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EX-31.1 - CERTIFICATION - ERF Wireless, Inc.erfwireless_10q-ex3101.htm
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EX-32.1 - CERTIFICATION - ERF Wireless, Inc.erfwireless_10q-ex3201.htm


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 10-Q
 
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2011
 
OR
  
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
ERF WIRELESS, INC.
 (Exact name of registrant as specified in its charter)
  
Nevada
 
000-27467
 
76-0196431
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)

 
2911 SOUTH SHORE BOULEVARD, SUITE 100, LEAGUE CITY, TEXAS 77573
 (Address of principal executive offices) (Zip Code)
 
Registrant's telephone number, including area code:  (281) 538-2101
 
Indicate by check mark whether the 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 the Registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days.  Yes x No o
    
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o
  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
  Large accelerated filer o Accelerated filer o  
       
  Non-accelerated filer o Smaller reporting company x  
   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)  Yes o No x
  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 1,920,576 common shares issued and outstanding as of November 16, 2011


 
 
 
 
   
PART I – FINANCIAL INFORMATION
   
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS
   
ERF WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2011, AND DECEMBER 31, 2010
($ in thousands except share data)
      
   
September 30,
2011
   
December 31,
2010
 
   
(unaudited)
       
ASSETS
 
Current assets
           
Cash and cash equivalents
  $ 309     $ 43  
Securities held for resale
    20       -  
Accounts receivable, net
    459       392  
Accounts receivable, other
    209       124  
Inventories
    299       255  
Prepaid expenses and other current assets
    71       105  
Total current assets
    1,367       919  
                 
Property and equipment
               
Property and equipment
    9,323       10,001  
Less: accumulated depreciation
    (5,447 )     (5,987 )
Net property and equipment
    3,876       4,014  
                 
Goodwill
    176       1,255  
Intangible assets, net
    -       134  
Other assets
    41       170  
                 
Total assets
  $ 5,460     $ 6,492  
                 
LIABILITIES AND SHAREHOLDERS’ DEFICIT
 
Current liabilities:
               
Notes payable and current portion of long-term debt
  $ 422     $ 598  
Current portion of long-term capital leases
    141       446  
Accounts payable
    850       872  
Accrued expenses
    783       1,139  
Derivative liabilities
    48       13  
Deferred liability and revenue
    227       500  
Total current liabilities
    2,471       3,568  
                 
Line of credit
    4,328       5,225  
Long-term debt, net of current portion
    -       78  
Long-term capital leases, net of current portion
    263       343  
Total liabilities
    7,062       9,214  
                 
Commitments
               
                 
Shareholders’ deficit:
               
    Preferred stock - $.001 par value
Series A authorized  25,000,000 shares
Issued and outstanding at September 30, 2011, and
December 31, 2010, 8,867,949 and 4,612,583, respectively
    9       5  
    Common stock - $.001 par value
Authorized 975,000,000 shares
Issued and outstanding at September 30, 2011, and
December 31, 2010, 1,658,645 and 784,805 respectively
    2       1  
Additional paid in capital
    48,547       45,091  
Accumulated deficit
    (50,148 )     (47,819 )
Accumulated other comprehensive loss
    (12 )     -  
Total shareholders’ deficit
    (1,602 )     (2,722 )
                 
Total liabilities and shareholders' deficit
  $ 5,460     $ 6,492  
   
See accompanying notes to consolidated financial statements.
   
 
2

 
   
ERF WIRELESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
(Unaudited)
($ in thousands except loss per share)
    
   
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
   
2011
   
2010
   
2011
   
2010
 
                         
Sales:
                       
Products
  $ 36     $ 19     $ 162     $ 113  
Services
    1,295       863       3,610       2,704  
Total sales
    1,331       882       3,772       2,817  
                                 
Costs of goods sold:
                               
Products and integration services
    431       251       1,088       798  
Rent, repairs and maintenance
    114       93       314       298  
Depreciation
    353       349       1,030       1,023  
Total costs of goods sold
    898       693       2,432       2,119  
                                 
Gross profit
    433       189       1,340       698  
                                 
Operating expenses:
                               
Selling, general and administrative
    1,508       1,934       4,032       5,441  
Depreciation and amortization
    61       94       193       306  
Total operating expenses
    1,569       2,028       4,225       5,747  
                                 
Operating loss from continuing operations
    (1,136 )     (1,839 )     (2,885 )     (5,049 )
                                 
Other income (expense):
                               
Interest expense, net
    (194 )     (316 )     (560 )     (1,130 )
Gain on sale of assets, net and other income
    2       (21 )     1,192       (14 )
Loss on extinguishment of debt
    -       (63 )     -       (63 )
Derivative income (expense)
    (11 )     7       2       334  
Total other income (expense)
    (203 )     (393 )     634       (873 )
Loss from continuing operations
    (1,339 )     (2,232 )     (2,251 )     (5,922 )
Loss from discontinued operations
    -       (64 )     (78 )     (308 )
Net loss
    (1,339 )     (2,296 )     (2,329 )     (6,230 )
                                 
Other comprehensive loss:
                               
Unrealized loss on securities held for sale
    (9 )     -       (12 )     -  
Total other comprehensive loss
    (9 )     -       (12 )     -  
                                 
Net loss applicable to common shareholders
  $ (1,348 )   $ (2,296 )   $ (2,341 )   $ (6,230 )
Basic and diluted loss per common share:
                               
Loss from continuing operations
  $ (0.89 )   $ (4.52 )   $ (1.94 )   $ (15.26 )
Loss from discontinued operations
  $ (0.00 )   $ (0.13 )   $ (0.07 )   $ (0.79 )
Net loss
  $ (0.90 )   $ (4.65 )   $ (2.02 )   $ (16.06 )
   
See accompanying notes to consolidated financial statements.
  
 
3

 
  
ERF WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
(Unaudited)
($ in thousands)
      
   
2011
   
2010
 
             
Cash flows from operating activities
           
Loss from continuing operations
  $ (2,251 )   $ (5,922 )
Loss from discontinued operations
    (78 )     (308 )
Net loss
    (2,329 )     (6,230 )
                 
Adjustments to reconcile net loss to net cash used by operating activities:
               
(Gain) / loss on sale of assets
    (1,183 )     1  
Loss on extinguishment of debt
    -       63  
Loss on foreign exchange translation
    -       2  
Amortization of debt discount
    1       162  
Depreciation and amortization
    1,277       2,325  
Stock based compensation
    -       13  
Stock issued for services rendered, interest  and compensation
    1,282       1,460  
Derivative income
    (2 )     (334 )
Bad debt expense
    -       100  
Changes in:
               
Accounts receivable, net
    (61 )     (55 )
Accounts receivable, other
    215       (35 )
Inventories
    (97 )     (12 )
Prepaid expenses
    34       122  
Costs and profits in excess of billings
    -       (1 )
Accounts payable
    (11 )     191  
Accrued expenses
    (485 )     762  
Deferred liability and revenue
    (273 )     (139 )
Total adjustment
    697       4,625  
Net cash used by operating activities
    (1,632 )     (1,605 )
                 
Cash flows from investing activities
               
Purchase of property and equipment
    (1,616 )     (687 )
Proceeds from sale of assets, net of cash received
    2,707       8  
Change in other assets
    (6 )     47  
Net cash provided (used by) investing activities
    1,085       (632 )
                 
Cash flows from financing activities
               
Net proceeds from line of credit
    1,224       2,296  
Proceeds from long-term debt obligations
    350       759  
Payment of long-term debt obligations
    (376 )     (768 )
Payment on capital lease obligations
    (385 )     (674 )
Proceeds from sale of common stock, net
    -       432  
Net cash provided by financing activities
    813       2,045  
                 
Net change in cash and cash equivalents
    266       (192 )
Cash and cash equivalents at the beginning of the period
    43       228  
Cash and cash equivalents at the end of the period
  $ 309     $ 36  
                 
Supplemental disclosure of cash flow information:
               
Net cash paid during the year for:
               
Interest
  $ 88     $ 203  
Income taxes
  $ -     $ -  
                 
Supplemental non-cash investing and financing activities:
               
   Conversion of debt through issuance of common stock
  $ 190     $ 1,789  
   Conversion of LOC and interest through issuance of Preferred stock
  $ 350     $ 1,904  
   Conversion of LOC and interest through issuance of Common stock
  $ 2,179     $ -  
  
See accompanying notes to consolidated financial statements.
   
