date, wehave granted options to purchase up to $600,000 of our common stock to one consultant; thisconsultant has exercised options to purchase 2,000,000 shares.  We have never granted any stockappreciation rights (SARs), nor do we expect to grant any SARs in the foreseeable future.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

As of April 10, 2002, there were 36,955,370 shares of our common stock issued and outstanding.The following table sets forth certain information regarding the current beneficial ownership ofour common stock, by (1) persons known to be beneficial owners of more than 5% of ourcommon 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 8748 Quarters Lake Road, BatonRouge, Louisiana 70809.

| Name and Address of Beneficial Owner             | Shares OwnedBeneficially | Percent Owned(1) |   |
|--------------------------------------------------|--------------------------|------------------|--------|
| _________________________________                | _______________          | _______________  |   |
| David M. Loflin(2)                               | 5950960                  | 11.34%           |   |
|                                             |                     |             |   |
| Waddell D. Loflin(2)                             | 2490000                  | 4.74%            |   |
|                                             |                     |             |   |
| James Kaufman                                    | 2425000                  | 4.62%            |   |
| 665 W. Velarde Drive                             |                     |             |   |
| Thousand Oaks, CA 91360                          |                     |             |   |
|                                             |                     |             |   |
| Robert A. Hart IV                                | 250000                   | less than 1%     |   |
|                                             |                     |             |   |
| Ross S. Bravata                                  | 144500(3)                | less than 1%     |   |
|                                             |                     |             |   |
| Fusion Capital Fund II, LLC                      | 3006200(4)               | 5.72%            |   |
| 222 Merchandise Mart Plaza                       |                     |             |   |
| Suite 9-112                                      |                     |             |   |
| Chicago, IL 60654                                |                     |             |   |
|                                             |                     |             |   |
| All officers and directors as a group (5persons) | 11260460(3)              | 21.45%           |   |
| ______________                                   |                     |             |   |

(1)  Based on 52,484,097 shares outstanding, assuming the issuance of all 6,153,727 sharesunderlying currently exercisable warrants, as well as the issuance of 3,125,000 shares andimmediately exercisable warrants to purchase 6,250,000 shares, pursuant to the Evergreenagreement described elsewhere herein.

(2)  All of the shares owned by this shareholder are subject to a voting agreement and must bevoted for David M. Loflin and Waddell D. Loflin in all elections of directors.

(3) 75,000 of these shares have not been issued, but underlie currently exercisable warrants.

(4) 645,000 of these shares have not been issued, but underlie currently exercisable warrants.

Item 12.  Certain Relationships and Related Transactions

Evergreen Agreement

In April 2002, we entered into a securities purchase agreement with a third party, EvergreenVenture Partners, LLC, whereby we are to issue 3,125,000 units of our securities, each unitconsisting of one share of our common stock, one common stock purchase warrant to purchaseone share at an exercise price of $.15 per share and one common stock purchase warrant topurchase one share at an exercise price of $.30 per share, for cash in the amount of $250,000payable in two equal increments at the initial closing (scheduled for April 15, 2002) and 60 daysthereafter.  Also pursuant to this agreement, we will hire a new president and chief executiveofficer, Douglas O. McKinnon, who will also become a director, and, receive 2,000,000 shares ofcommon stock, as a bonus; our current president, David M. Loflin,  will become Chairman of theBoard, reduce the term of his remaining term of employment from approximately 4 years to sixmonths, waive the payment of all accrued and unpaid salary and waive the repayment of all loansmade by him to us, in consideration of 2,000,000 shares of common stock being issued to him;two of our vice presidents will reduce the terms of their remaining terms of employment fromapproximately 4 years to six months and one year to six months, respectively, and waive thepayment of all accrued and unpaid salary, in consideration of 2,000,000 shares of common stockbeing issued to each of them; and our other vice president will terminate his employment with us.Also, upon the final closing under this agreement, Evergreen will name two persons to becomedirectors of USURF America.

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, $51,658in interest), the result of cash loans made to us by Mr. Loflin during the past approximately twoyears.  The proceeds of these loans were used primarily for operating expenses and purchases ofequipment.  On August 21, 2000, we entered into a letter agreement with our president, David M.Loflin, whereby Mr. Loflin agreed to convert all sums owed to him into shares of our commonstock.

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

Our board of directors, in authorizing the transaction described above, found the transaction to bein the best interest of USURF America, as it would significantly improve our financial condition,potentially making it more attractive to prospective investors.

Securities Purchases

In December 2001, Michael Cohn, a former director, purchased 75,000 units of our securities in aprivate offering, at a purchase of $.10 per unit, or $7,500 in the aggregate.  Each unit purchasedby Mr. Cohn consisted of one share of our common stock, one common stock purchase warrantto purchase one share of our common stock at an exercise price of $.20 per share and onecommon stock purchase warrant to purchase one share of our common stock at an exercise priceof $.30 per share.  Mr. Cohn purchased units on the same terms and conditions as were offered tounaffiliated investors.

In December 2001, Ross S. Bravata, a director, purchased 35,000 units of our securities in aprivate offering, at a purchase of $.10 per unit, or $3,500 in the aggregate.  Each unit purchasedby Mr. Bravata consisted of one share of our common stock, one common stock purchasewarrant to purchase one share of our common stock at an exercise price of $.20 per share and onecommon stock purchase warrant to purchase one share of our common stock at an exercise priceof $.30 per share.  Mr. Bravata purchased units on the same terms and conditions as were offeredto unaffiliated investors.

Stock Bonus - Officers

In May 2000, one of our vice presidents, Robert A. Hart IV, was issued 250,000 shares of ourcommon stock as an employment agreement signing bonus.  These shares were valued at$750,000, or $3.00 per share, pursuant to the terms of the Mr. Hart’s employment agreement.

In December 2000, two of our vice presidents, Waddell D. Loflin and James Kaufman, wereissued shares of our common stock as a bonus.  Mr. Loflin was issued 200,000 shares and 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 day immediately preceding theirissuance.

In October 2001, our President, David M. Loflin, was issued shares of our common stock as abonus.  Mr. Loflin was issued 700,000 shares.  These shares were valued at $133,000, or $.19 pershare, which was the closing sale price of our common stock on the date immediately precedingtheir issuance.  When this issuance was approved by our board of directors, Mr. Loflin abstainedfrom the voting.

