Form 10-QSB

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2002

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from to
--------- ---------

Commission File No. 1-15383

USURF America, Inc.
(Exact Name of Small Business Issuer as Specified in its Charter)

NEVADA 91-2117796
(State or Other Jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)

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)

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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:

Class Outstanding as of 5-17-02
------------------------ -------------------------
Common Stock, $.0001 par 43,731,870
value

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

USURF America, Inc.

Page
----
Consolidated Balance Sheets as of March 31, 2002 3
(unaudited), and December 31, 2001
Consolidated Statements of Operations for the Three 6
Months Ended March 31, 2002 and 2001 (unaudited)
Consolidated Statements of Cash Flows for the Three 8
Months Ended March 31, 2002 and 2001 (unaudited)
Notes to Consolidated Statements 11

USURF AMERICA, INC. AND SUBSIDIARIES
BATON ROUGE, LOUISIANA
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001, AND MARCH 31, 2002 (UNAUDITED)

ASSETS

3/31/02 12/31/01
(unaudited) (audited)
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 284 $ 10
Inventory 133,500 134,746
---------- ----------
133,784 134,756
---------- ----------
PROPERTY AND EQUIPMENT
Cost 204,387 203,141
Less: accumulated depreciation (129,986) (125,036)
---------- ----------
74,401 78,105
---------- ----------
OTHER ASSETS 14,583 16,667
---------- ----------
TOTAL ASSETS $ 222,768 $ 229,528
========== ==========

The accompanying notes are an integral part of these statements.

LIABILITIES AND STOCKHOLDERS' DEFICIT

3/31/02 12/31/01
(unaudited) (audited)
------------ ------------

CURRENT LIABILITIES
Disbursements in excess of cash balances $ 0 $ 15,539
Accounts payable 1,042,150 1,034,619
Accrued payroll 272,820 265,978
Other current liabilities 59,396 54,996
Notes payable to stockholder 0 18,521
------------ ------------
1,374,366 1,389,653
------------ ------------
LONG-TERM LIABILITIES 0 0
------------ ------------
1,374,366 1,389,653
REDEEMABLE COMMON STOCK
Common stock subject to rescission, 2,138,726 shares outstanding 220,998 1,192,700
at December 31, 2001, and 524,564 shares outstanding at March 31,
2002, $.0001 par value per share
------------ ------------
220,998 1,192,700
------------ ------------

STOCKHOLDERS' DEFICIT
Common stock, $.0001 par value; Authorized: 100,000,000 shares; 2,892 2,385
Issued and outstanding: 23,848,108 at December 31, 2001, and
28,919,306 at March 31, 2002
Additional paid-in capital 37,030,408 35,642,817
Accumulated deficit (37,608,585) (37,000,628)
Subscriptions receivable 166,500 165,750
Deferred consulting (963,811) (1,163,149)
------------ ------------
(1,372,596) (2,352,825)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 222,768 $ 229,528
============ ============

The accompanying notes are an integral part of these statements.

USURF AMERICA, INC. AND SUBSIDIARIES
BATON ROUGE, LOUISIANA
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2002 AND 2001

Three Months Ended March 31,

2002 2001
(unaudited) (unaudited)
----------- -----------
REVENUES
Revenues $ 4,626 $ 384
Internet access costs, cost of goods sold (8,482) 0
----------- -----------
Gross profit (loss) (3,856) 384
----------- -----------
OPERATING EXPENSES
Depreciation and amortization 7,033 11,580
Professional fees 270,147 707,288
Rent 7,681 5,361
Salaries and commissions 242,314 160,746
Advertising 62,000 0
Other 14,743 16,668
----------- -----------
603,918 901,643
----------- -----------
LOSS FROM OPERATIONS (607,774) (901,259)
----------- -----------

OTHER INCOME (EXPENSE)
Interest expense 183 0
------------ ------------
183 0
------------ ------------
LOSS BEFORE EXTRAORDINARY ITEMS (607,957) (901,259)
------------ ------------
LOSS BEFORE INCOME TAX (607,957) (901,259)
INCOME TAX BENEFIT 0 0
------------ ------------
NET LOSS $ (607,957) $ (901,259)
============ ============
Net loss per common share $ (0.02) $ (0.05)
============ ============
Weighted average number of shares outstanding 25,503,752 18,208,215
============ ============

The accompanying notes are an integral part of these statements.

USURF AMERICA, INC. AND SUBSIDIARIES
BATON ROUGE, LOUISIANA
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2002 AND 2001

Three Months Ended March 31,

2002 2001
(unaudited) (unaudited)
----------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES

- ---------------------------
Net loss $ (607,957) $ (901,259)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation and amortization 7,033 11,580
Consulting fees paid with stock 247,663 670,400
Legal fees paid with stock 6,000 0
Compensation expense paid with stock 163,146 0
Advertising expense paid with stock 62,000 0
Compensation expense 0 3,300
Changes in operating assets and liabilities
Accounts receivable 0 (384)
Inventory 0 0
Accounts payable (8,032) 1,786
Accrued payroll 6,842 41,893
Other current liabilities 0 10,000
----------- -----------
Net cash used in operating activities (123,305) (162,684)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
- ---------------------------
Proceeds on disposal of fixed assets $ 0 $ 0

Capital expenditures 0 0
--------- ---------
Net cash used in investing activities 0 0
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES

- ---------------------------
Payments on notes payable $ 0 $ 0
Disbursements in excess of cash balances 0 0
Payments on notes payable - stockholder (18,521) 0
Payments on subscriptions receivable 70,000 261,000
Proceeds from note payable - stockholder 0 26,090
Issuance of common stock for cash 64,000 0
Warrants exercised 13,000 0
Fee for stock issuances (4,900) 0
--------- ---------
Net cash provided by financing activities 123,579 287,090
--------- ---------
Net increase in cash and cash equivalents 274 124,406
Cash and cash equivalents, Beginning of period 10 1,088
Cash and cash equivalents, End of period $ 284 $ 125,494
========= =========

The accompanying notes are an integral part of these statements.

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND OTHER CASH FLOW INFORMATION

Three Months March 31, 2002:

- - In January 2002, the Company entered into a one-year consulting agreement, by
issuing 120,000 shares of stock valued at $10,800.