 
4

 
   
ERF WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
 (Unaudited)
     
NOTE 1 – BASIS OF PRESENTATION
 
NATURE OF THE COMPANY
 
ERF Wireless, Inc. (“Company” or “ERF Wireless”) provides secure, high-capacity wireless products and services to a broad spectrum of customers in primarily underserved, rural and suburban parts of the United States.  We provide our customers with high quality broadband services and basic communications services to residential, oil and gas, and bank customers in the areas that otherwise would not be able to receive such services. We are also a comprehensive solutions provider to other enterprise customers, providing them with a wide array of communications services including high speed broadband, voice over Internet Protocol (VOIP) telephone and facsimile service, and video security.
 
Historically, our revenues have been generated primarily from internet and construction services.  Our internet revenues have resulted from our offering of broadband and basic communications services to residential and enterprise customers. Our construction revenues typically have consisted of revenues generated from the construction of bank networks and other services associated with providing wireless products and services to the regional banking industry.
 
Our internet revenues are recorded in “ERF Wireless Bundled Services, Inc. (WBS)”, construction of bank, healthcare and educational networks in our “ERF Enterprise Network Services, Inc. (ENS)” and other construction in “ERF Wireless Messaging Services, Inc. (WMS)” and wireless broadband products and services to rural oil and gas locations are recorded in Energy Broadband, Inc. (EBI)”. Please refer to segment footnote 10 for additional information regarding segment operations.
 
BASIS OF ACCOUNTING
 
The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's annual report for the year ended December 31, 2010 filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year ended December 31, 2010 as reported in form 10-K have been omitted.
 
SECURITIES HELD FOR RESALE

Investments in public companies are classified as available-for-sale and are adjusted to their fair market value with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive income. Upon disposition of these investments, the specific identification method is used to determine the cost basis in computing realized gains or losses, which are reported in other income and expense. Declines in value that are judged to be other than temporary are reported in other comprehensive income and expense.
 
RECLASSIFICATION
 
Certain amounts in the 2010 financial statements have been reclassified to conform to the 2011 financial presentation. These reclassifications have no impact on net loss.

INVENTORIES
 
Inventories are valued at the lower of cost or market. The cost is determined by using the average cost method. Inventories consist of the following items as of September 30, 2011, in thousands:
      
   
September 30,
2011
   
Raw material
  $ 47    
Work in process
    51    
Finished goods
    201    
    $ 299    
      
 
5

 
 
ERF WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
 (Unaudited)
   
The Company has pledged all the finished goods inventory of WBS of $130,000 as collateral against outstanding notes as of September 30, 2011.
   
RECENT ACCOUNTING PRONOUNCEMENTS
 
Management does not anticipate that the recently issued but not yet effective accounting pronouncements will materially impact the Company’s financial condition.
   
NOTE 2 – ACCOUNTS RECEIVABLE

Accounts Receivable consists of the following (in thousands):
    
   
September 30,
2011
 
Accounts receivable
  $ 473  
Allowance for doubtful accounts
    (14 )
Accounts receivable, net
  $ 459  
  
The Company has pledged $173,000 of the accounts receivables of WBS as collateral against outstanding notes and capital leases as of September 30, 2011.
  
NOTE 3 – DEBT CONVERSION
  
(a) LINE OF CREDIT

For the nine months ended September 30, 2011, the Company has had several debt settlements of the unsecured revolving credit facility. See Note 8 for additional information on this facility.  The unsecured revolving credit facility provides financing for working capital requirements.  During the nine months ended September 30, 2011 the Company issued 5,354,366 shares of its Series A Preferred Stock for a total settlement amount of $350,000 of debt. The Company issued Preferred A Stock at an average price of $.0654 per share or $1.75 (post split) per share of ERF Wireless, Inc. (ERFB) common stock the day the debt is settled and converted to Preferred A Stock.

Also during the nine months ended September 30, 2011 the Company issued 550,758 shares of its Common Stock for the settlement of $1,771,000 of debt and $408,000 in accrued interest for a total amount of $2,179,000. The Company issued Common Stock at an average price of $3.96 per share of the ERFB common stock the day the debt was settled.

As additional consideration for the settlement the Company agreed to amend the Series A convertible preferred stock designation to increase the voting rights of each preferred share from 50 votes to 100 votes on all matters in which the common stock holders and preferred stock holders vote together. Under current accounting standards ASC 470-50-40-2 the extinguishment of related party debt for equity securities is considered a capital transaction and, accordingly, no gain or loss on the extinguishment is recognized in the statement of operations. If this was not a related party transaction a gain of $32,759 would have been recognized for the nine months ended September 30, 2011.

(b) OTHER DEBT

During the nine months ended September 30, 2011 the Company issued 32,478 and 3,453 shares of its Common Stock for the settlement of $190,000 of debt and $20,000 in current period interest, respectively, for a total amount of $210,000. The Company issued Common Stock at an average price of $5.83 per share of the ERFB common stock the day the debt was settled.
  
NOTE 4 – COMMON STOCK AND PREFERRED STOCK
  
The total number of shares of stock of all classes which the Company shall have the authority to issue is 1,000,000,000, of which 25,000,000 shall be shares of preferred stock with a par value of $.001 per share ("Preferred Stock"), and 975,000,000 shall be shares of common stock with a par value of $.001 per share ("Common Stock").
   
 
6

 

ERF WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
 (Unaudited)
  
On August 5, 2011 the company's board of directors and stockholders with a majority of the company's voting power approved an amendment to the company's Articles of Incorporation to affect a reverse split of the company's common stock at a ratio of 1 for 500. Any whole number of outstanding shares between and including 2 and 500 would be combined into one share of common stock, at a ratio selected by the board. There would be no change to the authorized shares of common stock of the company as a result of the reverse stock split and any fractional shares would be rounded up. The ratio of 1 for 500 reverse split affected 682,917,968 common shares prior to the split and were converted into 1,366,311 shares of $.001 par value common stock. The reverse stock split has been applied retroactively to all financial statement and footnote periods presented.
  
COMMON STOCK
 
As of September 30, 2011, there were 1,658,645 shares of common stock issued and outstanding.
 
During the nine months ended September 30, 2011, the Company issued 738,113 shares of common stock which was valued at the closing market price on the date of issuance of such shares, which were issued in lieu of cash as payment for the following (in thousands):
   
September 30, 2011
 
Supplemental Non-Cash Disclosure
 
Professional fees
  $ 534  
Services and compensation
    294  
Interest expense
    428  
Other services rendered
    26  
Total for services, interest, and compensation
  $ 1,282  
         
Notes payable
  $ 190  
Line of credit, principal
  $ 1,771  
    
PREFERRED STOCK

The Company has 25,000,000 shares of Preferred Stock authorized of which 10,000,000 shares had been designated as Series A Preferred Stock. 8,867,949 and 4,612,583 Series A preferred shares were issued and outstanding at September 30, 2011 and December 31, 2010, respectively. With respect to the Series A Preferred Stock outstanding at September 30, 2011, the Company would be required to issue 8,867,949 shares of its common stock upon conversion. During the nine months ended September 30, 2011, 1,099,000 Series A Preferred Stock were converted into net amount of 136,353 (post split) shares of common stock.

The company's board of directors approved an amendment to the company's Articles of Incorporation stating that due to a combination or reverse split each share of Series A Preferred Stock issued and outstanding may convert into 1 new share of common stock. As of August 5, 2011 the Company affected a reverse split of the company's common stock at a ratio of 1 for 500 thus subsequent conversions of each Series A Preferred Stock is convertible at holder's option for 1 share of common stock.  Prior to August 2011 each share of Series A Preferred Stock was converted at holder’s option for 18.676347 shares of common stock. The holder of Series A Preferred Stock is required to give a 65-day notice of conversion to the Company.  The holders of the Series A Preferred Stock are entitled to receive out of funds of the Company legally available therefore, dividends at the same rate as dividends are paid with respect to outstanding shares of common stock.

Holders of shares of the Series A Preferred Stock are entitled to vote, together with the holders of our common stock, on all matters submitted to a vote of the Company’s stockholders. Each share of Series A Preferred Stock entitles the holder thereof to 100 votes on all matters submitted to a vote of the Company’s stockholders.
   
Holders of the Series A Preferred Stock are also entitled to elect one director at any meeting of the Company’s stockholder at which such directors are to be elected.  The right of the holders of the Series A Preferred Stock to elect such additional director shall cease when all outstanding shares of Series A Preferred Stock have been converted or are no longer outstanding.  The shares of the Series A Preferred Stock are not redeemable by the Company.
    
 
7

 

ERF WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
 (Unaudited)
   
In the event of any liquidation, the holders of shares of the Series A Preferred Stock are entitled to receive out of the assets of the Company available for distribution to the Company’s stockholders, before any distribution of assets is made to holders of any other class of capital stock of the Company, an amount equal to the purchase price per share, plus accumulated and unpaid dividends thereon to the date fixed for distribution.