In December 2001, one of our vice president, Waddell D. Loflin, was awarded shares of ourcommon stock as a bonus.  Mr. Loflin was awarded 200,000 shares.  These shares were valued at$18,000, or $.09 per share, which was the closing sale price of our common stock on the dateimmediately preceding their award.  These shares were issued in January 2002.

Employment Agreements

Each of our officers have entered into employment agreement, as well as confidentialityagreements and agreements not to compete.

| Name of Officer   | Position(s)                            | Term               | Salary      | Date    |
|-------------------|----------------------------------------|--------------------|-------------|---------|
| _____________     | _______________________                | __________         | ___________ | _______ |
| David M. Loflin   | President                              | 7 years (1)        | $150,000(5) | 6/1/99  |
| Waddell D. Loflin | Vice President and Secretary           | 7 years (2)        | $100,000(6) | 6/1/99  |
| Robert A. Hart IV | Vice President of Technology           | 3 years (3)        | $90,000(7)  | 5/25/00 |
| James Kaufman     | Vice President of CorporateDevelopment | 1 year(4)renewable | $120,000(8) | 3/22/00 |
| _____________     |                                   |               |        |    |

(1) Term to be reduced to six months, renewable for one six month period, upon theconsummation of the Evergreen agreement.

(2) Term to be reduced to six months, upon the consummation of the Evergreen agreement.

(3) To be terminated, upon the consummation of the Evergreen agreement.

(4) Term to be reduced to six months, upon the consummation of the Evergreen agreement.

(5) Mr. Loflin has agreed to defer payment of a portion of his salary until we are able to pay it.As at December 31, 2001, we owed Mr. Loflin deferred salary in the amount of $87,695.

(6) Mr. Loflin has agreed to defer payment of a portion of his salary until we are able to pay it.As at December 31, 2001, we owed Mr. Loflin deferred salary in the amount of $59,840.

(7) Mr. Hart will begin to receive salary payments at such time as we obtain a significant capitalinvestment.  Mr. Hart received 250,000 shares of our stock as a signing bonus, which shares werevalued at $750,000.  The value of these shares was derived from the closing price for our stockon the date of execution of his employment agreement.

(8) Mr. Kaufman has agreed to defer payment of a portion of his salary until we are able to pay it.As at December 31, 2001, we owed Mr. Kaufman deferred salary in the amount of $252,937,80% of which is payable in shares of our stock.  In 2000, we issued Mr. Kaufman a total of34,536 shares of our stock valued at $154,667 in payment of the stock portion of his salary.

Voting Agreement

On January 29, 1999, David W. Loflin, Waddell D. Loflin, Julius W. Basham, David W. Brownand Wm. Kim Stimpson entered into a voting agreement, whereby all of these persons arerequired to vote all shares owned by them for David M. Loflin and Waddell D. Loflin in allelections of directors of USURF America.  Currently, approximately 8,850,000 shares are subjectto this voting agreement.  This amount of stock represents approximately 23% of our currentlyoutstanding shares.

H + N Partners

During 1998, we issued a total of 187,000 shares of our common stock to H + N Partners, afictitious name division of B. Edward Haun & Company, a Denver, Colorado-based investmentbanking and research firm in which James Kaufman, our Vice President - CorporateDevelopment, was a partner.  Mr. Kaufman received a portion of the shares issued to H + NPartners.  37,000 of the shares were valued at $2.00 per share and 150,000 of the shares werevalued at $2.50 per share.  All of the shares issued to H+N Partners were the subject of effectiveregistration statements filed with the SEC.  Mr. Kaufman was not an officer at the time of thestock issuances to H + N Partners.

Also during 1998, in connection with a private offering of our securities, we issued  to H + NPartners 56,667 warrants to purchase a like number of shares of our common stock at an exerciseprice of $1.25 per share and 56,667 warrants to purchase a like number of shares of our commonstock at an exercise price of $1.50 per share.  Mr. Kaufman was not an officer at the time of thewarrant issuances to H + N Partners.

Fusion Capital Consulting Agreement

In January 2001, we entered into a one-year consulting agreement with Fusion Capital, pursuantto which Fusion Capital agreed to provide operational and strategic consulting services.  FusionCapital received a total of 120,000 shares of our common stock during the term of this agreementand reimbursement for expenses.

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

Item 13.  Exhibits and Reports on Form 8-K

|   | (a)    | (1)    | Financial Statements                                                                                           |
|--------|--------|--------|----------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                           |
|   |   |   | Index to Financial Statements of USURF America                                                                 |
|   |   |   | Independent Auditor’s Report                                                                             |
|   |   |   | Consolidated Balance Sheets as of December 31, 2001 and 2000                                                   |
|   |   |   | Consolidated Statements of Operations for the Years Ended December31, 2001 and 2000                            |
|   |   |   | Consolidated Statements of Changes in Stockholders’ Equity for theYears Ended December 31, 2001 and 2000 |
|   |   |   | Consolidated Statements of Cash Flows for the Years Ended December31, 2001 and 2000                            |
|   |   |   | Notes to Consolidated Financial Statements                                                                     |
|   |   |   |                                                                                                           |
|   | (a)    | (2)    | Exhibits                                                                                                       |

|   | Exhibit No.     | Description                                                    |
|--------|-----------------|----------------------------------------------------------------|
|   | _______________ | _______________________________________                        |
|   | 23.1            | Consent of Postlethwaite & Netterville,Independent Auditor |

|   | (b)    | Reports on Form 8-K                                                                           |
|--------|--------|-----------------------------------------------------------------------------------------------|
|   |   |                                                                                          |
|   |   | During the three months ended December 31, 2001, we did not file a CurrentReport on Form 8-K. |
|   |   |                                                                                          |
|   |   | Subsequent to December 31, 2001, we have filed two Current Reports on Form8-K:                |

|   |   | - | Date of event: February 6, 2002, wherein we reported theresignation of one of our directors.  This Current Report on Form8-K is incorporated herein by this reference. |
|--------|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | - | Date of event: April 5, 2002, wherein we reported informationpursuant to Regulation FD.                                                                                |