- - In February 2002, the Company issued 300,000 under a four month consulting
agreement, which shares of stock were valued at $30,000.

- - In March 2002, the Company entered into a one-month consulting agreement, by
issuing 75,000 shares of stock valued at $7,500.

- - In March 2002, the Company issued 75,000 shares in payment of legal services,
which shares of stock were valued at $6,000.

Three Months March 31, 2001:

- - In January 2001, the Company entered into a one-year consulting agreement, by
issuing 200,000 shares of stock valued at $62,000.

- - In January 2001, the Company issued 800,000 shares of stock valued at
$248,000, in payment of a commitment fee under a common stock purchase
agreement.

- - In January 2001, 774,162 shares were issued to the Company's president,
pursuant to a debt conversion agreement, which shares were not issued in 2000,
due to an administrative error.

USURF AMERICA, INC. AND SUBSIDIARIES
BATON ROUGE, LOUISIANA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2002
(Unaudited)

Note 1. Nature of Business, Organization and Basis of Presentation

Basis of Presentation

USURF America, Inc. (the "Company"), formerly Internet Media Corporation, was
incorporated as Media Entertainment, Inc. in the State of Nevada on November 1,
1996. The Company currently 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 all wholly owned subsidiaries. Inter-company transactions and balances
have been eliminated in the consolidation.

Loss Per Common Share

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

Note 2. Interim Consolidated Financial Statements

In the opinion of management, the accompanying consolidated financial statements
for the three months ended March 31, 2002 and 2001, reflect all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the financial condition, results of operations and cash flows of USURF,
including subsidiaries, and include the accounts of USURF and all of its
subsidiaries. All material inter-company transactions and balances are
eliminated.

The financial statements included herein have been prepared by USURF, without
audit, pursuant to the rules and regulations of the SEC. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with U.S. generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. It is suggested
that these unaudited financial statements be read in conjunction with the
financial statements and notes thereto included in USURF's Annual Report on Form
10-KSB for the year ended December 31, 2001, as filed with the SEC. Certain
reclassifications and adjustments may have been made to the financial statements
for the comparative period of the prior fiscal year to conform with the 2001
presentation. The results of operations for the interim periods are not
necessarily indicative of the results to be obtained for the entire year.

Note 3. Notes Payable to Shareholder

March 31, 2002 December 31, 2001
(unaudited)
----------------- -----------------
Notes payable to majority $0 $18,521
stockholder, interest accrues at 8%,
due on demand and unsecured

Note 4. Stock and Warrant Issuances

During the three months ended March 31, 2002, the Company issued (or became
obligated to issue) shares of common stock and common stock purchase warrants,
as follows:

- 486,500 shares as finder's fees.

- 570,000 shares in payment of consulting fees.

- 1,519,000 warrants (200,000 warrants, exercise price $.049 per share;
560,000 warrants, exercise price $.10 per share; 666,000 warrants,
exercise price of $.20 per share; 93,000 warrants, exercise price of
$.30 per share) were issued in payment of consulting fees.

Note 5. Contingencies

A. Bankruptcy

On September 29, 2000, three creditors of CyberHighway filed an
involuntary petition in the Idaho 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 the motion failed.

Subsequent to the involuntary bankruptcy, CyberHighway lost all of its
customers. Due to this loss of customer base, the Company's intangible
assets relating to those customers became worthless and were written
off in 2000. Due to this change in operating environment, goodwill was
impaired and, consequently, the goodwill associated with these
operations was written off in the 2000 statement of operations.

B. Potential Rescission Claims

From January 2000 through June 2001, a total of 4,906,549 shares of
the common stock of the Company may have been issued in violation of
Section 5 of the Securities Act of 1933, as amended. The aggregate
value assigned to these shares upon their issuance totaled $5,090,252.
For a period of one year from issuance, the issuees of these shares
have or had, as the case may be, a potential claim for rescission of
their respective issuance transactions.

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

At March 31, 2002, 524,564 of these shares have been reflected under
the redeemable stock caption on the accompanying balance sheet with an
assigned value of $220,998

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

The Company believes that it is unlikely that any of these potential
rescission claims will be asserted against the Company.

Note 6. Financing Transaction

On May 9, 2001, the Company signed an amended and restated common stock purchase
agreement 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 on market prices of the Company's common stock.
The purchase agreement calls for the Company to meet certain requirements and
maintain certain criteria with respect to its common stock in order to avoid an
event of default. Upon the occurrence of the event of default, the buyer is no
longer obligated to purchase any additional shares of common stock. The
registration statement filed with respect to this financing transaction became
effective on June 29, 2001. The commencement date of the purchase agreement was
July 10, 2001. To date, the Company has received approximately $395,000 in
proceeds under the purchase agreement, approximately $55,000 of which was
received by the Company during the first three months of 2002. The purchase
agreement remains in effect.

Note 7. Stock Ownership Plan

In March 2002, the Company adopted a 2002 Stock Ownership Plan for employees and
consultants, 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 a third party, under which agreement the Company granted the
consultant options, under its 2002 Stock Ownership Plan, to purchase up to
$600,000 of its common stock, up to $50,000 per month for ten years, the per
share exercise price being based on future market prices, with a 38.75% discount
to the market price on the date of exercise. In March and April 2002, the
consultant exercised options to purchase $98,000 of Company common stock.
2,000,000 shares of common stock were issued pursuant to this option exercise.

Note 8. Subsequent Events

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 one share of common stock, one common stock purchase
warrant to purchase one share at an exercise price of $.15 per share and one
common stock purchase warrant to purchase one share at an exercise price of $.30
per share, for cash in the amount of $250,000 payable in two equal increments at
the initial closing (held April 15, 2002) and June 14, 2002. Also pursuant to
this agreement, the Company hired a new president and chief executive officer,
who became a director of the Company, and, as a signing bonus, issued him
3,000,000 shares of common stock; the current president became Chairman of the
Board, reduced the term of his remaining term of employment from approximately
four years to six months, waived the payment of all accrued and unpaid salary
and waived the repayment of all loans made by him to the Company, in
consideration of 2,000,000 shares of common stock being issued to him; two of
the Company's vice presidents reduced the terms of their remaining terms of
employment from approximately four years to six months and one year to six
months, respectively, and waived the payment of all accrued and unpaid salary,
in consideration of 2,000,000 shares of common stock being issued to each of
them; and the other vice president of the Company terminated his employment with
the Company.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

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) television industries. 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 wireless cable frequencies, we
believe our frequencies possess future value. However, these frequencies will
not be of value to us, unless and until the FCC approves two-way communications
on them.