EBI STOCK DIVIDEND

The Company will issue a stock dividend to ERF Wireless shareholders of up to 5% of the existing common stock in Energy Broadband, the Company's wholly owned oil and gas private subsidiary. ERF Wireless declared for each 200 shares of ERF Wireless common stock, or preferred stock convertible into 200 common shares, that a shareholder owns as of September 30, 2011, the shareholder will receive one unit of Energy Broadband securities consisting of 100 Energy Broadband common shares, one warrant to purchase 100 shares at a fixed price of $4.00 per share and one warrant to purchase an additional 100 shares at a fixed price of $6.00 per share. The Company has estimated the stock dividend to be 900,000 shares of EBI stock which may not be confirmed for up to 180 days. The stock dividend will be expensed based on our historical cost. The EBI shares were originally acquired by ERF at par of $0.001 for a total historical cost of $900.  ERF acquired the warrants from EBI on September 30, 2011 at fair value for a total cost of $132,302.
 
NOTE 5 – STOCK PLAN AND EMPLOYEE STOCK OPTIONS
 
In June 2011, the Board of directors increased the shares reserved under the 2011 Non-Qualified Stock Option Plan from 50,000 shares to 100,000. As of September 30, 2011 under the 2011 Non-Qualified Stock Option Plan, 99,866 shares were issued and outstanding to certain employees and consultants for services rendered.
   
   
2011
Plan
 
Shares initially reserved
    100,000  
         
Shares issued during 2011
    99,866  
         
Remaining shares available to be issued at September 30, 2011
    134  
         
Shares issued and outstanding as of September 30, 2011
    99,866  
   
In February 2011, the Board of directors adopted a Non-Qualified Stock Option Plan whereby 50,000 shares were reserved for issuance. As of June 30, 2011 under the 2011 Non-Qualified Stock Option Plan, all 50,000 shares were issued to certain employees and consultants for services rendered.
 
In June 2010, the Board of directors adopted a Non-Qualified Stock Option Plan whereby 50,000 shares were reserved for issuance. As of March 31, 2011, under the 2010 Non-Qualified Stock Option Plan, all 50,000 shares were issued to certain employees and consultants for services rendered.
   
 
8

 
 
ERF WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
 (Unaudited)
    
NOTE 6 – EARNINGS PER SHARE:
 
The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amount):
  
    For the three months ended September 30, 2011  
   
Income
(Numerator)
   
Shares
(Denominator)
   
Per-Share
Amount
 
Basic EPS:
                 
Loss from continuing operations
  $ (1,339 )     1,504     $ (0.89 )
Loss from discontinued operations
  $ -       1,504     $ -  
Loss available to common stockholders
  $ (1,348 )     1,504     $ (0.90 )
Effect of dilutive securities
    -               -  
Diluted EPS:
                       
Loss available to common stockholders and assumed conversions
  $ (1,348 )     1,504     $ (0.90 )
    
    For the three months ended September 30, 2010  
   
Income
(Numerator)
   
Shares
(Denominator)
   
Per-Share
Amount
 
Basic EPS:
                       
Loss from continuing operations
  $ (2,232 )     494     $ (4.52 )
Loss from discontinued operations
  $ (64 )     494     $ (0.13 )
Loss available to common stockholders
  $ (2,296 )     494     $ (4.65 )
Effect of dilutive securities
    -       -       -  
Diluted EPS:
                       
Loss available to common stockholders and assumed conversions
  $ (2,296 )     494     $ (4.65 )
  
    For the nine months ended September 30, 2011  
   
Net loss
(Numerator)
   
Shares
(Denominator)
   
Per-Share
Amount
 
Basic EPS:
                 
Loss from continuing operations
  $ (2,251 )     1,161     $ (1.94 )
Loss from discontinued operations
  $ (78 )     1,161     $ (0.07 )
Loss available to common stockholders
  $ (2,341 )     1,161     $ (2.02 )
Effect of dilutive securities
    -       -       -  
Diluted EPS:
                       
Loss available to common stockholders and assumed conversions
  $ (2,341 )     1,161     $ (2.02 )
     
    For the nine months ended September 30, 2010  
   
Net loss
(Numerator)
   
Shares
(Denominator)
   
Per-Share
Amount
 
Basic EPS:
                       
Loss from continuing operations
  $ (5,922 )     388     $ (15.26 )
Loss from discontinued operations
  $ (308 )     388     $ (0.79 )
Loss available to common stockholders
  $ (6,230 )     388     $ (16.06 )
Effect of dilutive securities
    -       -       -  
Diluted EPS:
                       
Loss available to common stockholders and assumed conversions
  $ (6,230 )     388     $ (16.06 )
  
For the nine months ended September 30, 2011, dilutive securities existed. Diluted earnings per share reflect the potential dilution of a security that could share in the earnings of an entity, such as convertible preferred stock, stock options, warrants or convertible securities.
 
The calculation of diluted earnings per share for the nine months ended September 30, 2011excludes 650 shares of common stock assuming all employee stock options were exercised; 3,867 shares of common stock assuming all warrants were exercised; 8,867,949 shares of common stock assuming all Series A Preferred Stock were converted due to their anti-dilutive effect.
  
 
9

 
 
ERF WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
 (Unaudited)
    
NOTE 7 – MAJOR CUSTOMERS
 
The Company had gross sales of approximately $3,772,000 and $2,817,000 for the nine months ended September 30, 2011 and 2010, respectively. The Company had one customer that represented 37% of the gross sales in the nine months ended September 30, 2011.
 
NOTE 8 – NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES
 
Notes payable, long-term debts and capital leases consist of the following as of September 30, 2011 (in thousands):
  
   
Terms
 
Maturity Date
 
Interest Rate
   
Gross Balance
   
Debt Discount
   
Balance
 
Bancleasing, Inc.
 
$10,660 / Month including interest
 
October-14
    11.62%     $ 352     $ -     $ 352  
Agility Capital Lease
 
$15,893 / Month including interest
 
Various
    18.82%       52       -       52  
Centramedia
 
$56,342 / Quarterly including interest
 
December-11
    7.50%       109       -       109  
Bridge loan promissory note
 
$52,658 / Month including interest
 
March-12
    18.00%       300       -       300  
E-bond investor notes
 
 3 years/ Semiannual interest (See below)
 
Various
    7.50%       50       37       13  
Line of credit
 
 2 years/ Quarterly interest (See below)
 
December-13
    12.00%       4,328       -       4,328  
Total debt
                  $ 5,191     $ 37       5,154  
Less current maturities
                                    (563 )
Long-term debt
                                  $ 4,591  
    
LINE OF CREDIT
 
During June 2010, the Company increased its unsecured revolving credit facility with Angus Capital Partners, a related party, from $10.5 million to $12.0 million maturing December 31, 2013. The terms of the unsecured revolving credit facility allow the Company to draw upon the facility as financing requirements dictate and provide for quarterly interest payments at a 12% rate per annum. The payment of principal and interest may be paid in cash, common shares or preferred shares at the Company’s election. At September 30, 2011, the outstanding balance on the line of credit totaled $4,328,000 with a remaining line of credit availability of $7,672,000.

For the nine months ended September 30, 2011, the Company has had several debt settlements of the unsecured revolving credit facility. See Note 8 for additional information on this facility.  The unsecured revolving credit facility provides financing for working capital requirements.  During the nine months ended September 30, 2011 the Company issued 550,758 shares of its Common Stock for the settlement of $1,771,000 of debt and $408,000 in accrued interest for a total amount of $2,179,000. The Company issued Common Stock at an average price of $3.96 per share of the ERFB common stock the day the debt was settled.
    
E-SERIES BOND INVESTOR NOTE
 
In July 2011, the Company issued to certain accredited investors a principal amount of $50,000 of E-series bonds (the "Bonds"). At September 30, 2011, the outstanding balance of the Bonds totaled $50,000. The Bonds are due and payable upon maturity, a three-year period from the issuance date. Interest on the Bonds is payable at the rate of 7.5% per annum, and is payable semiannually. The Bondholder may require the Company to convert the Bond (including any unpaid interest) into shares of common stock at any time only during the first year, but not thereafter. If the Bonds are converted under this option, the Company will issue shares representing 100% of the Bond principal and unpaid interest calculated through maturity. The common stock issued under this option will be valued at the five days closing price average of the common shares for the five days prior to the notification. If the Bond is converted within the first year the Company will issue a warrant to purchase one share of Energy Broadband Inc., common stock at a price of $4.00 for every $2.00 of Bond principal.
   