SIGNATURES

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

|   | USURF AMERICA, INC.     |
|--------|-------------------------|
|   |                    |
|   | By: /s/ DAVID M. LOFLIN |
|   | David M. Loflin         |
|   | President               |

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

| /s/ DAVID M. LOFLIN                                                                    | April 13, 2002 |
|----------------------------------------------------------------------------------------|----------------|
| President (Principal Executive Officer) Acting PrincipalFinancial Officer and Director |           |
|                                                                                   |           |
| /s/ WADDELL D. LOFLIN                                                                  | April 13, 2002 |
| Vice President, Secretary and Director                                                 |           |
|                                                                                   |           |
| /s/ JAMES KAUFMAN                                                                      | April __, 2002 |
| Vice President of Corporate Development                                                |           |
|                                                                                   |           |
| /s/ ROBERT A. HART IV                                                                  | April __, 2002 |
| Vice President of Technology                                                           |           |
|                                                                                   |           |
| /s/ ROSS S. BRAVATA                                                                    | April 13, 2002 |
| Director                                                                               |           |

Supplemental Information to be Furnished With Reports Filed Pursuant to §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 Annual Reporton Form 10-KSB.

INDEX TO FINANCIAL STATEMENTS OF USURF AMERICA, INC.

Independent Auditor’s Report

Consolidated Balance Sheets as of December 31, 2001 and 2000

Consolidated Statements of Operations for the Years Ended December 31, 2001 and 2000

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31,

   2001 and 2000

Consolidated Statements of Cash Flows for the Years Ended December 31, 2001 and 2000

Notes to Consolidated Financial Statements

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders

USURF America, Inc. and Subsidiaries

Baton Rouge, Louisiana

We have audited the accompanying consolidated balance sheets of USURF America, Inc. andSubsidiaries as of December 31, 2001 and 2000, and the related consolidated statements ofoperations, changes in stockholders' deficit and cash flows for the years then ended. Theseconsolidated financial statements are the responsibility of the Company's management. Ourresponsibility is to express an opinion on these consolidated financial statements based on ouraudits.

We conducted our audits in accordance with auditing standards generally accepted in the UnitedStates of America. Those standards require that we plan and perform the audits to obtainreasonable assurance about whether the consolidated financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the consolidated financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluatingthe overall consolidated financial statement presentation. We believe that our audits provide areasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects,the financial position of USURF America, Inc. and Subsidiaries as of December 31, 2001 and2000, and the results of their operations and cash flows for the years then ended in conformitywith accounting principles generally accepted in the United States of America.

As discussed more fully in Note 13, the Company is not in compliance with continued listingguidelines of AMEX. The ultimate outcome of this uncertainty is not determinable at this time,but could have a significant impact on the Company.

The accompanying financial statements have been prepared assuming that the Company willcontinue as a going concern. As discussed in Note 16 to the consolidated financial statements,the Company has significant operating losses. In addition, the Company has excess currentliabilities over current assets of approximately $1.25 million. These conditions raise substantialdoubt about its ability to continue as a going concern. Management's plans regarding thesematters are also described in Note 16. The financial statements do not include any adjustmentsthat might result from the outcome of this uncertainty.

/s/ POSTLETHWAITE & NETTERVILLE

Postlethwaite & Netterville

Baton Rouge, Louisiana

April 12, 2002

| USURF AMERICA, INC. AND SUBSIDIARIES |
|--------------------------------------|
| BATON ROUGE, LOUISIANA               |
| CONSOLIDATED BALANCE SHEETS          |
| DECEMBER 31, 2001 AND 2000           |

ASSETS

|                                 | 2001          | 2000          |
|--------------------------------------|---------------|---------------|
|                                 | __________    | __________    |
| CURRENT ASSETS                       |          |          |
|  Cash and cash equivalents      | $10           | $1,088        |
|  Inventory                      | 134,746       | 246,721       |
|                                 | _____________ | _____________ |
|                                 | 134,756       | 247,809       |
|                                 | _____________ | _____________ |
| PROPERTY AND EQUIPMENT               |          |          |
|  Cost                           | 203,141       | 138,954       |
|  Less: accumulated depreciation | (125,036)     | (69,476)      |
|                                 | _____________ | _____________ |
|                                 | 78,105        | 69,478        |
|                                 | _____________ | _____________ |
| INVESTMENTS                          | 0             | 68,029        |
|                                 | _____________ | _____________ |
| OTHER ASSETS                         | 16,667        | 25,000        |
|                                 | _____________ | _____________ |
| TOTAL ASSETS                         | $229,528      | $410,316      |
|                                 | ===========   | ===========   |

The accompanying notes are an integral part of these statements.

LIABILITIES AND STOCKHOLDERS’ DEFICIT

|                                                                                                                                                                  | 2001          | 2000          |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|---------------|
|                                                                                                                                                                  | __________    | __________    |
| CURRENT LIABILITIES                                                                                                                                                   |          |          |
|  Disbursements in excess of cash balances                                                                                                                        | $15,539       | $42,469       |
|  Accounts payable                                                                                                                                                | 1,034,619     | 1,472,030     |
|  Accrued payroll                                                                                                                                                 | 265,978       | 158,262       |
|  Other current liabilities                                                                                                                                       | 54,996        | 41,824        |
|  Property dividends payable                                                                                                                                      | 0             | 43,750        |
|  Notes payable to stockholder                                                                                                                                    | 18,521        | 6,638         |
|                                                                                                                                                                  | _____________ | _____________ |
|                                                                                                                                                                  | 1,389,653     | 1,764,973     |
|                                                                                                                                                                  | _____________ | _____________ |
| LONG-TERM LIABILITIES                                                                                                                                                 |          |          |
|  Deferred income taxes                                                                                                                                           | 0             | 0             |
|                                                                                                                                                                  | _____________ | _____________ |
|                                                                                                                                                                  | 1,389,653     | 1,764,973     |
| REDEEMABLE COMMON STOCK                                                                                                                                               |          |          |
| Common stock subject to rescission, 2,138,726 sharesoutstanding at December 31, 2001, and 2,767,823 sharesoutstanding at December 31, 2000, $.0001 par value pershare | 1,192,700     | 3,897,552     |
| Deferred consulting                                                                                                                                                   | 0             | (574,000)     |
|                                                                                                                                                                  | _____________ | _____________ |
|                                                                                                                                                                  | 1,192,700     | 3,323,552     |
|                                                                                                                                                                  | _____________ | _____________ |
| STOCKHOLDERS’ DEFICIT                                                                                                                                           |          |          |
| Common stock, $.0001 par value; Authorized:100,000,000 shares; Issued and outstanding: 23,848,108in 2001 and 13,920,985 in 2000                                       | 2,385         | 1,392         |
| Additional paid-in capital                                                                                                                                            | 35,642,817    | 30,286,687    |
| Accumulated deficit                                                                                                                                                   | (37,000,628)  | (34,502,160)  |
| Subscriptions receivable                                                                                                                                              | 165,750       | 933,514       |
| Deferred consulting                                                                                                                                                   | (1,163,149)   | (1,397,642)   |
|                                                                                                                                                                  | _____________ | _____________ |
|                                                                                                                                                                  | (2,352,825)   | (4,678,209)   |
|                                                                                                                                                                  | _____________ | _____________ |
| TOTAL LIABILITIES AND STOCKHOLDERS’DEFICIT                                                                                                                      | $229,528      | $410,316      |
|                                                                                                                                                                  | ===========   | ===========   |