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

Current Overview

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

Our new president has expanded the scope of our original Quick-Cell
business plan, which called for the construction of Quick-Cell systems in small
and medium-sized cities. In addition to our original plan, we are now attempting
to develop working partnerships with companies who need to create or extend
broadband Internet connectivity for their customers, employees and partners. The
companies with which we seek to do business operate in the following market
segments, among others: hospitality, education, aviation, multiple dwelling
unit, planned community development, independent local exchange, utility and
municipality.

On April 15, 2002, we consummated a securities purchase agreement with
Evergreen Venture Partners, LLC. Under this agreement, we are to issue a total
of 3,125,000 units of our securities for cash in the amount of $250,000, payable
in two equal increments: on April 15, 2002, and June 14, 2002. Each unit sold to
Evergreen consists of one share of our common stock, one common stock purchase
warrant to purchase one share at an exercise price of $.15 per share and one
common stock purchase warrant to purchase one share at an exercise price of $.30
per share. Also pursuant to this agreement, we hired a new president and chief
executive officer, Douglas O. McKinnon, who also became a director, and who
received, as a signing bonus, 3,000,000 shares of our common stock; David M.
Lofin, our former president, became our Chairman of the Board, reduced the term
of his remaining term of employment from approximately 4 years to six months,
waived the payment of all accrued and unpaid salary and waived the repayment of
all loans made by him to us, in consideration of 2,000,000 shares of our common
stock; two of our vice presidents reduced the terms of their remaining terms of
employment from approximately 4 years to six months and one year to six months,
respectively, and waived the payment of all accrued and unpaid salary, in
consideration of 2,000,000 shares of our common stock; and our other vice
president terminated his employment with us. Also, under this agreement, upon
the final closing scheduled for June 14, 2002, Evergreen will name two persons
to become directors of USURF America.

As a result of the transactions with these four officers arising out of the
Evergreen agreement, we will incur a charge against our earnings during the
second quarter of 2002 of approximately $650,000.

In May 2001, we entered into an amended and restated common stock purchase
agreement with Fusion 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 effective registration
statement. To date, we have received only $395,000 under our agreement with
Fusion Capital. Fusion Capital has not purchased the maximum shares possible
under this agreement. 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 price increases significantly or (2) we secure
funding from a source other than Fusion Capital, of which there is no assurance.
Please see the discussion under the heading "Management's Plans Relating to
Future Liquidity", for a more thorough explanation of the impact this agreement
could have on our business. Should we obtain more substantial funding, we would
be able to begin to pursue our wireless Internet business plan. In October 2001,
we began company-owned Quick-Cell operations in Del Rio, Texas, and have
agreements with two resellers there. We have approximately 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 completed engineering
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 earlier anticipated, from November 2001 through March 31, 2002, we
obtained additional funds through sales of our securities, as follows:

- $57,500 (2001) from the sale of 575,000 shares of our common stock and
a total of 1,150,000 warrants;

- $30,000 (2002) from the exercise of outstanding warrants - 200,000
shares at $.15 per share;

- $13,000 (2002) from the exercise of outstanding warrants - 162,500
shares at $.08 per share; and

- $49,000 (2002) from the exercise of options - 1,000,000 shares at
$.049 per share (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 Internet access business.

Subsequent to March 31, 2002, in April 2002, we obtained funds through
sales of our securities, as follows:

- $49,000 from the exercise of options - 1,000,000 shares at $.049 per
share (a 38.75% discount to the market price on the date of exercise).
These funds were applied exclusively to operating expenses.

- $125,000 from the sale of 1,562,500 shares and a total of 3,125,000
warrants, pursuant to the Evergreen transaction. A portion of these
funds are to be used for operating expenses, while the balance is to
be utilized in our efforts to expand our wireless Internet access
business.

Pursuant to the Evergreen agreement, we are to receive an additional
$125,000, in June 2002, which funds we expect will enable us to pursue our
business plan more aggressively. However, we cannot assure you that we will ever
earn a profit.

We will need further capital, as we continue to expand our wireless
Internet access business.

CyberHighway Bankruptcy

In September 2000, an involuntary bankruptcy petition was filed against
CyberHighway in the Idaho Federal Bankruptcy Court, styled In Re: CyberHighway,
Inc., Case No. 00-02454, by ProPeople Staffing, CTC Telecom, Inc. and

Hawkins-Smith. A joint motion to dismiss the bankruptcy proceeding was
unsuccessful because some of CyberHighway's creditors believe that
CyberHighway's as-yet unasserted damage claims against the original petitioning
creditors and their law firm and a claim against Dialup USA, Inc. represent
CyberHighway's most valuable assets. These as-yet unasserted claims include
claims for bad faith filing of the original bankruptcy petition as to the
original petitioning creditors and their law firm, as well as a claim for
tortious interference with beneficial business relationships as to Dialup USA,
Inc. These creditors desire that these claims be adjudicated in the bankruptcy
court. It is likely that, at some time in the future, a final order of
bankruptcy will be entered with respect to CyberHighway. No prediction of the
timing of such an order can be made, although we believe that such an order
would come only after the final adjudication of the claims described above.

The January 1999 acquisition of CyberHighway fundamentally altered our
company. Our annual revenues went from nearly zero to about $2.5 million.
However, the involuntary bankruptcy proceeding caused the demise of
CyberHighway's business. CyberHighway's company-owned dial-up customer base went
from approximately 8,500 to none. The filing of the involuntary bankruptcy and
CyberHighway's switch-over to the network of Dialup USA were the primary causes
of CyberHighway's customer base demise. We will not apply any available future
capital to the revitalization of our dial-up Internet access business.

Results of Operations

General. By the end of February 2001, CyberHighway had lost all of its
dial-up Internet access customers and we do not foresee the revitalization of
CyberHighway's business. You should not purchase our common stock expecting that
CyberHighway's business will assist in making us profitable.