 
10

 
   
ERF WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
 (Unaudited)
    
At the Company's discretion at any time after the first year, the Bonds, including the interest payments calculated through the date of conversion may be repaid in cash or in shares of our common Stock ERF Wireless Inc., (ERFB), which shares will be valued at the average last sales price of our common stock over the 5-trading-day period preceding any payment date. If the Company chooses to issue shares of our common stock as repayment of the Bond principal, we will issue shares representing a value equal to 125% of the Bond principal. If the Company elects to issue shares of our common stock as payment of interest, we will issue shares representing a value equal to 100% of the interest due. The Bonds were determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature and the redemption option (compound embedded derivative liability). At the date of issuance the Bond, compound embedded derivative liabilities were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. These derivative liabilities will be marked-to-market each quarter with the change in fair value recorded in the income statement. The Company uses the effective interest method to record interest expense and related debt accretion which was $650 for the nine months ended September 30, 2011, and the estimated debt accretion for subsequent years is $1,629, $8,690, $13,660 and $12, 604 for years ending December 31, 2011, 2012, 2013 and 2014, respectively
 
The following table summarizes the convertible debt activity for the period July 29, 2011, thru September 30, 2011:
   
Description
 
E-Series Bonds
   
Compound Derivative Liability
   
Total
 
Fair value issuance at inception
  $ 12,767     $ 37,233     $ 50,000  
07-29-11 to 09-30-11 change in fair value
    650       11,210       11,860  
Conversions from inception to date
    -       -       -  
Fair value at September 30, 2011
  $ 13,417     $ 48,443     $ 61,860  
   
The Company recorded a net derivative expense of $11,210 and for the nine months ended September 30, 2011.

BRIDGE LOAN PROMISSORY NOTE

On September 30, 2011 the Company entered into a six month secured bridge loan with individuals for $300,000 with an interest rate of eighteen percent (18%). Subsequent to September 30, 2011 the note was increased to $600,000.  The repayment of the note will be from the proceeds of a $3,000,000 equipment loan from Dakota Capital Fund LLC. This secured equipment loan is expected to be funded in November 2011.
 
CAPITAL LEASES
 
Agility Lease Fund, LLC Included in property and equipment at September 30, 2011, is $52,019 capitalized equipment, net of amortization. The equipment and one of the Company's bank accounts are the primary collateral securing the financing with a guarantee of repayment by ERF Wireless, Inc.
 
Banc Leasing Inc., Included in property and equipment at September 30, 2011, is $391,994 capitalized equipment, net of amortization. The equipment is the primary collateral securing the financing.
 
NOTE 9 – COMMITMENTS
 
LEASES AND LICENSE AGREEMENTS
 
For the nine months ended September 30, 2011 and 2010, rental expenses of approximately $552,000 and $673,000, respectively, were incurred. The Company accounts for rent expense under leases that provide for escalating rentals over the related lease term on a straight-line method. The Company occupies office and tower facilities under several non-cancelable operating lease agreements expiring at various dates through September 2018, and requiring payment of property taxes, insurance, maintenance and utilities.
  
 
11

 
  
ERF WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
 (Unaudited)
   
Future minimum lease payments under non-cancelable operating leases at September 30, 2011, were as follows (in thousands):
    
Period Ending December 31,
 
Amount
 
2011
  $ 51  
2012
    54  
2013
    12  
2014
    7  
2015
    7  
Thereafter
    16  
Total
  $ 147  
     
Banc Leasing Inc.

During August 2007, the Company entered into a contract with Banc Leasing Inc., to fund the Company’s US-BankNet System. The funding is provided only after a contract is signed with financial institution. Each funding is collateralize by the equipment and normally is repaid over a seven year period with interest established at the date of the inception of the lease. Each lease has a $1 buyout provision. The details of the capital lease are included in footnote 8.

Purchase Commitment – Mobile Broadband Trailers

On March 15, 2011, the Company entered into a settlement agreement with the current manufacturer of mobile broadband trailers (MBT’s). Under the terms of this settlement the Company agreed to purchase an additional 168 MBT’s and replacement inventory on a delivery schedule which commenced March 15, 2011 and terminates October 1, 2013.  The estimated value of the purchase obligation is $3,000,000.
 
NOTE 10 – INDUSTRY SEGMENTS
 
This summary reflects the Company's current segments, as described below.
 
Wireless Bundled Services Division (WBS)
 
WBS provides wireless broadband products and services to commercial and individual customers throughout the wireless industry. The company is in the early stages of building and acquiring a seamless wireless broadband network throughout North America to serve private entities, cities, municipalities and the general public. All sales from external customers are located within the United States.
 
Wireless Messaging Services Division (WMS)
 
WMS principally provides wireless broadband system design and implementation, manufactures paging equipment, repair and maintain paging infrastructure equipment and supplies high-power infrastructure equipment to the wireless messaging industry. All sales from external customers are located within the United States as well as certain international locations.
 
Enterprise Network Services (ENS)
 
ENS provides product and service to operate an enterprise-class encrypted wireless banking network business. Also, ENS provides the CryptoVue System consisting of software, site-based hardware devices and servers to perform network encryption; contracts for the construction, operation, monitoring and maintenance of fixed wireless networks for banking, healthcare and educational customers; trade names, equipment and software, including the software architecture and design.
 
Energy Broadband, Inc. (EBI)
 
EBI provides wireless connectivity to rural oil and gas locations primarily via Mobile Broadband Trailers (MBT’s). EBI provides wireless broadband products and services focusing primarily on commercial customers providing high speed bandwidth to rural North America to serve the Oil and Gas sector. All sales from external customers are located within the United States and Canada.
   
 
12

 

ERF WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
 (Unaudited)
    
The Company’s industry segment data for the three months ended September 30, 2011and 2010 is as follows (in thousands):
  
Three Months Ended September 30, 2011
 
WMS
   
WBS
   
EBI
   
ENS
   
Total
 
Revenue
  $ 14     $ 543     $ 709     $ 65     $ 1,331  
Segment (loss) income
    2       (217 )     7       (60 )     (268 )
Segment assets
    9       1,526       2,203       1,301       5,039  
Capital expenditures
    -       204       812       9       1,025  
Depreciation and amortization
    -       483       198       108       789  
   
Three Months Ended September 30, 2010
 
WMS
   
WBS
   
EBI
   
ENS
   
Total
 
Revenue
  $ 16     $ 565     $ 251     $ 50     $ 882  
Segment (loss) income
    (45 )     (303 )     (105 )     (133 )     (586 )
Segment assets
    25       4,398       1,066       1,428       6,917  
Capital expenditures
    -       141       24       -       165  
Depreciation and amortization
    4       302       60       54       420  
    
Reconciliation of Segment Loss from Operations
 
Three Months Ended
September 30, 2011
   
Three Months Ended
September 30, 2010
 
Total segment loss from operations
  $ (268 )   $ (586 )
Total corporate overhead
    (868 )     (1,253 )
Consolidated loss from operations
  $ (1,136 )   $ (1,839 )
   
The Company’s industry segment data for the nine months ended September 30, 2011and 2010 is as follows (in thousands):
      
Nine Months Ended September 30, 2011
 
WMS
   
WBS
   
EBI
   
ENS
   
Total
 
Revenue
  $ 18     $ 1,640     $ 1,887     $ 227     $ 3,772  
Segment (loss) income
    (16 )     (480 )     94       (94 )     (496 )
Segment assets
    9       1,526       2,203       1,301       5,039  
Capital expenditures
    -       350       1,129       115       1,594  
Depreciation and amortization
    -       722       285       161       1,168  
   
Nine Months Ended September 30, 2010
 
WMS
   
WBS
   
EBI
   
ENS
   
Total
 
Revenue
  $ 100     $ 1,850     $ 629     $ 238     $ 2,817  
Segment (loss) income
    (85 )     (1,041 )     (262 )     (377 )     (1,765 )
Segment assets
    25       4,398       1,066       1,428       6,917  
Capital expenditures
    -       316       350       -       666  
Depreciation and amortization
    11       878       36       11       936  
      
Reconciliation of Segment Loss from Operations
 
Nine Months Ended
September 30, 2011
   
Nine Months Ended
September 30, 2010
 
Total segment loss from operations
  $ (496 )   $ (1,765 )
Total corporate overhead
    (2,389 )     (3,284 )
Consolidated loss from operations
  $ (2,885 )   $ (5,049 )
   
 
13

 
 
ERF WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
 (Unaudited)
   
Reconciliation of Segment Assets to Total Assets
 
September 30, 2011
   
December 31, 2010
 
Total segment assets
  $ 5,039     $ 6,294  
Total corporate assets
    421       198  
Consolidated  assets
  $ 5,460     $ 6,492  
      
The accounting policies of the reportable segments are the same as those described in footnote one. The Company evaluates the performance of its operating segments based on income before net interest expense, income taxes, accounting changes and non-recurring items.
 