The accompanying notes are an integral part of these statements.

| USURF AMERICA, INC. AND SUBSIDIARIES   |
|----------------------------------------|
| BATON ROUGE, LOUISIANA                 |
| CONSOLIDATED STATEMENTS OF OPERATIONS  |
| YEARS ENDED DECEMBER 31, 2001 AND 2000 |

|                                          | 2001                    | 2000                       |
|-----------------------------------------------|-------------------------|----------------------------|
|                                          | __________              | __________                 |
| REVENUES                                      |                    |                       |
|  Revenues                                | $7,446                  | $1,781,082                 |
|  Equipment sales                         | 0                       | 91,547                     |
| Internet access costs, cost of goods sold     | (11,999)                | (2,145,955)                |
| Inventory write-down                          | (97,526)                | 0                          |
|                                          | _____________           | _____________              |
| Gross profit (loss)                           | (102,079)

_________    | (273,326)

__________      |
| OPERATING EXPENSES                            |                    |                       |
|  Depreciation and amortization           | 70,105                  | 7,618,755                  |
|  Professional fees                       | 1,803,751               | 4,168,610                  |
|  Rent                                    | 28,528                  | 216,416                    |
|  Salaries and commissions                | 856,124                 | 2,060,528                  |
|  Advertising                             | 0                       | 24,583                     |
|  Other                                   | 93,602                  | 886,691                    |
|                                          | _____________           | _____________              |
|                                          | 2,852,110               | 14,975,583                 |
|                                          | _____________           | _____________              |
| LOSS FROM OPERATIONS                          | (2,954,189)

__________ | (15,248,909)

___________  |
| OTHER INCOME (EXPENSE)                        |                    |                       |
|  Other income                            | 0                       | 67,447                     |
|  Impairment loss                         | (31,118)                | (9,239,310)                |
|  Interest expense                        | (3,066)                 | (21,418)                   |
|                                          | _____________           | _____________              |
|                                          | (34,184)

__________    | (9,193,281)

___________   |
| LOSS BEFORE EXTRAORDINARY ITEMS               | (2,988,373)

__________ | (24,442,190)

____________ |
| EXTRAORDINARY ITEMS                           |                    |                       |
| Gain on debt forgiveness                      | 489,905                 | 0                          |
| Gain on rescission                            | 0                       | 961,436                    |
|                                          | _____________           | _____________              |
|                                          | 489,905                 | 961,436                    |
|                                          | _____________           | _____________              |
| LOSS BEFORE INCOME TAX                        | (2,498,468)             | (23,480,754)               |
| INCOME TAX BENEFIT                            | 0                       | 1,595,424                  |
|                                          | _____________           | _____________              |
| NET LOSS                                      | $(2,498,468)            | $(21,885,330)              |
|                                          | ===========             | ===========                |
| Net loss per common share                     | $(0.13)                 | $(1.68)                    |
|                                          | ===========             | ===========                |
| Weighted average number of shares outstanding | 18,616,434              | 13,000,391                 |
|                                          | ===========             | ===========                |

The accompanying notes are an integral part of these statements.

| USURF AMERICA, INC. AND SUBSIDIARIES                              |
|-------------------------------------------------------------------|
| BATON ROUGE, LOUISIANA                                            |
| CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT |
| YEARS ENDED DECEMBER 31, 2001 AND 2000                            |

|                                                 | Shares                | CommonStock     | Paid-inCapital        | AccumulatedDeficit | SubscriptionsReceivable | DeferredConsulting    | Total                 |
|------------------------------------------------------|-----------------------|-----------------|-----------------------|--------------------|-------------------------|-----------------------|-----------------------|
|                                                 | ___________           | ___________     | ___________           | ___________        | ___________             | ___________           | ___________           |
| Balance,12/31/99                                     | 12,786,116            | 1,279           | 28,918,638            | (12,616,830)       | (860)                   | (1,861,918)           | 14,440,309            |
| Issuance ofcommonstock forfutureservices             | 425,227               | 42              | 958,138               | 0                  | 0                       | (958,180)             | 0                     |
| Issuance ofcommonstock 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 ofstock peremploymentagreement              | 19,642                | 2               | 115,080               | 0                  | 0                       | 0                     | 115,082               |
| Expenses paidby issuance ofcommonstock               | 290,000               | 29              | 214,871               | 0                  | 0                       | 0                     | 214,900               |
| Conversion ofdebt to equity                          | 0                     | 0               | 0                     | 0                  | 969,374                 | 0                     | 969,374               |
| Amortizationof deferredconsulting                    | 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,12/31/2000                                   | 13,920,985            | 1,392           | 30,286,687            | (34,502,160)       | 933,514                 | (1,397,642)           | (4,678,209)           |
| Plus: sharessubject torescission                     | 2,767,826

