10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

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

For the quarterly period ended June 30, 2013

OR

£ 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 S   No £

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 S   No £

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 £   Accelerated filer £

Non-accelerated filer £    Smaller reporting company S

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes £   No S

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 11,593,803 common shares issued and outstanding as of August 14, 2013

1

PART I – FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

ERF WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2013, AND DECEMBER 31, 2012
($ in thousands except share data)

	June 30,			December 31,
	2013			2012
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	1,287		$	118
Accounts receivable, net		725			828
Accounts receivable, other		344			346
Inventories		363			377
Costs and estimated earnings in excess of billings on uncompleted contracts		–			35
Prepaid expenses and other current assets		402			221
Total current assets		3,121			1,925
Property and equipment
Property and equipment		11,946			11,644
Less: accumulated depreciation		(8,477	)		(7,511	)
Net property and equipment		3,469			4,133
Goodwill		176			176
Other assets		36			37
Total assets	$	6,802		$	6,271
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Notes payable and current portion of long-term debt	$	2,973		$	1,358
Current portion of long-term capital leases		220			169
Accounts payable	$	1,045		$	1,226
Accrued expenses		947			1,120
Derivative liabilities		1,107			492
Deferred revenue		8			20
Total current liabilities		6,300			4,385
Line of credit (LOC)		3,027			3,168
Long-term debt, net of current portion		1,133			1,419
Long-term capital leases, net of current portion		231			214
Total liabilities		10,691			9,186
Commitments
Shareholders’ deficit:
Preferred stock  -  $0.001 par value, 25,000,000  authorized
Series A designated 10,000,000 shares issued and outstanding at June 30, 2013 and December 31, 2012, 8,426,982 and 8,426,982 shares, respectively		8			8
Common stock  -  $0.001 par value Authorized 975,000,000 shares issued and outstanding at June 30, 2013 and December 31,  2012, 10,244,153 and 5,487,072 shares, respectively		10			6
Additional paid in capital		55,922			52,987
Accumulated deficit		(59,924	)		(56,012	)
Accumulated other comprehensive loss		(32	)		(32	)
Total ERF Wireless, Inc. shareholders’ deficit		(4,016	)		(3,043	)
Non-controlling interest		127			128
Total shareholders’ deficit		(3,889	)		(2,915	)
Total liabilities and shareholders' deficit	$	6,802		$	6,271

See accompanying notes to consolidated financial statements.

2

ERF WIRELESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2013 AND 2012

(Unaudited)
($ in thousands except loss per share)

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2013			2012			2013			2012
Sales:
Products	$	–		$	28		$	11		$	44
Services		1,563			1,659			3,466			3,291
Total sales		1,563			1,687			3,477			3,335
Costs of goods sold:
Products and integration services		366			537			759			953
Rent, repairs and maintenance		198			173			393			300
Depreciation		435			338			872			624
Total costs of goods sold		999			1,048			2,024			1,877
Gross profit		564			639			1,453			1,458
Operating expenses:
Selling, general and administrative		1,859			1,634			3,836			3,085
Depreciation		52			55			104			107
Total operating expenses		1,911			1,689			3,940			3,192
Loss from operations		(1,347	)		(1,050	)		(2,487	)		(1,734	)
Other income (expense):
Interest expense, net		(1,030	)		(320	)		(1,789	)		(679	)
Derivative income		104			18			339			101
Gain on sale of assets		13			–			24			–
Total other (expense) income		(913	)		(302	)		(1,426	)		(578	)
Consolidated net loss		(2,260	)		(1,352	)		(3,913	)		(2,312	)
Net loss (income) attributable to non-controlling interest		4			(3	)		1			(8	)
Net loss attributable to ERF Wireless, Inc.		(2,256	)		(1,355	)		(3,912	)		(2,320	)
Other comprehensive (loss):
Unrealized loss on securities held for resale		–			(2	)		–			(6	)
Total other comprehensive loss		–			(2	)		–			(6	)
Total comprehensive loss	$	(2,256	)	$	(1,357	)	$	(3,912	)	$	(2,326	)
Basic loss per common share:
Net loss	$	(0.24	)	$	(0.46	)	$	(0.48	)	$	(0.87	)
Net loss attributable to ERF Wireless, Inc.	$	(0.24	)	$	(0.46	)	$	(0.48	)	$	(0.87	)
Diluted loss per common share:
Net loss	$	(0.24	)	$	(0.46	)	$	(0.48	)	$	(0.87	)
Net loss attributable to ERF Wireless, Inc.	$	(0.24	)	$	(0.46	)	$	(0.48	)	$	(0.87	)

See accompanying notes to consolidated financial statements.