For the nine months ended September 30, 2011, one customer accounts for $1,400,000 of EBI revenues.

NOTE 11 – ASSET PURCHASE AND SALE AGREEMENT
 
On February 14, 2011, the Company sold its North and Central Texas operations and assets for $2,700,000, in cash, settlement holdback receivable of $300,000 and 100,000 common shares of Keyon Communications, a public company.
 
The asset sale to Keyon Communication Holding; Inc. on February 14, 2011, were as follows (in thousands):
       
Keyon Communications asset sale
     
       
Gain on sale of assets to Keyon Communications Holdings Inc.
  $ 1,176  
Accounts receivable
    (6 )
Inventory
    53  
Deposits
    134  
Property and equipment
    489  
Goodwill
    1,079  
Identifiable intangible assets
    122  
Accounts payable
    (11 )
Accrued expenses
    (4 )
Asset selling price
    3,032  
Holdback settlement receivable
    (300 )
Equity securities
    (32 )
Proceeds from sale of assets
  $ 2,700  
  
As a condition of the closing of the asset purchase and sale agreement, the Company paid off $431,000 of notes payable and capital leases during the period ended June 30, 2011.
 
The holdback receivable of $300,000 was paid in full net of any settlement expenses.
 
NOTE 12 – SUBSEQUENT EVENTS
 
Subsequent to September 30, 2011, the Company issued 261,931 shares of common stock for services rendered, debt, and conversion of preferred stock for a settlement amount of $422,000.
 
Debt Financing From Dakota Capital Fund LLC
   
ERF Wireless, Inc finalized and signed a debt financing agreement with Dakota Capital Fund LLC of Sioux Falls, South Dakota, for financing of up to $3,000,000. The funding will be primarily utilized for equipment to build out networks in major oil and gas exploration regions of North America. The financing package provides for immediate access to $2,000,000.  Dakota Capital Fund LLC also has the option of funding an additional $1,000,000 within 90 days of October 31, 2011, under the same terms. The financing received under this debt facility is secured by certain ERF Wireless assets and there is no prepayment penalty.
   
 
14

 
   
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
 
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the other sections of this quarterly report on Form 10-Q, including the financial statements.
 
OUR MARKETS AND BUSINESS STRATEGY
 
Historically, our revenues have been generated primarily from Internet and construction services.  Our Internet revenues result from our offering of broadband and basic communications services to residential and enterprise customers.  Our construction revenues result from the construction of bank networks and other services associated with providing wireless products and services to the regional banking industry.  During the three months ended September 30, 2011, approximately 41% of our revenues were generated from internet services, 53% of our revenues were generated from providing broadband services to the energy industry, 5% of our revenues were generated from construction services and 1% was generated from wireless messaging services. We expect that our internet services will experience a decline in 2011 as a result of our recent divestiture of certain wireless broadband assets and operations in territories that are not core to our oil and gas vertical market focus and that the most growth during fiscal 2011 will continue to come from devoting significant capital resources to developing the oil and gas market utilizing wireless services.
 
During the third quarter of fiscal 2011, the Company continued to make progress with its strategic business plan as evidenced by the completion and announcement of numerous significant agreements and activities.
 
The Company’s financial condition improved dramatically as compared to the most recent fiscal year ended December 31, 2010 and the prior year same quarterly and nine month reporting period ended September 30, 2010 including but not limited to the following attributes:
 
 
The Company reported revenues of $1,331,000 for the quarter ended September 30, 2011 as compared to revenues of $882,000 for the same prior year quarter ended September 30, 2010; an increase of $449,000 or 51%.
     
 
The Company reported a net loss applicable to common shareholders of $1,348,000 for the quarter ended September 30, 2011 as compared to a Net Loss of $2,296,000 for the same prior quarter ended September 30, 2010; an improvement of $948,000 or 41%.
     
 
The Company’s Energy Broadband, Inc. subsidiary reported revenues of $709,000 for the quarter ended September 30, 2011 as compared to revenues of $251,000 for the same prior year quarter ended September 30, 2010; an increase of $458,000 or 182%.
     
 
The Company reported a reduction of $459,000 or 23% decline in Operating Expenses in the quarter ended September 30, 2011 as compared to the same prior year quarter ended September 30, 2010.
     
 
The Company reported revenues of $3,772,000 for the nine-month period ended September 30, 2011 as compared to revenues of $2,817,000 for the same prior year nine-month period ended September 30, 2010; an increase of $955,000 or 34%.
     
 
The Company reported a net loss applicable to common shareholders of $2,341,000 for the nine-month period ended September 30, 2011 as compared to a Net Loss of $6,230,000 for the same prior year nine-month period ended September 30, 2010; an improvement of $3,889,000 or 62%.
     
 
The Company’s Energy Broadband, Inc. subsidiary reported revenues of $1,887,000 for the nine-month period ended September 30, 2011 as compared to revenues of $629,000 for the same prior year nine-month period ended September 30, 2010; an increase of $1,258,000 or 200%.
     
 
The Company reported a reduction of $1,522,000 or 26% decline in Operating Expenses in the nine-month period ended September 30, 2011 as compared to the same prior year nine-month period ended September 30, 2010.
     
 
The Company’s liquidity position improved by $1,678,000 for the nine-month period ended September 30, 2011 as compared to the most recent balance sheet at fiscal year ended December 31, 2010; including a $448,000 increase in Current Assets, a $1,230,000 decrease in Current Liabilities that included $761,000 retirement of Long-term debt and Capital Lease obligations.
     
 
The Company invested $1,616,000 in cash during the nine-month period ended September 30, 2011, primarily for the purchase of assets in its Energy Broadband, Inc. subsidiary for the continued expansion of networks and infrastructure, including increasing its Mobile Broadband Trailer, (“MBT”) fleet associated with the increased oil and gas business growth being experienced.
  
 
15

 
   
 
The Company recently announced that it has secured $3,000,000 in debt financing from Dakota Capital Fund LLC.  The funding will be utilized by the Company to quickly expand its Energy Broadband subsidiary’s presence in the major oil and gas exploration regions of North America.
     
 
The Company recently announced that it had finalized the requirements for Energy Broadband Stock Dividend.
     
 
The Company’s stock now trades under the symbol ERFB.OB.
     
 
The Company recently announced that its patent attorney recently received correspondence from the U.S. Patent Office that a third patent the company previously applied for related to the CryptoVue® encrypted security device, has been approved and that a patent will be issued as soon as the proper forms are submitted.
     
 
The Company recently announced that its Enterprise Network Services (ENS) division has been actively working with its existing banking network customers in Texas and Louisiana to meet their needs for expanded and upgraded services, including the addition of new service areas.   ENS recently completed the addition of one new branch for one bank customer and is now in the process of finalizing plans for the addition of four to eight branches for two other bank customers.
     
 
The Company recently announced that it had been notified that it ranked number 337 on the Deloitte’s 2011 Technology Fast 500, an annual ranking by Deloitte LLP of the 500 fastest growing technology, media, telecommunications, life sciences and clean technology companies in North America.
     
 
The Company recently announced that in an expanded effort to create greater awareness about the company’s recent significant developments including the increase in its oil and gas business activities and related revenue increases, it has retained the services of Investor Awareness, Inc. as its new investor relations firm.
    
The Company's revenue is generated primarily from the sale of wireless communications products and services, including providing reliable, enterprise-class wireless broadband services. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectibility is probable.

The Company records revenues from its fixed-price, long-term contracts using the percentage-of-completion method. Revenues are recorded based on construction costs incurred to date as a percentage of estimated total cost at completion. The percentage-of-completion, determined by using total costs incurred to date as a percentage of estimated total costs at completion, reflects the actual physical completion of the project. This method of revenue recognition is used because management considers total cost to be the best available measure of progress on the contracts.

The Company recognizes product sales generally at the time the product is shipped. Concurrent with the recognition of revenue, the Company provides for the estimated cost of product warranties and reduces revenue for estimated product returns. Sales incentives are generally classified as a reduction of revenue and are recognized at the later of when revenue is recognized or when the incentive is offered. Shipping and handling costs are included in cost of goods sold.

Service revenue is principally derived from wireless broadband services, including internet, voice, and data and monitoring service. Subscriber fees are recorded as revenues in the period during which the service is provided.
       