During the first quarter of 2001, we derived no revenue from CyberHighway's
business. For the first three months of 2001 and 2002, our small amounts of
revenues were dervied from our Quick-Cell wireless Internet access operations.
We currently lack the capital necessary to pursue our complete Quick-Cell
business plan, and we may never possess enough capital with which to exploit
fully our Quick-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
monthly customer payments for dial-up access and from per-customer royalty
payments from our CyberHighway affiliate-ISPs.

Beginning in March 2000, we began initial Quick-Cell wireless Internet
access operations in Santa 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 the system and have only
a few customers remaining. We have yet to derive significant revenue from our
Santa Fe market. In the last quarter of 2001, we began to derive revenues from
the first customers in Del Rio, Texas. We have lacked capital with which to
expand either of these markets.

In September 2001, we began Quick-Cell operations in Del Rio, Texas. We
have approximately 50 customers online, but our growth there has been slowed
significantly due to our lack of capital. 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 in customer
acquisition, rather than to have begun full-scale marketing activities only to
suspend them soon after their start due to our lack of capital. Should we begin
to derive greater amounts of funds under the Fusion Capital agreement or from
another source, of which there is no assurance, we plan to construct additional
Quick-Cell systems throughout the remainder of 2002.

In the middle of 2000, we began marketing our Quick-Cell systems to local
exchange telephone companies, independent telephone companies, digital
subscriber line resellers and Internet service providers. We sold three
Quick-Cell systems in a short time. Due to a lack of capital, however, this
marketing effort was suspended before we investigated the nature of the other
inquiring companies. No paying customers use these systems, due to circumstances
involving these companies that are beyond our control. During the first three
months of 2001 and 2002, we derived no significant revenues from customer modem
sales to these Quick-Cell purchasers, and we do not expect to do so during 2002.

In cities in which we construct company-owned Quick-Cell systems, we intend
to employ telephone marketing as the initial means for acquiring customers and,
later, mass media. We will employ a sales force that will focus primarily on
potential business customers. This focus on business customers is based on our
management's informal study of Internet usage by businesses versus home users
that revealed businesses' higher demand for high-speed Internet access. Our
management's decision may prove to have been incorrect, which would
significantly impair our ability 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 be incorrect. Our Quick-Cell business will not be able to succeed
without additional capital.

In cities where a Quick-Cell reseller operates, we will not have final
approval of the reseller's marketing strategies. Our resellers will be permitted
to market our Quick-Cell service in any commercially reasonable manner. We
cannot, therefore, assure you that any of our resellers will ever 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 to issues within WebConnect that were out of our control,
to date, we have not derived any benefit from this agreement. However, after
recent discussions with WebConnect, it is possible that we will begin to
implement our agreement during 2002, as it appears that WebConnect's internal
issues have been resolved to a point that it is now in a position to participate
as a Quick-Cell reseller. It is possible that the terms of our agreement with
WebConnect might be amended in the future, but we cannot predict if and when an
amendment would be executed.

Our revenues for the first three months of 2001 and 2002 were significantly
below those of 2000, since we no longer derive revenues from the operations of
CyberHighway and we have lacked capital with which to implement a full-scale
implementation of our Quick-Cell business plan. In 2002, we will produce
significant revenues only if we are able to be successful in placing Quick-Cell
service customers online, of which there is no assurance, due to the uncertainty
surrounding our level of capitalization to be derived under the Fusion Capital
agreement or any other sources.

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 that would arise from this circumstance.

Potential Rescission Claims. At March 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 that each of the
issuees of these shares has a potential claim for rescission of their respective
issuance transactions. We do not possess capital with which to pay any such
claims, if asserted, and, if such claims are asserted, it is possible that our
then-available capital would become impaired and our future operating results
would likely suffer.

Three Months Ended March 31, 2002, versus Three Months Ended March 31,
2001. During both periods, our small amounts of revenues were derived from our
wireless Internet access business. Without additional capital, our revenues will
remain at these levels.

Our operating results for the first quarters of 2002 and 2001 are
summarized in the following table:

First Quarter 2002 First Quarter 2001
(unaudited) (unaudited)
---------------- ----------------

Revenues $4,626 $384
Internet Access Costs, Cost of Goods Sold 8,482 0

Gross Profit (Loss) (3,856) 384
Operating Expenses 603,918 901,643
Loss from Operations (607,774) (901,259)
Net Loss (607,957) (901,259)

Our net loss of $574,274 (unaudited) for the first quarter of 2002 was
significantly less than our net loss for the 2001 period of $901,259
(unaudited). Certain line items in our statements of operations changed
materially from the 2001 period to the 2002 period, which contributed to the
reduction in our net loss for the current period, as follows:

- Professional fees decreased from $707,288 in the 2001 period to
$270,147 in the 2002 period. This decrease is a result of our not
having required professional services during the 2002 period at the
levels required during the 2001 period. Also, during the 2002, we did
not have a charge against our earnings similar to the $248,000 amount
that occurred during the 2001 period, the result of the issuance of
800,000 shares as a commitment fee under a common stock purchase
agreement. Should we continue to lack cash reserves, it is likely
that, during the remainder of 2002, we would issue shares of our
common stock in payment of certain professional fees.

- During the 2001 period, we incurred no advertising expense. However,
during the 2002 period, we incurred advertising expenses of $62,000.
All of our advertising expenses during the current period are
attributable to the exercise of options to acquire shares of our
common stock by a consultant.

- An increase in salaries and commissions, from $160,746 in the 2001
period to $242,314 in the 2002 period, was offset by the reduction the
expenses described in the prior paragraphs. This increase in salaries
and commissions is attributable to the issuance of 34,536 shares of
our common stock to one of our officers, in payment of a portion of
his accrued salary in the approximate amount of $140,000. Had this
one-time expense not been incurred, our salaries and commissions would
have been well below 2001 levels, due to our reductions in personnel
during the last quarter of 2001 and the first quarter of 2002.

As a result of the Evergreen transaction, we will incur a one-time charge
against our earnings for the second quarter of 2002 in the approximate amount of
$650,000, due to the following stock issuances:

- 3,000,000 shares issued to our new president and chief executive
officer as a signing bonus under his employment agreement.