__________ | 277

__________ | 3,897,275

__________ | 0

__________      | 0

__________           | (574,000)

__________ | 3,323,552

__________ |
| Balance,12/31/2000                                   | 16,688,811            | 1,669           | 34,183,962            | (34,502,160)       | 933,514                 | (1,971,642)           | (1,354,657)           |
| Issuance ofcommonstock forfutureservices             | 2,005,000             | 201             | 365,049               | 0                  | 0                       | (365,250)             | 0                     |
| Professionalfees paid byissuance ofcommonstock       | 1,534,500             | 154             | 526,956               | 0                  | 0                       | 0                     | 527,110               |
| Compensa-tion paid/pay-able byissuance ofcommonstock | 819,361               | 82              | 180,865               | 0                  | 96,000                  | 0                     | 276,947               |
| Issuance ofcommonstock for cash                      | 2,500,000             | 250             | 340,000               | 0                  | 0                       | 0                     | 340,250               |
| Stockissuance costs                                  | 0                     | 0               | (19,200)              | 0                  | 0                       | 0                     | (19,200)              |
| Exercise ofwarrants                                  | 100,000               | 10              | 14,990                | 0                  | (15,000)                | 0                     | 0                     |
| Stock issuedfor debtconversion                       | 774,162               | 77              | 943,437               | 0                  | (943,514)               | 0                     | 0                     |
| Issuance ofsubscriptionagreement                     | 1,545,000             | 154             | 291,846               | 0                  | (292,000)               | 0                     | 0                     |
| Subscriptionagreement forstock bonus                 | 0                     | 0               | 0                     | 0                  | 27,000                  | 0                     | 27,000                |
| Proceeds onsubscriptionreceivable                    | 0                     | 0               | 0                     | 0                  | 359,750                 | 0                     | 359,750               |
| Issuance ofcommonstock forsettlement                 | 20,000                | 2               | 7,398                 | 0                  | 0                       | 0                     | 7,400                 |
| Amortizationof deferredconsulting                    | 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 atDecember 31,2001                           | 25,986,834            | $2,599          | $36,835,303           | $(37,000,628)      | $165,750                | (1,163,149)           | $(1,160,125)          |
| Less: sharessubject torescission                     | (2,138,726)           | (214)           | (1,192,486)           |               |                    |                  | (1,192,700)           |
|                                                 | ___________           | ___________     | ___________           | ___________        | ___________             | ___________           | ___________           |
|                                                 | 23,848,108            | $2,385          | $35,642,817           | $(37,000,628)      | $165,750                | $(1,163,149)          | $(2,352,825)          |
|                                                 | ==========            | ==========      | ==========            | ==========         | ==========              | ==========            | ==========            |

The accompanying notes are an integral part of these statements.

| USURF AMERICA, INC. AND SUBSIDIARIES   |
|----------------------------------------|
| BATON ROUGE, LOUISIANA                 |
| CONSOLIDATED STATEMENTS OF CASH FLOWS  |
| YEARS ENDED DECEMBER 31, 2001 AND 2000 |

|                                                                      | 2001          | 2000          |
|---------------------------------------------------------------------------|---------------|---------------|
|                                                                      | __________    | __________    |
| CASH FLOWS FROM OPERATING ACTIVITIES                                      |          |          |
| __________________________________________                                |          |          |
| Net loss                                                                  | $(2,498,468)  | $(21,885,330) |
| Adjustments to reconcile net loss to net cash used inoperating activities |          |          |
|  Depreciation and amortization                                       | 70,105        | 7,618,755     |
|  Consulting fees paid with stock                                     | 1,623,903     | 3,000,276     |
|  Litigation settlement                                               | 7,400         | 214,900       |
|  Gain on rescission                                                  | 0             | (961,436)     |
|  Impairment loss and write down of assets                            | 128,644       | 10,577,878    |
|  Legal fees paid with stock                                          | 66,000        | 281,498       |
|  Compensation expense paid with stock                                | 303,947       | 774,066       |
|  Deferred income taxes                                               | 0             | (1,595,423)   |
|  Gain on debt forgiveness                                            | (489,905)     | 0             |
| Changes in operating assets and liabilities                               |          |          |
|  Accounts receivable                                                 | 0             | 59,098        |
|  Inventory                                                           | 1,398         | 71,000        |
|  Prepaid expenses and other current assets                           | 0             | 5,500         |
|  Accounts payable                                                    | (41,481)      | 1,108,365     |
|  Accrued payroll                                                     | 107,716       | 40,105        |
|  Other current liabilities                                           | 13,172        | (174,826)     |
|  Deferred revenue                                                    | 0             | (87,538)      |
|                                                                      | _____________ | _____________ |
| Net cash used in operating activities                                     | (707,569)     | (953,112)     |
|                                                                      | _____________ | _____________ |
| CASH FLOWS FROM INVESTING ACTIVITIES                                      |          |          |
| __________________________________________                                |          |          |
| Proceeds on disposal of fixed assets                                      | $0            | $40,050       |
| Capital expenditures                                                      | (12,681)      | (125,200)     |
|                                                                      | _____________ | _____________ |
| Net cash used in investing activities                                     | (12,681)      | (85,150)      |
|                                                                      | _____________ | _____________ |
| CASH FLOWS FROM FINANCING ACTIVITIES                                      |          |          |
| __________________________________________                                |          |          |
| Payments on notes payable                                                 | $0            | $(5,910)      |
| Disbursements in excess of cash balances                                  | 15,539        | 42,469        |
| Payments on notes payable - stockholder                                   | 0             | (11,093)      |
| Payments on subscriptions receivable                                      | 359,750       | 0             |
| Proceeds from note payable - stockholder                                  | 11,883        | 568,571       |
| Issuance of common stock for cash                                         | 340,000       | 370,000       |
| Fee for stock issuances                                                   | (8,000)       | 0             |
|                                                                      | _____________ | _____________ |
| Net cash provided by financing activities                                 | 719,172       | 964,037       |
|                                                                      | _____________ | _____________ |
| Net decrease in cash and cash equivalents                                 | (1,078)       | (74,225)      |
| Cash and cash equivalents, Beginning of period                            | 1,088         | 75,313        |
| Cash and cash equivalents, End of period                                  | $10           | 1,088         |
|                                                                      | ===========   | ===========   |

The accompanying notes are an integral part of these statements.

| USURF AMERICA, INC. AND SUBSIDIARIES       |
|--------------------------------------------|
| BATON ROUGE, LOUISIANA                     |
|                                       |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Principles of Consolidation

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

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 of contingentassets and liabilities at the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period.  Actual results could differ from those estimates.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months orless from the date of purchase to be cash equivalents.