 
16

 
  
RESULTS OF OPERATIONS
 
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011, COMPARED TO THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010
 
The following table sets forth summarized consolidated financial information for the three and nine months ended September 30, 2011 and 2010:
  
   
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
($ in thousands)
 
2011
   
2010
   
$ Change
   
% Change
   
2011
   
2010
   
$ Change
   
% Change
 
Total sales
  $ 1,331     $ 882     $ 449       51%     $ 3,772     $ 2,817     $ 955       34%  
Cost of goods sold
    898       693       205       30%       2,432       2,119       313       15%  
Gross profit
    433       189       244       129%       1,340       698       642       92%  
Percent of total sales
    33%       21%                       36%       25%                  
Operating expenses
    1,569       2,028       (459 )     -23%       4,225       5,747       (1,522 )     -26%  
Loss from operations
    (1,136 )     (1,839 )     703       -38%       (2,885 )     (5,049 )     2,164       -43%  
Other income/(expense)
    (203 )     (393 )     190       -48%       634       (873 )     1,507       -173%  
Loss from continuing operations
    (1,339 )     (2,232 )     893       40%       (2,251 )     (5,922 )     3,671       62%  
Loss from discontinued operations
    -       (64 )     64       100%       (78 )     (308 )     230       75%  
Other comprehensive loss
    (9 )     -       (9 )     -100%       (12 )     -       (12 )     -100%  
Net loss applicable to common shareholders
  $ (1,348 )   $ (2,296 )   $ 948       -41%     $ (2,341 )   $ (6,230 )   $ 3,889       -62%  
    
For the three months ended September 30, 2011, the Company's business operations reflected a decrease in sales for Wireless Bundled Services (WBS), Wireless Messaging Services (WMS), and offset with an increased in Enterprise Network Services (ENS) and Energy Broadband, Inc. (EBI). For the three months ended September 30, 2011, the Company's consolidated operations generated net sales of $1,331,000 compared to prior year net sales of $882,000. The $449,000 increase in net sales is primarily attributable to $22,000 decrease sales in WBS is primarily due to a reduction in our retail wireless and dialup customer base, $2,000 decrease in WMS due to decline in wireless infrastructure sales and services, offset with a $458,000 increased sales in EBI from deployment of our Mobile Broadband Trailers (MBT’s) in the oil and gas regions and $15,000 increased sales in ENS primarily due to recurring sales of school network installation and services.  Service sales increased $419,000 and product sales increased $30,000 for a total increase of $449,000. For the three months ended September 30, 2011, the Company had a gross profit margin of 33%, compared to a gross profit margin 21% for the prior year. The $244,000 increase in gross profit margin is primarily attributed to the following factors; (i) approximately $173,000 increase in gross margin in EBI attributable to increase sales associated with (MBT’s) utilize in the field in oil and gas regions and (ii) $11,000 increase in gross margins in ENS primarily related to decrease tower rent of our BankNet infrastructure (iii) $45,000 increase in gross margins in WBS primarily related to decrease third party service cost and an increase of $15,000 in WMS.

For the nine months ended September 30, 2011, the Company's business operations reflected a decrease in sales for Wireless Bundled Services (WBS), Enterprise Network Services (ENS), and Wireless Messaging Services (WMS) with an offset of increased sales of Energy Broadband, Inc. (EBI). For the nine months ended September 30, 2011, the Company's consolidated operations generated net sales of $3,772,000 compared to prior year net sales of $2,817,000. The $955,000 increase in net sales is primarily attributable to $210,000 decrease sales in WBS is primarily due to a reduction in our retail wireless and dialup customer base, $11,000 decrease sales in ENS due to reduction in sales of banking network installation and services, $82,000 decrease in WMS due to decline in wireless infrastructure sales and services and offset with a $1,258,000 increased sales in EBI from deployment of our Mobile Broadband Trailers (MBT’s) in the oil and gas regions.  Service sales increased $903,000 and product sales increased $52,000 for a total increase of $955,000. For the nine months ended September 30, 2011, the Company had a gross profit margin of 36%, compared to a gross profit margin 25% for the prior year. The $642,000 increase in gross profit margin is primarily attributed to the following factors; (i) approximately $463,000 increase in gross margin in EBI attributable to increase sales associated with (MBT’s) utilize in the field in oil and gas regions and (ii) $36,000 increase in gross margins in ENS primarily related to decrease tower rent of our BankNet infrastructure (iii) $172,000 increase in gross margins in WBS primarily related to decrease third party service cost, with an offset of $29,000 in WMS due to decline in wireless infrastructure sales and services.
 
The Company incurred a net loss including other comprehensive loss of $1,348,000 for the three months ended September 30, 2011. The Company's principal components had declining expenses over prior period September 30, 2010 which significantly contributed to the reduction in net loss for the three months ended September 30, 2011. The components included approximately $414,000 in depreciation and amortization expenses, $194,000 of interest expense, $291,000 of other general and administrative expense, $808,000 in employment expenses and $314,000 in professional services expense.
 
The Company incurred a net loss including other comprehensive loss of $2,341,000 for the nine months ended September 30, 2011. The Company's principal components had declining expenses over prior period September 30, 2010 which significantly contributed to the reduction in net loss for the nine months ended September 30, 2011. The components included approximately $1,223,000 in depreciation and amortization expenses, $560,000 of interest expense, $766,000 of other general and administrative expense, $2,139,000 in employment expenses, $841,000 in professional services expense, and a gain on sale of assets of $1,176,000 due to a sale of non-core assets of our North and Central Texas network on February 14, 2011, and a gain on sale of other assets of $8,000.
   
 
17

 
     
SALES INFORMATION
 
Set forth below is a table presenting summarized sales information for our business segments for the three months and nine months ended September 30, 2011 and 2010.
  
($ in thousands)
 
Three Months Ended September 30,
Business Segment
  2011  
% of Total
  2010  
% of Total
  $ Change  
% Change
Wireless Messaging Services
 
$
         14
 
1%
 
$
         16
 
2%
 
$
(2
-13%
Wireless Bundled Services
   
       543
 
41%
   
       565
 
64%
   
       (22
-4%
Enterprise Network Services
   
         65
 
5%
   
         50
 
6%
   
         15
 
30%
Energy Broadband, Inc.
   
       709
 
53%
   
       251
 
28%
   
       458
 
182%
Total Sales
 
$
    1,331
 
100%
 
$
       882
 
100%
 
$
       449
 
51%
    
($ in thousands)
 
Nine Months Ended September 30,
Business Segment
  2011  
% of Total
  2010  
% of Total
  $ Change  
% Change
Wireless Messaging Services
 
$
         18
 
0%
 
$
       100
 
4%
 
$
       (82
)
-82%
Wireless Bundled Services
   
    1,640
 
43%
   
    1,850
 
66%
   
     (210
)
-11%
Enterprise Network Services
   
       227
 
6%
   
       238
 
8%
   
       (11
-5%
Energy Broadband, Inc.
   
    1,887
 
50%
   
       629
 
22%
   
    1,258
 
200%
Total Sales
 
$
    3,772
 
100%
 
$
    2,817
 
100%
 
$
       955
 
34%
   
For the three months ended September 30, 2011, net sales increased to $1,331,000 from $882,000 for the three months ended September 30, 2010. The overall increase of 51% was attributable to an increase of $458,000 of Energy Broadband, Inc., increase of $15,000 in Enterprise Network Services, offset with a decrease of $22,000 of Wireless Bundled Services and a decrease in Wireless Messaging Services of $2,000. The $458,000 increased sales in EBI are from deployment of our Mobile Broadband Trailers (MBT’s) in the oil and gas regions, $15,000 in ENS due primarily to recurring sales of school network installation and services with an offset of $22,000 decreased sales in WBS due to a reduction in our retail wireless and dialup customer base, and $2,000 decrease in WMS due to a decline in wireless infrastructure sales and services.
 
For the nine months ended September 30, 2011, net sales increased to $3,772,000 from $2,817,000 for the nine months ended September 30, 2010. The overall increase of 34% was attributable to an increase of $1,258,000 of Energy Broadband, Inc., offset with a decrease of $210,000 of Wireless Bundled Services, decrease of $11,000 in Enterprise Network Services and a decrease in Wireless Messaging Services of $82,000. The $1,258,000 increased sales in EBI are from deployment of our Mobile Broadband Trailers (MBT’s) in the oil and gas regions, with an offset of $210,000 decreased sales in WBS due to a reduction in our retail wireless and dialup customer base, $11,000 decreased sales in ENS due to a reduction of banking network installation sales and services and $82,000 decrease in WMS due to a decline in wireless infrastructure sales and services.
   
COST OF GOODS SOLD
 
The following tables set forth summarized cost of goods sold information for the three months ended September 30, 2011 and 2010.
     