- 2,000,000 shares to our former president (current Chairman of the
Board) in consideration of his agreeing to reduce the term of his
employment agreement, waive the payment of accrued salary and waive
the repayment of unpaid loans made by him to us.

- 2,000,000 shares to one of our vice presidents in consideration of his
agreeing to reduce the term of his employment agreement and waive the
payment of accrued salary.

- 2,000,000 shares to our vice president of corporate development in
consideration of his agreeing to reduce the term of his employment
agreement and waive the payment of accrued salary.

We expect that our results of operations for the second quarter of 2002
will be similar to those of the first quarter of 2002.

Due to our severe lack of capital during the 2001 and 2002 periods, we
issued shares of our stock to consultants in payment of their services. The fair
value of the shares issued to consultants is included in our statements of
operations under the "Professional Fees" line item. Issuing shares of our common
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 been
expensed in equal monthly amounts over their respective terms:

- during the first three months of 2001, we issued 320,000 shares of our
common stock under two consulting agreements; these shares were valued
for financial accounting purposes at $99,200, in the aggregate. This
amount was expensed in equal monthly amounts during 2001.

- during the first three months of 2002, we issued 570,000 shares of our
common stock under consulting agreements; these shares were valued for
financial accounting purposes at $61,500, in the aggregate. This
amount is being expensed in equal monthly amounts over periods ranging
from four months to one year. All of this total amount will be
expensed during 2002.

Subsequent to March 31, 2002, we have issued shares to consultants,
professional service providers and to certain of our officers, the value of
which will be charged against our earnings, beginning in the second quarter of
2002. Specifically, we have issued: 1,625,000 shares to consultants, valued at
approximately $165,000, all of which will be charged against our earnings during
2002; 500,000 shares to professional service providers, valued at approximately
$40,000, all of which will be charged against our earnings in the second quarter
of 2002; and 9,000,000 shares to certain of our officers pursuant to the
Evergreen transaction, value at approximately $800,000, which amount will be
charged against our earnings in the second quarter of 2002.

Liquidity and Capital Resources

General. Since our inception, we have had a significant working capital
deficit. Currently, we are substantially illiquid, although we do possess enough
cash to continue our current level of business activities, through the result of
recent securities sales. As the level of funding under the Fusion Capital
agreement has been lower than we had earlier anticipated, during the last two
months of 2001 and the first three months of 2002, we obtained 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
a total of 1,150,000 warrants;

- $30,000 (2002) from the exercise of outstanding warrants - 200,000
shares at $.15 per share;

- $13,000 (2002) from the exercise of outstanding warrants - 162,500
shares at $.08 per share; and

- $49,000 (2002) from the exercise of options - 1,000,000 shares at
$.049 per share (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 Internet access business.

Subsequent to March 31, 2002, in April 2002, we obtained funds through
sales of our securities, as follows:

We will need further capital, as we continue to expand our wireless
Internet access business. It is possible that we will not be able to secure
adequate capital as we need it. Also, 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, we will require additional capital of approximately
$300,000. To accomplish our goals of expanding our Quick-Cell business, we will
require at least $1.2 million. If we are unable to obtain this needed capital,
we could be forced to cease our operations.

Currently we do not possess enough capital to accomplish our goals for our
Quick-Cell wireless Internet access business, including the construction of
Quick-Cell systems. When we refer to the construction 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 and configuration - 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 our Quick-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 - for approximately $18,000, and we have
added a third server cell to this system, in response to consumer demand.
However, we continue to lack capital with which to market our Quick-Cell service
aggressively. Rather, in Del Rio, we have chosen to make sustained slow progress
in customer acquisition, rather than to have begun full-scale marketing
activities only to suspend them soon after their start due to our lack of
capital. Should we begin to derive greater amounts of funds under the Fusion
Capital agreement, of which there is no assurance, we plan to construct
additional Quick-Cell systems throughout 2002.

If and when we begin to obtain the maximum amount of funds available
pursuant to the Fusion Capital agreement, we expect, then, to have enough money
to pay for the construction of the initial Quick-Cell cell site in at least
three markets per month. We cannot assure you that we will be able to construct
Quick-Cell cell sites at that rate or that we will ever possess adequate capital
with 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 with enough capital to construct the initial
Quick-Cell cell site and commence marketing activities in approximately 30
markets. With the Quick-Cell construction permitted by this amount of capital,
we will be able to determine whether our Quick-Cell wireless Internet access
business is a viable business, as presently offered. However, the funds expected
under the Fusion Capital agreement will not be adequate for us to pursue our
complete Quick-Cell business plan, and we cannot assure you that we will be able
to obtain capital when needed. Our inability to obtain further capital when
needed would lessen our chance of earning a profit, as we would become illiquid.

Proceeds from the Fusion Capital Agreement. Beginning in July 2001, we
began to receive the first funds of up to $10 million under our agreement with
Fusion Capital. Since then, we have received only $395,000 in payment of a total
of 3,100,000 shares under this agreement. Fusion Capital has not purchased the
maximum funding amount possible under this agreement. 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 price increases
significantly or (2) we secure funding from a source other than Fusion Capital,
of which there is no assurance. Assuming we receive the entire $10 million under
that agreement, of which there is no assurance, we anticipate that we will 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 Capital agreement, due to the current low market price of our common
stock. In addition, under the Fusion Capital agreement, we must maintain
compliance with certain criteria in order to avoid an event of default.
Currently, we are in compliance with these criteria and expect to remain in
compliance for the foreseeable future.

Should all of our outstanding warrants, including all of the warrants to be
issued in connection with the Fusion Capital agreement, be exercised, we would
receive cash proceeds of approximately $3,278,376. Upon the final closing under
the Evergreen agreement, we will issue warrants that could yield $703,125 if
exercised. Funds received from the exercise of warrants would be used to
purchase Quick-Cell equipment, to construct Quick-Cell systems, to market our
Quick-Cell wireless Internet access service and for working capital. Please see
the discussion under "Use of Proceeds".