Inventory

Inventories are stated at the lower of cost or market, and represents modems purchased fromsuppliers.  During 2001, the Company determined that certain items of its inventory had becomeimpaired and recorded a write-down of its inventory in the approximate amount of $98,000.

Property and Equipment

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

Revenue Recognition

Until September 2000, the Company maintained license agreements with affiliate ISP’s toprovide internet access to affiliates’ customers. License fees were typically billed in the monththe services were provided. The Company charges direct customers (residential and businesssubscribers) monthly access fees to the internet and recognizes the revenue in the month theaccess is provided.  The Company has contracted with a reseller in Del Rio, Texas, with respectto the marketing of its wireless Internet access service.  This reseller is paid, from the grossreceipts of the Company, a monthly per-customer commission.

Costs of Access Revenues

For 2000, costs of access revenues primarily consist of telecommunications expenses inherent inthe network infrastructure.  Costs of access expenses also include fees paid for lease of theCompany’s backbone, as well as license fees for Web browser software based on a per-usercharge, other license fees paid to third-party software vendors, product costs, and contractor feesfor distribution of software to new subscribers.

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 deductible amounts inthe future based on enacted tax laws and rates applicable to the period in which the differencesare expected to affect taxable income. Valuation allowances are established when realization isless than 50% probable. Income tax expense is the tax payable or refundable for the periodadjusted for the change during the period in deferred tax assets and liabilities.

Financial Instruments and Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk,consist principally of cash.  The Company maintains its cash in bank deposit accounts, which, attimes, may exceed federally insured limits.  The Company has not experienced any losses in suchaccounts 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-termmaturities of these instruments. The difference between the carrying amount and fair value of theCompany’s rescission shares is not significant (see Note 18).

Loss Per Common Share

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

Goodwill and Other Intangible Assets

On January 29, 1999, the Company acquired all the stock of CyberHighway, Inc., a Boise, Idaho-based ISP, by issuing 2,000,000 shares of stock valued at approximately $15,940,000.  Inaddition, 325,000 shares of common stock were issued in payment of a finder's fee arising out ofthis acquisition. This acquisition was accounted for as a purchase business combination.  SeeNote 13.

During 1999, the Company acquired two private companies and certain assets of two otherprivate companies.  In these acquisitions, the Company issued a total of 306,000 shares with anassigned approximate value of $1,195,000.  During 2000, the Company acquired two privatecompanies.  In these acquisitions, the Company issued a total of 131,063 shares with an assignedapproximate value of $762,000.  All of these acquisitions were accounted for as purchasebusiness combinations.  None of these acquired companies had significant operations at the timethey were acquired by the Company.  Therefore, proforma disclosure of what operations wouldhave been as if the transactions had occurred at the beginning of the period are not shown, due tothe transactions’ being immaterial to the financial statements taken as a whole.

Goodwill and other intangible assets, primarily acquired customer bases, were stated on the basisof cost and were amortized, principally on a straight-line basis, over the estimated future periodsto be benefitted (generally 3 years).  Goodwill and other intangible assets were reviewed forimpairment to ensure they were appropriately valued.  A change in the operations of a subsidiaryin 2000 indicated the existence of an impairment issue.

Due to the demise of the dial-up Internet access business of the CyberHighway subsidiary,associated goodwill and other intangibles were impaired at December 31, 2000, and wereexpensed in the amounts of $4,425,037 and $4,814,272 (net of deferred taxes of $2,531,497),respectively.

Advertising

The Company expenses advertising costs as incurred.  During the year ended December 31,2000, the Company incurred approximately $25,000 in advertising costs.

Investments

Effective December 31, 1996, the Company acquired all of the outstanding common stock ofWinter Entertainment, Inc., a Delaware corporation (WEI), and Missouri Cable TV Corp., aLouisiana corporation (MCTV).  Effective October 8, 1998, the Company formed Santa FeWireless Internet, Inc. (Santa Fe), a New Mexico corporation, to hold the assets acquired fromDesert Rain Internet Services.  Santa Fe was organized to provide wireless internet access.  Theacquisition of WEI and MCTV by the Company was accounted for as a reorganization ofcompanies under common control.  The assets and liabilities acquired were recorded at historicalcost in a manner similar to a pooling of interests.  The acquisition of Desert Rain was accountedfor as a purchase whereby cost is allocated to the assets acquired.

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 total amount of$24,279.  This impairment was caused by the uncertainty of the value of these non-publiccompanies.  The Company has ceased efforts to develop its wireless cable and low powertelevision businesses and the values of all of the assets associated with them have been written-down.

Stock for Services

The Company has issued stock pursuant to various consulting agreements. Deferred consultingcosts, which are valued at the stock price on the date of the agreements, are recorded as areduction of stockholders' equity and will be amortized over the respective lives of theagreements.

2. NET 1, INC. ACQUISITION

In October 2000, the prior acquisition of Net 1, Inc. was rescinded.  Included in the terms of thesettlement agreement was the return of the 250,000 shares of the Company’s common stockissued in the original transaction to the Company. The Company then issued 250,000 shares ofstock in settlement of the arbitration.  The agreement also called for one of the former owners toassume a $50,000 liability, that was recorded by USURF upon the acquisition.  The total gain onthe rescission of the transaction was approximately $960,000. 