($ in thousands)
 
Three Months Ended September 30,
Business Segment
  2011  
% of Total
  2010  
% of Total
  $ Change  
% Change
Wireless Messaging Services
 
$
           4
 
0%
 
$
         21
 
3%
 
$
             (17
-81%
Wireless Bundled Services
   
       328
 
37%
   
       396
 
57%
   
             (68
-17%
Enterprise Network Services
   
         85
 
9%
   
         81
 
12%
   
                4
 
5%
Energy Broadband, Inc.
   
       481
 
54%
   
       195
 
28%
   
            286
 
147%
Total cost of sales
 
$
       898
 
100%
 
$
       693
 
100%
 
$
            205
 
30%
      
 
18

 
        
   
Three Months Ended
September 30,
             
($ in thousands)
 
2011
   
2010
   
$ Change
   
% Change
 
                         
Products and integration service
  $ 431     $ 251     $ 180       72%  
Rent and maintenance
    114       93       21       23%  
Depreciation
    353       349       4       1%  
Total cost of sales
  $ 898     $ 693     $ 205       30%  
  
For the three months ended September 30, 2011, cost of goods sold increased by $205,000, or 30%, to $898,000 from $693,000 as compared to the three months ended September 30, 2010. The increase of $205,000 in cost of goods sold is primarily attributable to an increase of $286,000 in EBI due to increased third party services for deployment of our Mobile Broadband Trailers (MBT’s) in oil and gas regions, $4,000 increase in ENS and offset with a $68,000 decrease in WBS due to a decreasing third party cost and a decrease of $17,000 in WMS primarily related to materials and supplies associated with decrease sales.

The following tables set forth summarized cost of goods sold information for the Nine months ended September 30, 2011 and 2010.
  
($ in thousands)
 
Nine Months Ended September 30,
Business Segment
  2011  
% of Total
  2010  
% of Total
  $ Change  
% Change
Wireless Messaging Services
 
$
           4
 
0%
 
$
         57
 
3%
 
$
             (53
-93%
Wireless Bundled Services
   
       988
 
41%
   
    1,371
 
65%
   
           (383
-28%
Enterprise Network Services
   
       273
 
11%
   
       319
 
15%
   
             (46
-14%
Energy Broadband, Inc.
   
    1,167
 
48%
   
       372
 
17%
   
            795
 
214%
Total Cost of Goods
 
$
    2,432
 
100%
 
$
    2,119
 
100%
 
$
            313
 
15%
   
   
Nine Months Ended September 30,
             
($ in thousands)
 
2011
   
2010
   
$ Change
   
% Change
 
                         
Products and integration service
  $ 1,088     $ 798     $ 290       36%  
Rent and maintenance
    314       298       16       5%  
Depreciation
    1,030       1,023       7       1%  
Total Operating Expenses
  $ 2,432     $ 2,119     $ 313       15%  
  
For the nine months ended September 30, 2011, cost of goods sold increased by $313,000, or 15%, to $2,432,000 from $2,119,000 as compared to the nine months ended September 30, 2010. The increase of $313,000 in cost of goods sold is primarily attributable to an increase of $795,000 in EBI due to increased third party services for deployment of our Mobile Broadband Trailers (MBT’s) in oil and gas regions and offset with a $46,000 decrease in ENS due to streamlining tower rent cost of our BankNet infrastructure, $383,000 decrease in WBS due to a decreasing third party cost and a decrease of $53,000 in WMS primarily related to materials and supplies associated with decrease sales.
  
OPERATING EXPENSES
 
The following table sets forth summarized operating expense information for the three months and nine months ended September 30, 2011 and 2010:
  
   
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
($ in thousands)
 
2011
   
2010
   
$ Change
   
% Change
   
2011
   
2010
   
$ Change
   
% Change
 
                                                 
Employment expenses
  $ 808     $ 922     $ (114 )     -12%     $ 2,139     $ 2,885     $ (746 )     -26%  
Professional services
    314       670       (356 )     -53%       841       1,377       (536 )     -39%  
Rent and maintenance
    95       87       8       9%       286       268       18       7%  
Depreciation and amortization
    61       94       (33 )     -35%       193       306       (113 )     -37%  
Other general and administrative
    291       255       36       14%       766       911       (145 )     -16%  
Total operating expenses
  $ 1,569     $ 2,028     $ (459 )     -23%     $ 4,225     $ 5,747     $ (1,522 )     -26%  
   
 
19

 
  
For the three months ended September 30, 2011, operating expenses decreased by 23% to $1,569,000, as compared to $2,028,000 for the three months ended September 30, 2010. The decreases that occurred, as evidenced by the immediately preceding table, are discussed below:
  
 
A $114,000 decrease in employment expense. The decrease is primarily attributable to the centralization of our operations thus reducing our employee headcount to 55 at September 30, 2011 from 69 at September 30, 2010;
     
 
A $356,000 decrease in professional services;
     
 
A $33,000 decrease in depreciation and amortization; and
     
 
A $36,000 increase in other general and administrative expense.
   
For the nine months ended September 30, 2011, operating expenses decreased by 26% to $4,225,000, as compared to $5,747,000 for the nine months ended September 30, 2010. The decreases that occurred, as evidenced by the immediately preceding table, are discussed below:
 
 
A $746,000 decrease in employment expense. The decrease is primarily attributable to the centralization of our operations thus reducing our employee headcount to 55 at September 30, 2011 from 69 at September 30, 2010;
     
 
A $536,000 decrease in professional services;
     
 
A $113,000 decrease in depreciation and amortization; and
     
 
A $145,000 decrease in other general and administrative expense.
  
OTHER (INCOME) EXPENSE, NET
 
For the three months ended September 30, 2011, the decrease in other expense is primarily attributable to other income net of $2,000 and a decline in our interest expense, net on debt obligations totaling $194,000 and a net derivative expense to $11,000 as compared to interest expense, net of $316,000, loss on extinguishment of debt of $63,000, loss on sale of other assets and other expense net of $21,000 and derivative income of $7,000 for the three months ended September 30, 2010. The derivative expense/income represents the net unrealized (non-cash) charge during the three months ended September 30, 2011 and 2010, in the fair value of our derivative instrument liabilities related to warrants and embedded derivatives in our debt instruments that have been bifurcated and accounted for separately.
 
For the nine months ended September 30, 2011, the increase in other income is primarily attributable to gain on sale of assets of $1,176,000 on the asset sale of non-core assets of our North and Central Texas network on February 14, 2011, gain on sale of other assets and other income net of $16,000 and a decline in our interest expense, net on debt obligations totaling $560,000 and a reduction in our net derivative income to $2,000 as compared to interest expense, net of $1,130,000, loss on extinguishment of debt of $63,000, loss on sale of other assets and other income net of $14,000 and derivative income of $334,000 for the nine months ended September 30, 2010. The derivative expense/income represents the net unrealized (non-cash) charge during the nine months ended September 30, 2011 and 2010, in the fair value of our derivative instrument liabilities related to warrants and embedded derivatives in our debt instruments that have been bifurcated and accounted for separately.
 
NET LOSS
 
For the three months ended September 30, 2011, our net loss before other comprehensive loss was $1,339,000 compared to a loss of $2,232,000 for the three months ended September 30, 2010. The decrease in the net loss for the three months ended September 30, 2011, as compared to the three months ended September 30, 2010 is primarily attributable to the factors describe in the preceding tables.
 
For the nine months ended September 30, 2011, our net loss before other comprehensive loss was $2,329,000 compared to a loss of $6,230,000 for the nine months ended September 30, 2010. The decrease in the net loss for the nine months ended September 30, 2011, as compared to the nine months ended September 30, 2010 is primarily attributable to the factors describe in the preceding tables.
 
CASH FLOWS
 
The Company's operating activities increased net cash used by operating activities to $1,632,000 in the nine months ended September 30, 2011, compared to net cash used of $1,605,000 in the nine months ended September 30, 2010. The increase in net cash used by operating activities was primarily attributable to decrease depreciation and amortization over prior year leading to an improvement in the company's net operating loss of $2,329,000, net of $1,375,000 non-cash charges combined with $678,000 of cash used by fluctuations in working capital requirements consisting of the combination of accounts receivable, inventory, prepaid expenses, accounts payable, accrued expenses, deferred liability lease and deferred revenue.
  
 
20

 
  
The Company's investing activities provided net cash of $1,085,000 in the nine months ended September 30, 2011, compared to net cash used of $632,000 in the nine months ended September 30, 2010. The increase in investing activities is primarily the sale of non-core assets of our North and Central Texas network
 
The Company's financing activities provided net cash of $813,000 in the nine months ended September 30, 2011, compared to $2,045,000 of cash provided in the nine months ended September 30, 2010. The cash provided in the nine months ended September 30, 2011, was primarily associated with proceeds from debt financing and the line of credit, net.
 