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

Potential Rescission Claims. Because we lack the capital to pay any
potential claims for rescission that may be asserted by some of our
shareholders, any such claim made against us could negatively impact our ability
to continue in business. At March 31, 2002, 524,564 of these shares, with an
aggregate value of $220,998, remain subject to potential claims for rescission.
We do not possess capital with which to pay any such claims, if asserted, and,
if such claims are asserted, it is possible that we would be forced to cease
operations, as our then-available capital could become severely impaired.

March 31, 2002. Historically, we have had a significant working capital
deficit. At March 31, 2002, our working capital deficit was $1,240,582
(unaudited) which is only slightly lower than our $1,254,897 deficit at December
31, 2001. Our receipt of funds through sales of our securities during the first
three months of 2002 permitted us to maintain a constant working capital deficit
throughout the quarter. Approximately 85% of our accounts payable are accounts
payable of CyberHighway and are subject to the pending Chapter 7 bankruptcy
proceeding of CyberHighway. Without additional capital, our working capital
deficit can be expected to become larger each quarter.

The following table sets forth our current assets and current liabilities
at March 31, 2002, and December 31, 2001:

March 31, 2002 December 31, 2001
----------------- --------------------
(unaudited) (audited)

Current Assets Cash $ 284 $ 10
Inventory 133,500 134,756

Current Liabilities Disbursements of Cash $ 0 $ 15,539
Balances
Accounts Payable 1,042,150 1,034,619
Accrued Payroll 272,820 265,978
Other Current Liabilities 59,396 54,996
Notes Payable to Stockholder 0 18,521

Our accrued payroll at March 31, 2002, as well as at December 31, 2001, is
attributable to accrued salary of three of our officers. In connection with the
Evergreen transaction described above, these officers waived payment of all of
their accrued salaries, which will be reflected on our June 30, 2002, balance
sheet.

We reduced our note payable to stockholder during the first quarter of 2002
by $18,521, and owed this shareholder no amount at March 31, 2002. We do not
expect that we will again borrow funds from this shareholder.

During the first quarter of 2002, we obtained a total of $149,500 in cash
from sales of our securities.

- $57,500 (2001) from the sale of 575,000 shares of our common stock and
a total of 1,150,000 warrants;

- $30,000 (2002) from the exercise of outstanding warrants - 200,000
shares at $.15 per share;

- $13,000 (2002) from the exercise of outstanding warrants - 162,500
shares at $.08 per share; and

- $49,000 (2002) from the exercise of options - 1,000,000 shares at
$.049 per share (a 38.75% discount to the market price on the date of
exercise).

The funds received were applied primarily to operating expenses.

Subsequent to March 31, 2002, in April 2002, we obtained funds through
sales of our securities, as follows:

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

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

Cash Flows from Operating Activities. During the first quarter of 2002, our
operations used $123,305 (unaudited) in cash compared to cash used of $162,684
(unaudited) during the first quarter of 2001. In both periods, the use of cash
in operations was a direct result of the lack of revenues compared to our
operating expenses, particularly salaries and commissions.

Cash Flows from Investing Activities. During the first quarters of 2001
and 2002, our investing activities neither provided nor used cash. Because we
lack working capital, we cannot predict our cash flows from investing
activities
for the remainder of 2002.

Cash Flows from Financing Activities. For the first quarter of 2002, our
financing activities provided $123,579 (unaudited) in cash. Our payments on
notes payable to stockholder of $18,521 and $4,900 in finder's fees were offset
by payments on subscriptions receivable of $70,000, $64,000 in cash from sales
of our common stock and $13,000 in cash obtained by the exercise of certain
warrants. For the first quarter of 2001, our financing activities provided
$287,090 in cash. Of this amount, $26,090 is attributable to loans from our
president and $261,000 is attributable to private sales of securities. We
continue to seek capital and cannot, therefore, predict future levels of cash
flows from financing activities.

Management's Plans Relating to Future Liquidity

To sustain our current level of operations for the next twelve months, we
will require additional capital of approximately $300,000. Our recent securities
purchase agreement with Evergreen will provide a significant portion of this
capital requirement. To accomplish our goals of expanding our Quick-Cell
business, we will require at least $1.2 million.

Our best opportunity for obtaining needed funds is pursuant to the Fusion
Capital agreement. However, to date, we have received only $395,000 under our
agreement with Fusion Capital. Fusion Capital has not purchased the maximum
shares possible under this agreement.

Since we only plan to sell up to 6,000,000 shares to Fusion Capital under
the Fusion Capital agreement, the selling price of our stock sold to Fusion
Capital will need to average $1.67 per share for us to receive the maximum
proceeds of $10 million under that agreement. Assuming a selling price of $.08
per share, the closing sale price of the common stock on May 16, 2002, and the
purchase by Fusion Capital of the full amount of shares purchasable under the
Fusion Capital agreement, total proceeds to us would only be approximately
$600,000, unless we choose to issue more 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 we will be able to have accomplished our primary objectives:

- entering into several working partnerships with companies who need to
create or extend broadband Internet connectivity for their customers,
employees and partners;

- placing at least 10,000 customers on our Quick-Cell systems during the
next year; and

- proving the commercial viability of our Quick-Cell wireless Internet
access service.

We cannot assure you that we will accomplish these objectives.

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

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

Capital Expenditures

During the first three months of 2002, we made no capital expenditures and
we currently have no capital with which to make any significant capital
expenditures. Should we obtain significant funding, of which there is no
assurance, we would be able to make major expenditures on Quick-Cell-related
equipment. However, without additional capital, we will make no capital
expenditures.