3. PROPERTY AND EQUIPMENT

Classifications of property and equipment and accumulated depreciation were as follows atDecember 31, 2001 and 2000:

|                              | 2001          | 2000          |   |
|-----------------------------------|---------------|---------------|--------|
|                              | _____________ | _____________ |   |
| Furniture, fixtures and equipment | 203,141       | 138,954       |   |
|                              | ____________  | ____________  |   |
| Accumulated depreciation          | (125,036)     | (69,476)      |   |
|                              | ____________  | ____________  |   |
| Property and equipment, net       | $78,105       | $69,478       |   |
|                              | ===========   | ===========   |   |

4. INTANGIBLES

Classification of intangibles and accumulated amortization at December 31st were as follows:

|                     | 2001          | 2000          |   |
|--------------------------|---------------|---------------|--------|
|                     | _____________ | _____________ |   |
| Website                  | 25,000        | 25,000        |   |
| Accumulated amortization | (8,333)       | 0             |   |
|                     | ____________  | ____________  |   |
|                     | $16,667       | $25,000       |   |
|                     | ===========   | ===========   |   |

5. WIRELESS CABLE ASSETS

Property and equipment includes wireless cable station equipment.  The equipment wasdetermined to be impaired at December 31, 2000 and its cost of approximately $188,000 waswritten off.  In addition, the Company owns licenses in the wireless cable markets, which operateon the same frequencies and are able to be used in the wireless Internet market.

6. LICENSES AND RIGHTS TO LEASES OF LICENSES

The Company owns licenses or rights to leases of licenses in the following wireless cable andcommunity 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.

7. NOTE PAYABLE TO STOCKHOLDER

|                                                                           | 2001         | 2000         |   |
|--------------------------------------------------------------------------------|--------------|--------------|--------|
|                                                                           | ____________ | ____________ |   |
| Note payable to stockholder, interestaccrues at 8%, due on demand andunsecured | $18,521      | $ 6,638      |   |
|                                                                           | ===========  | ===========  |   |

8. LOAN CONVERSION - STOCKHOLDER

As of August 21, 2000, the Company owed its president a total of $967,703 ($916,045 inprincipal, $51,658 in interest), the result of cash loans made to the Company by this officerduring the previous approximately two years.  On August 21, 2000, the Company entered into aletter of agreement with this officer, whereby this officer agreed to convert all sums owed to himinto shares of Company common stock.

Pursuant to the letter agreement, this officer received one share of common stock for every $1.25of debt converted, for a total of 774,162 shares.  The $1.25 price was agreed upon as that pricewas the low price for the Company's common stock on Friday, August 18, 2000, as reported bythe American Stock Exchange.  The Company's board of directors, in authorizing the transactiondescribed above, found the transaction to be in the best interest of USURF America.  Theissuance of shares was not complete until the first quarter of 2001, therefore, the substance of thistransaction was reflected as stock subscription, as of December 31, 2000, in the accompanyingfinancial statements.

9. INCOME TAXES

The significant components of deferred tax assets and liabilities were as follows at December31st:

|                                   | 2001         | 2000         |   |
|----------------------------------------|--------------|--------------|--------|
|                                   | ____________ | ____________ |   |
| Deferred tax assets                    |         |         |   |
|  Net operating loss carryforwards | $4,589,067   | $3,739,588   |   |
|  Less - valuation allowance       | (4,589,067)  | (3,739,588)  |   |
|                                   | ____________ | ____________ |   |
|                                   | $0           | $0           |   |
|                                   | ===========  | ===========  |   |

The net change in the valuation allowance for the periods ended December 31, 2001 and 2000,was $849,479 and $1,426,429, respectively.

The Company has a net operating loss carry forward available to offset future income for incometax reporting purposes, which will begin to expire between 2011.

10. SOURCES OF SUPPLIES

The Company relies on local telephone companies and other companies to provide datacommunications.  Although management believes alternative telecommunications facilities couldbe found in a timely manner, any disruption of these services could have an adverse effect onoperating results.

During 2000, the Company purchased all of its network radios from one supplier.  Currently, theCompany is able to purchase modem components from numerous suppliers and assembles itsmodems in its Baton Rouge, Louisiana, facility.

11. STOCK COMPENSATION

In December 2000, a total of 500,000 shares of common stock were issued to two officers asbonuses for their services as officers.  Compensation expense of approximately $125,000 wasrecorded based on the fair value of the common stock on the date of issue.

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

In December 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 fair valueof the common stock on the date of issue.  These shares were authorized in 2001 and were issuedin 2002.

12. WARRANTS

During 2001, the Company issued warrants to purchase 4,124,250 shares of common stock atvarious share prices.  Warrants outstanding at December 31, 2001, consist of the following:

|   | Number of Warrants | Exercise Price   | Expiration Date  |   |
|--------|--------------------|------------------|------------------|--------|
|   | ________________   | ________________ | ________________ |   |
|   | 56,667             | $1.25            | May 2003         |   |
|   | 56,667             | $1.50            | May 2003         |   |
|   | 12,143             | $1.25            | May 2004         |   |
|   | 60,000             | $7.00            | May 2002         |   |
|   | 35,000             | $7.00            | May 2002         |   |
|   | 60,000             | $3.50            | December 2004    |   |
|   | 50,000             | $6.00            | September 2002   |   |
|   | 65,000             | $7.50            | March 2002       |   |
|   | 380,000            | $.20             | December 2003    |   |
|   | 840,000            | $.15             | February 2004    |   |
|   | 336,000            | $.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         |   |
|   | 287,000            | $.20             | June 2004        |   |
|   | 577,500            | $.20             | December 2004    |   |
|   | 577,500            | $.30             | December 2004    |   |
|   | ____________       |             |             |   |
| Total  | 4,899,727          |             |             |   |
|   | ===========        |             |             |   |

13. CONTINGENCIES

Involuntary Bankruptcy

On September 29, 2000, three creditors of CyberHighway filed an involuntary petition in theIdaho Federal Bankruptcy Court, styled In Re:CyberHighway, Inc..  In December 2000,CyberHighway and the petitioning creditors filed a joint motion to dismiss this proceeding.However, some of CyberHighway’s creditors objected to the joint motion to dismiss and themotion failed.  (See Note 14).

Subsequent to the involuntary bankruptcy, CyberHighway lost all of its customers.  Due to thisloss of customer base, the Company's intangible assets relating to those customers becameworthless.  The write-off of the intangible assets reflected in the Company's December 31, 2000,statement of operations was $4,814,272 (net of deferred taxes).  Due to this change in operatingenvironment, the Company's revenues decreased substantially as well as a decrease in expensesassociated with the elimination of personnel previously required to operate the Company'snetwork operations center, and accordingly goodwill was impaired.  The write-down of goodwillreflected in the Company's December 31, 2000, statement of operations was $4,425,037.