LIQUIDITY AND CAPITAL RESOURCES
 
At September 30, 2011, the Company's current assets totaled $1,367,000 (including cash and cash equivalents of $309,000); total current liabilities were $2,338,000, resulting in negative working capital of $971,000. The Company has funded operations to date primarily through a combination of utilizing cash on hand, borrowings and raising additional capital through the sale of its securities. The Company’s operation for the nine months ended September 30, 2011, was primarily funded by proceeds from the Company's line of credit totaling $1,224,000, debt financing of $350,000 and the divestiture of certain non-core assets and operations receiving proceeds of $2,700,000.
 
CURRENT DEBT FACILITY
 
In June 2010, the Company increased its unsecured revolving credit facility with Angus Capital Partners a related party from $10.5 million to $12.0 million maturing December 31, 2013. At September 30, 2011, the Company had approximately $7,672,000 available on a $12.0 million unsecured revolving credit facility with Angus Capital Partners, with an outstanding balance of $4,328,000. The terms of the unsecured revolving credit facility will allow us to draw upon the facility as financing requirements dictate and provides for quarterly interest payments at an annual 12% rate. The loan may be prepaid without penalty or repaid at maturity. Subsequent to September 30, 2011, the Company entered into a long-term debt facility of $3,000,000. The Company has received $1,600,000 under this facility.
 
ISSUANCE OF COMMON STOCK
 
During the three months ended September 30, 2011, we issued to various accredited investors and third parties (i) 288,193 shares for services rendered and debt conversions, and (ii) 121,412 shares upon conversion of Series A Preferred Stock. We relied on Section 4(2) of the Securities Act in effecting these transactions. During the three months ended September 30, 2011, we issued 43,221 shares of common stock to employees and business consultants, for aggregate consideration of $123,000 of services rendered, pursuant to a registration statement on form S-8.
 
During the nine months ended September 30, 2011, we issued to various accredited investors and third parties (i) 628,855 shares for services rendered and debt conversions, and (ii) 136,353 shares upon conversion of Series A Preferred Stock. We relied on Section 4(2) of the Securities Act in effecting these transactions. During the nine months ended September 30, 2011, we issued 108,258 shares of common stock to employees and business consultants, for aggregate consideration of $533,347 of services rendered, pursuant to a registration statement on form S-8.
 
USE OF WORKING CAPITAL
 
We believe our cash and available credit facilities afford us adequate liquidity for the balance of fiscal 2011.  We anticipate that we will need additional capital in the future to continue to expand our business operations, which expenditures may include acquisitions and capital expenditures.  We have historically financed our operations through private equity and debt financings. We do not have any commitments for significant equity funding at this time, and additional funding may not be available to us on favorable terms, if at all. As such there is no assurance that we can raise additional capital from external sources, the failure of which could cause us to curtail operations.
 
OFF-BALANCE SHEET ARRANGEMENTS
 
As of September 30, 2011, the Company did not have any significant off-balance-sheet arrangements other than certain office and tower facility operating leases requiring minimal commitments under non-cancelable leases disclosed in the table above.
  
 
21

 
  
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 
Property and Equipment
 
Property and equipment are stated at cost less accumulated depreciation. Major renewals and improvements are capitalized; minor replacements, maintenance and repairs are charged to current operations. Depreciation is computed by applying the straight-line method over the estimated useful lives which are generally three to seven years.
 
Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. No impairment losses have been recorded since inception.

Long-Lived Assets

We review our long-lived assets, to include intangible assets subject to amortization, for recoverability whenever events or changes in circumstances indicate that the carrying amount of such long-lived asset or group of long-lived assets (collectively referred to as "the asset") may not be recoverable. Such circumstances include, but are not limited to:
  
 
a significant decrease in the market price of the asset;
     
 
a significant change in the extent or manner in which the asset is being used;
     
 
a significant change in the business climate that could affect the value of the asset;
     
 
a current period loss combined with projection of continuing loss associated with use of the asset;
     
 
a current expectation that, more likely than not, the asset will be sold or otherwise disposed of before the end of its previously estimated useful life;
  
We continually evaluate whether such events and circumstances have occurred. When such events or circumstances exist, the recoverability of the asset's carrying value shall be determined by estimating the undiscounted future cash flows (cash inflows less associated cash outflows) that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset. To date, no such impairment has occurred. To the extent such events or circumstances occur that could affect the recoverability of our long-lived assets, we may incur charges for impairment in the future.

Derivative Instruments
 
In connection with the sale of debt or equity instruments, the Company may sell options or warrants to purchase our common stock. In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, such as embedded derivative features which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.
 
The Company's derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income in the period in which the changes occur. For options, warrants and bifurcated embedded derivative features that are accounted for as derivative instrument liabilities, the Company estimates fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The valuation techniques require assumptions related to the remaining term of the instruments and risk-free rates of return, our current common stock price and expected dividend yield, and the expected volatility of our common stock price over the life of the option. Because of the limited trading history for our common stock, the Company estimates the future volatility of its common stock price based on not only the history of its stock price but also the experience of other entities considered comparable to the Company.

Recent Accounting Pronouncements
Management does not anticipate that the recently issued but not yet effective accounting pronouncements will materially impact the Company’s financial condition.
   
 
22

 
   
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
As a smaller reporting company, as defined in rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are not required to provide the information mandated by this item.
 
ITEM 4. CONTROLS AND PROCEDURES
 
We maintain controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed as of the end of the period covered by this report, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures were adequate.
 
There were no changes in the Company's internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
  
 
23

 
   
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
  
We are not a party to any material legal proceedings.

On January 13, 2009, the Company entered into exclusive reseller agreements with Schlumberger Technology Corporation and Schlumberger Canada Limited (Schlumberger).  Currently, the contract is in operation in its second year.  During the fourth quarter of 2010 the Company and Schlumberger entered into a contractual mediation to resolve various financial issues.  During 2011 the Company and Schlumberger were unable to resolve these financial issues through mediation and the Company has initiated binding arbitration as mandated in the contract.
 
ITEM 1A. RISK FACTORS
 
See Risk Factors in item 1A of the Company form 10-K of Fiscal year ended December 31, 2010.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
The following transactions were completed pursuant to either Section 4(2) of the Securities Act or Regulation D of the Securities Act. With respect to issuances made pursuant to Section 4(2) of the Securities Act, the transactions did not involve any public offering and were sold to a limited group of persons. Each recipient either received adequate information about ERF Wireless or had access, through employment or other relationships, to such information, and ERF Wireless determined that each recipient had such knowledge and experience in financial and business matters that they were able to evaluate the merits and risks of an investment in the Company.
 
With respect to issuances made pursuant to Regulation D of the Securities Act, ERF Wireless determined that each purchaser was an "accredited investor" as defined in Rule 501(a) under the Securities Act, or if such investor was not an accredited investor, that such investor received the information required by Regulation D.
 
Except as otherwise noted, all sales of the Company's securities were made by officers of the Company who received no commission or other remuneration for the solicitation of any person in connection with the respective sales of securities described above. The recipients of securities represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions.
 
Common Stock Issued for Debt Conversions
 
In July, 2011, 104,813 shares of common stock at average price of $3.18 were issued for debt conversions.
   
In August, 2011, 75,000 shares of common stock at average price of $1.32 were issued for debt conversions.
  
In September, 2011, 108,380 shares of common stock at average price of $1.54 were issued for debt conversions.
 
Common Stock Issued Upon Conversion of Series A Preferred Stock
 
On July 1, 2011, an accredited investor acquired 22,412 shares of common stock pursuant to Preferred A Conversions.
 
On August 10, 2011, an accredited investor acquired 99,000 shares of common stock pursuant to Preferred A Conversions.
 
ITEM 3. DEFAULT IN SENIOR SECURITIES
 
None.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
None.
  
 
24

 
  
ITEM 5. OTHER INFORMATION
 
None.
  
ITEM 6. EXHIBITS
  
Exhibit 31
Certification of Chief Executive officer and Chief Financial officer pursuant to Rules 13a-14 (a) and 15d-14 (a), as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002
   
Exhibit 32
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
101.INS
XBRL Instance Document
   
101.SCH
XBRL Taxonomy Extension Schema Document
   
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF
XBRL Definition Linkbase Document
   
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
25

 
  
SIGNATURES
 
In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
  
ERF Wireless, Inc.    
       
 
By:
/s/ H. Dean Cubley  
   
H. Dean Cubley
 
   
Chief Executive Officer
 
  Date: November 18, 2011  
 
 
 
 
26