CERTAIN STATEMENTS CONTAINED IN THIS "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" ARE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 AND ARE, THUS, PROSPECTIVE. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT
TO RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM FUTURE RESULTS EXPRESSED OR IMPLIED BY SUCH FORWARD-
LOOKING STATEMENTS. THE MOST SIGNIFICANT OF SUCH RISKS, UNCERTAINTIES AND OTHER
FACTORS IS OUR ABILITY TO OBTAIN CAPITAL IN AMOUNTS NECESSARY FOR US TO
ACCOMPLISH OUR PLAN FOR THE EXPLOITATION OF OUR QUICK-CELL WIRELESS INTERNET
ACCESS PRODUCTS, AS WELL AS CONSUMER ACCEPTANCE OF THESE PRODUCTS.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

CyberHighway Involuntary Bankruptcy

On September 29, 2000, an involuntary bankruptcy petition was filed against
CyberHighway in the Idaho Federal Bankruptcy Court, styled In Re: CyberHighway,
Inc., Case No. 00-02454. The petitioning creditors were ProPeople Staffing, CTC
Telecom, Inc. and Hawkins-Smith. In December 2000, CyberHighway and the
petitioning creditors filed a joint motion to dismiss this proceeding. The joint
motion to dismiss was denied because the creditors believe that CyberHighway's
as-yet unasserted damage claims against the original petitioning creditors and
their law firm and a claim against Dialup USA, Inc. represent CyberHighway's
most valuable assets. These as-yet unasserted claims include claims for bad
faith filing of the original bankruptcy petition as to the original petitioning
creditors and their law firm, as well as claim for tortious interference with
beneficial business relationships as to Dialup USA, Inc. It is likely that, at
some time in the future, a final order of bankruptcy will be entered with
respect to CyberHighway, no prediction of the timing of such an order can be
made, although we believe that 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 against Darrell Davis, formerly one of our officers, and his
wife, Deanna Davis. We have alleged that the Davises have diverted dial-up
customers from CyberHighway to a company controlled by him, all while he was an
employee of USURF America. We expect that a hearing for our motion for a
permanent injunction will occur in the future. In addition, we are seeking
monetary damages 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 Darrell D. 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 former vice president of finance and chief financial officer. We
have alleged that Mr. Wiebelt violated certain terms of his employment agreement
and are seeking damages resulting from those violations. This case is styled:
USURF America, Inc. versus Christopher L. Wiebelt, American Arbitration
Association, Case No. 71-160-00087-01. We expect this arbitration proceeding to
be settled in the near future.

Possible Claim

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

Potential Legal Proceeding

In addition to CyberHighway's cause of action against Dialup USA, it is the
intention of USURF America to pursue damage claims against Dialup USA for
tortiously interfering with the beneficial business relationships between
CyberHighway and its customers. These claims arise out of Dialup USA's actions
on behalf of one of our former officers, which were designed to divert customers
to a company controlled by him. Our claim against Dialup USA will be for
approximately $2 million. We have not established a date by which we intend to
commence this legal proceeding.

Item 2. Changes in Securities.

During the three months ended March 31, 2002, we issued securities as
follows:

1. (a) Securities Sold. In January 2002, 120,000 shares of Company Common Stock
were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock were
issued to Fusion Capital Fund II, LLC. (c) Consideration. Such shares of Common
Stock were issued pursuant to a consulting agreement and were valued at $12,000.
(d) Exemption from Registration Claimed. The Company relied upon the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933, as
amended.

2. (a) Securities Sold. In February 2002, 86,500 shares of Company Common Stock
were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock were
issued to Shelter Capital Ltd.
(c) Consideration. Such shares of Common Stock were issued as a finder's
fee.
(d) Exemption from Registration Claimed. These securities are exempt from
registration under the Securities Act of 1933, as amended, pursuant to the
provisions of Regulation S thereunder.

3. (a) Securities Sold.In February 2002, 160,000 common stock purchase warrants
of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to Shelter
Capital Ltd.
(c) Consideration. Such warrants were issued as a finder's fee.
(d) Exemption from Registration Claimed. These securities are exempt from
registration under the Securities Act of 1933, as amended, pursuant to the
provisions of Regulation S thereunder.
(e) Terms of Conversion or Exercise. Exercise price of the warrants is $.10
per share and exercisable for a period of three years from issuance.

4. (a) Securities Sold. In February 2002, 266,000 common stock purchase
warrants of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to Shelter
Capital Ltd.
(c) Consideration. Such warrants were issued as a finder's fee.
(d) Exemption from Registration Claimed. These securities are exempt from
registration under the Securities Act of 1933, as amended, pursuant to the
provisions of Regulation S thereunder.

(e) Terms of Conversion or Exercise. Exercise price of the warrants is $.20
per share and exercisable for a period of three years from issuance.

5. (a) Securities Sold. In February 2002, 93,000 common stock purchase warrants
of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to Shelter
Capital Ltd.
(c) Consideration. Such warrants were issued as a finder's fee.
(d) Exemption from Registration Claimed. These securities are exempt from
registration under the Securities Act of 1933, as amended, pursuant to the
provisions of Regulation S thereunder.
(e) Terms of Conversion or Exercise. Exercise price of the warrants is $.30
per share and exercisable for a period of three years from issuance.

6. (a) Securities Sold. In February 2002, 300,000 shares of Company Common
Stock were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock were issued
to Peter Rochow.
(c) Consideration. Such shares of Common Stock were issued pursuant to a
consulting agreement and were value at $30,000.
(d) Exemption from Registration Claimed. These securities are exempt from
registration under the Securities Act of 1933, as amended, pursuant to the
provisions of Regulation S thereunder.

7. (a) Securities Sold. In March 2002, 400,000 shares of Company Common Stock
were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock were issued
to Peter Rochow.
(c) Consideration. Such shares of Common Stock were issued as a finder's
fee.
(d) Exemption from Registration Claimed. These securities are exempt from
registration under the Securities Act of 1933, as amended, pursuant to the
provisions of Regulation S thereunder.

8. (a) Securities Sold. In March 2002, 400,000 common stock purchase warrants
of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to Peter
Rochow.
(c) Consideration. Such warrants were issued as a finder's fee.
(d) Exemption from Registration Claimed. These securities are exempt from
registration under the Securities Act of 1933, as amended, pursuant to the
provisions of Regulation S thereunder.
(e) Terms of Conversion or Exercise. Exercise price of the warrants is $.10
per share and exercisable for a period of three years from issuance.

9. (a) Securities Sold. In March 2002, 400,000 common stock purchase warrants
of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to Peter
Rochow.
(c) Consideration. Such warrants were issued as a finder's fee.
(d) Exemption from Registration Claimed. These securities are exempt from
registration under the Securities Act of 1933, as amended, pursuant to the
provisions of Regulation S thereunder.
(e) Terms of Conversion or Exercise. Exercise price of the warrants is $.20
per share and exercisable for a period of three years from issuance.