Potential Delisting from the American Stock Exchange

The Company is not in compliance with the continued listing guidelines of AMEX.  TheCompany was in contact with AMEX during 2001 and has not received any additionalcommunication in 2002.  Should the common stock be delisted from AMEX, it is likely to have adetrimental effect on the Company's ability to raise additional capital, which is critical to theCompany to continue as a going concern (see Note 16).  In addition, if the common stock isdelisted from AMEX, the Company would be in default under a financing agreement (see Note17) and would be unable to obtain future funding under that agreement.

14. 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’s balancesheet.  At December 31, 2001, the Company’s balance sheet included $953,561 in “permittedclaims” against CyberHighway, the total claims submitted by creditors of CyberHighway during2001, including the statutory notification period.  This notification period began on December 6,2001, and ended on March 6, 2002.  A substantial amount of the claims were submitted byDecember 31, 2001; therefore, a reduction in the liabilities at that date was deemed appropriate.The $489,905 reduction in CyberHighway’s liabilities is reflected in the Company’s consolidatedstatements of operations as an extraordinary item.

15. SEGMENT DISCLOSURE

The Company adopted SFAS No. 131 “Disclosures about Segments of an Enterprise and RelatedInformation,” during the fourth quarter of 2000.  SFAS No. 131 established standards forreporting information about operating segments in annual financial statements and requiresselected information about operating segments in interim financial reports issued to stockholders.It also established standards for related disclosures about products and services and geographicareas.  Operating segments are defined as components of an enterprise about which separatefinancial information is available that is evaluated regularly by chief operating decision makersor decision making groups, in deciding how to allocate resources and in assessing performance.The Company considers internet service providing and wireless internet service providing to be asimilar industry; as such, there are no individual segments that are required to be reportedpursuant to SFAS 131.

16. GOING CONCERN

These financial statements are presented on the basis that the Company is a going concern.Going concern contemplates the realization of assets and the satisfaction of liabilities in thenormal course of business over a reasonable length of time.  The accompanying financialstatement shows that current liabilities exceed current assets by approximately $1.25 million atDecember 31, 2001.  The Company’s president loaned the Company approximately $12,000during fiscal 2001. The appropriateness of using the going concern basis is dependent uponobtaining additional financing or equity capital and, ultimately, to achieve profitable operations.The uncertainty about these conditions raises substantial doubt about its ability to continue as agoing concern. The financial statements do not include any adjustments that might result fromthe outcome of this uncertainty.

Management plans to raise capital by obtaining financing and eventually, through publicofferings. Management intends to use the proceeds from any borrowings to acquire and developmarkets to implement its Wireless Internet Access System and sell its service.  The Companybelieves that these actions will enable it to carry out its business plan and ultimately to achieveprofitable operations.  (See Note 19).

17. FINANCING TRANSACTION

On May 9, 2001, the Company signed an amended and restated common stock purchaseagreement with an unrelated company to sell up to 6,000,000 shares of common stock for up to$10,000,000.  The purchase price of the shares under this purchase agreement varies, based onmarket prices of the Company's common stock.  The purchase agreement calls for the Companyto meet certain requirements and maintain certain criteria with respect to its common stock inorder to avoid an event of default.  Upon the occurrence of the event of default the buyer is nolonger obligated to purchase any additional shares of common stock.  The registration statementfiled with respect to this financing transaction became effective on June 29, 2001.  Thecommencement date of the purchase agreement was July 10, 2001. $340,000 in proceeds underthe purchase agreement was received by the Company during 2001.  At December 31, 2001, theCompany had advanced 1,321,200 shares in consideration of the buyer’s advance of $80,176, inexpectation that a settlement will take place in the near future.  The purchase agreement remainsin effect.

18.  POTENTIAL RESCISSION CLAIMS

From January 2000 through June 2001, a total of 4,906,549 shares of the common stock of theCompany may have been issued in violation of Section 5 of the Securities Act of 1933, asamended.  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 or had, as the case maybe, a potential claim for rescission of their respective issuance transactions.

At December 31, 2000, 2,767,823 of these shares have been reflected under the redeemable stockcaption on the accompanying balance sheet with an assigned value of $3,897,552.

At December 31, 2001, 2,138,726 of these shares have been reflected under the redeemable stockcaption on the accompanying balance sheet with an assigned value of $1,192,700.

The diminishing number of shares subject to potential rescission claims was caused either by theexpiration of the respective statute of limitations periods or by the transfer of the subject sharesby the original issuees.

The Company believes that it is unlikely that any of the remaining potential rescission claimswill be asserted against the Company.

19. SUBSEQUENT EVENTS

The following events occurred subsequent to December 31, 2001:

In January 2002, the Company issued 120,000 shares of its common stock under a one-yearconsulting agreement with the third party with which the Company entered into the amended andrestated common stock purchase agreement described in Note 17.

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

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

Significant Equity Purchase

In April 2002, the Company entered into a securities purchase agreement with a third party,whereby the Company is to issue 3,125,000 units of its securities, each unit consisting of oneshares of common stock, one common stock purchase warrant to purchase one share at anexercise price of $.15 per share and one common stock purchase warrant to purchase one share atan exercise price of $.30 per share, for cash in the amount of $250,000 payable in two equalincrements at the initial closing and 60 days thereafter.  Also pursuant to this agreement, theCompany will hire a new president and chief executive officer, who will become a director of theCompany, and, as a signing bonus, issue him 2,000,000 shares of common stock; the currentpresident will become Chairman of the Board, reduce the term of his remaining term ofemployment from approximately four years to six months, waive the payment of all accrued andunpaid salary and waive the repayment of all loans made by him to the Company, inconsideration of 2,000,000 shares of common stock being issued to him; two of the Company’svice presidents will reduce the terms of their remaining terms of employment fromapproximately four years to six months and one year to six months, respectively, and waive thepayment of all accrued and unpaid salary, in consideration of 2,000,000 shares of common stockbeing issued to each of them; and the other vice president of the Company will terminate hisemployment with the Company.