10. (a) Securities Sold. In March 2002, 200,000 common stock purchase warrants
of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to Shelter
Capital Ltd.
(c) Consideration. Such warrants were issued as a finder's fee.
(d) Exemption from Registration Claimed. These securities are exempt from
registration under the Securities Act of 1933, as amended, pursuant to the
provisions of Regulation S thereunder.
(e) Terms of Conversion or Exercise. Exercise price of the warrants is $.049
per share and exercisable for a period of three years from issuance.

Subsequent to March 31, 2002, we have issued unregistered securities, as
follows:

1. (a) Securities Sold. In April 2002, 200,000 common stock purchase warrants
of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to Shelter
Capital Ltd.
(c) Consideration. Such warrants were issued as a finder's fee.

(d) Exemption from Registration Claimed. These securities are exempt from
registration under the Securities Act of 1933, as amended, pursuant to the
provisions of Regulation S thereunder.
(e) Terms of Conversion or Exercise. Exercise price of the warrants is $.049
per share and exercisable for a period of three years from issuance.

2. (a) Securities Sold. In April 2002, 500,000 shares of Company Common Stock
were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock were issued
to Newlan & Newlan.
(c) Consideration. Such shares of Common Stock were issued as a bonus, at a
price of $.10 per share.
(d) Exemption from Registration Claimed. The Company relied upon the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended.

3. (a) Securities Sold. In April 2002, 75,000 shares of Company Common Stock
were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock were issued
to Patrick F. McGrew.
(c) Consideration. Such shares of Common Stock were issued as a bonus, at a
price of $.10 per share.
(d) Exemption from Registration Claimed. The Company relied upon the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended.

4. (a) Securities Sold. In April 2002, 500,000 shares of Company Common Stock
were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock were issued
to Heyer Capital Fund.
(c) Consideration. Such shares of Common Stock were issued as a finder's
fee.
(d) Exemption from Registration Claimed. These securities are exempt from
registration under the Securities Act of 1933, as amended, pursuant to the
provisions of Regulation S thereunder.

5. (a) Securities Sold. In April 2002, 200,000 shares of Company Common Stock
were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock were issued
to Employer Support Services.
(c) Consideration. Such shares of Common Stock were issued in payment of a
trade payable and were valued at a price of $20,000.
(d) Exemption from Registration Claimed. The Company relied upon the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended.

6. (a) Securities Sold. In April 2002, a total of 9,000,000 shares of Company
Common Stock were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock were issued
to Douglas O. McKinnon (3,000,000 shares), David M. Loflin (2,000,000 shares),
Waddell D. Loflin (2,000,000 shares) and James Kaufman (2,000,000 shares).
(c) Consideration. Such shares of Common Stock were issued in pursuant to
the terms of employment-related agreements and were valued at approximately
$930,000, in the aggregate.
(d) Exemption from Registration Claimed. The Company relied upon the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended.

7. (a) Securities Sold. In April 2002, 1,562,500 shares of Company Common Stock
were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock were issued
to Evergreen Venture Partners, LLC.
(c) Consideration. Such shares of Common Stock were issued pursuant to a
securities purchase agreement, at a price of $.08 per share.
(d) Exemption from Registration Claimed. The Company relied upon the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended.

8. (a) Securities Sold. In April 2002, 1,562,500 common stock purchase warrants
of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to Evergreen
Venture Partners, LLC.
(c) Consideration. Such warrants were issued for no additional consideration
pursuant to securities purchase agreement.
(d) Exemption from Registration Claimed. The Company relied upon the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended.
(e) Terms of Conversion or Exercise. Exercise price of the warrants is $.15
per share and exercisable for a period of three years from issuance.

9. (a) Securities Sold. In April 2002, 1,562,500 common stock purchase warrants
of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to Evergreen
Venture Partners, LLC.
(c) Consideration. Such warrants were issued for no additional consideration
pursuant to securities purchase agreement.
(d) Exemption from Registration Claimed. The Company relied upon the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended.
(e) Terms of Conversion or Exercise. Exercise price of the warrants is $.30
per share and exercisable for a period of three years from issuance.

10. (a) Securities Sold. In April 2002, 900,000 shares of Company Common Stock
were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock were issued
to Allen & Company Business Communications.
(c) Consideration. Such shares of Common Stock were issued pursuant to a
consulting agreement and were valued at $90,000.
(d) Exemption from Registration Claimed. The Company relied upon the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended.

11. (a) Securities Sold. In April 2002, 250,000 shares of Company Common Stock
were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock were issued
to B. Edward Haun & Company.
(c) Consideration. Such shares of Common Stock were issued pursuant to a
consulting agreement and were valued at $25,000.
(d) Exemption from Registration Claimed. The Company relied upon the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended.

12. (a) Securities Sold. In April 2002, 250,000 shares of Company Common Stock
were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock were issued
to Summit Venture Partners, LLC.
(c) Consideration. Such shares of Common Stock were issued pursuant to a
consulting agreement and were valued at $25,000.
(d) Exemption from Registration Claimed. The Company relied upon the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended.

13. (a) Securities Sold. In April 2002, 150,000 shares of Company Common Stock
were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock were issued
to Barker Design, Inc.
(c) Consideration. Such shares of Common Stock were issued pursuant to a
consulting agreement and were valued at $15,000.
(d) Exemption from Registration Claimed. The Company relied upon the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits.

None.

(b) Reports on From 8-K.

During the three months ended March 31, 2002, we filed one Current
Report on Form 8-K, as follows:

- Date of event: February 6, 2002, wherein we reported the resignation
of one of our directors. This Current Report on Form 8-K is
incorporated herein by this reference.

Subsequent to March 31, 2002, we have filed two Current Reports on Form
8-K, as follows:

- Date of event: April 5, 2002, wherein we reported information
pursuant to Regulation FD; and

- Date of event: April 15, 2002, wherein we reported a material
securities sale transaction and the hiring of a new president and
chief executive officer.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Dated: May 20, 2002.

USURF AMERICA, INC.
By: /s/ DAVID M. LOFLIN
--------------------
David M. Loflin
Chairman of the Board and
Principal Accounting Officer