3

ERF WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012

(Unaudited)
($ in thousands)

	2013			2012
Cash flows from operating activities
Net loss	$	(3,913	)	$	(2,312	)
Adjustments to reconcile net loss to net cash used by operating activities:
Gain on sale of assets		(24	)		–
Amortization of debt discount		892			128
Depreciation		976			731
Stock issued for services rendered, interest  and compensation		709			214
Derivative income		(339	)		(101	)
Bad debt expense		17			–
Changes in:
Accounts receivable, net		86			(59	)
Accounts receivable, other		2			(127	)
Inventories		7			(53	)
Prepaid expenses and other current assets		167			155
Costs and profits in excess of billings		35			–
Accounts payable		(181	)		360
Accrued expenses		(97	)		414
Deferred revenue		(12	)		(1	)
Total adjustment		2,238			1,661
Net cash used by operating activities		(1,675	)		(651	)
Cash flows from investing activities
Purchase of property and equipment		(168	)		(906	)
Proceeds from sale of assets		34			–
Change in other assets		1			31
Net cash used by investing activities		(133	)		(875	)
Cash flows from financing activities
Net proceeds from line of credit		774			319
Proceeds from long-term debt obligations		2,916			845
Payment of long-term debt obligations		(632	)		(7	)
Payment on capital lease obligations		(81	)		(73	)
Net cash provided by financing activities		2,977			1,084
Net change in cash and cash equivalents		1,169			(442	)
Cash and cash equivalents at the beginning of the period		118			591
Cash and cash equivalents at the end of the period	$	1,287		$	149
Supplemental disclosure of cash flow information:
Net cash paid during the period for:
Interest	$	125		$	209
Income taxes	$	–		$	–
Supplemental non-cash investing and financing activities:
Conversion of debt through issuance of common stock	$	1,139		$	155
Conversion of preferred stock to common stock	$	–		$	70
Conversion of LOC and interest through issuance of common stock	$	1,113		$	1,275
Unrealized loss on securities held for resale	$	–		$	(6	)
Transfer of subsidiary equity to non-controlling interest	$	–		$	107
Property and equipment financed with debt and capital leases	$	148		$	73

See accompanying notes to consolidated financial statements.

4

ERF WIRELESS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
FOR THE PERIODS ENDED JUNE 30, 2013 AND DECEMBER 31, 2012
(in thousands)

	Common Stock				Preferred Stock						Additional Paid in			Accumulated			Accumulated Comprehensive			Non-controlling			Total Shareholders’
	Shares		Value		Shares			Value			Capital			Deficit			Income			Interest			Deficit
Total shareholders’ deficit as of December 31, 2011		2,161	$	2		8,579		$	9		$	49,121		$	(51,198	)	$	(25	)	$	–		$	(2,091	)
Net loss		–		–		–			–			–			(4,814	)		–			21			(4,793	)
New stock issued to shareholders:
Conversion of preferred stock to common stock		270		–		(270	)		(1	)		1			–			–			–			–
For services, compensation and interest		440		1		–			–			620			–			–			–			621
For retirement of debt		393		1		–			–			534			–			–			–			535
Conversion of LOC and interest to preferred stock		–		–		118			–			124			–			–			–			124
Stock based compensation		–		–		–			–			–			–			–			–			–
Conversion of LOC and interest to common stock		2,223		2		–			–			2,587			–			–			–			2,589
Transfer of subsidiary equity to non-controlling interest		–		–		–			–						–			–			107			107
Unrealized loss on securities held for resale		–		–		–			–			–			–			(7	)		–			(7	)
Total shareholders’ deficit as of December 31, 2012		5,487		6		8,427			8			52,987			(56,012	)		(32	)		128			(2,915	)
Net loss		–		–		–			–			–			(3,912	)		–			(1	)		(3,913	)
New stock issued to shareholders:
For services, compensation, interest and prepaids		1,131		1		–			–			708			–			–			–			709
For retirement of debt		1,546		1		–			–			1,138			–			–			–			1,139
Conversion of LOC and interest to common stock		2,080		2		–			–			1,111			–			–			–			1,113
Derivative liability		–		–		–			–			(22	)		–			–			–			(22	)
Total shareholders’ deficit as of June 30,  2013 (unaudited)		10,244	$	10		8,427		$	8		$	55,922		$	(59,924	)	$	(32	)	$	127		$	(3,889	)

See accompanying notes to consolidated financial statements.

5

ERF WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013
(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

Nature of the Company

ERF Wireless, Inc. (“Company” or “ERF Wireless”) provides critical infrastructure wireless broadband communications products and services to a broad spectrum of customers in primarily rural oil and gas exploration areas of North America. We also provide high quality broadband services and critical communications services to residential, oil and gas, educational, health care, and regional banks in rural areas utilizing our Company owned and operated wireless networks. As a total comprehensive solutions provider we offer a wide array of critical 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 wireless internet and network 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, educational, and healthcare networks and other services associated with providing wireless products and services to the regional banking, educational and healthcare industries.

Our internet revenues are recorded in “ERF Wireless Bundled Services, Inc. (WBS)”, revenues from construction of bank, healthcare and educational networks in our “ERF Enterprise Network Services, Inc. (ENS)” and wireless broadband products and services to rural oil and gas locations are recorded in “Energy Broadband, Inc. (EBI)”. Please refer to segment footnote 12 for additional information regarding segment operations.

Basis of Accounting

The accompanying unaudited interim consolidated 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, 2012 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 consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year ended December 31, 2012 as reported in form 10-K have been omitted.

Non-controlling Interest

Non-controlling interest in our majority owned subsidiary EBI, is included in the equity section of the consolidated balance sheets. Non-controlling interest represents 3.63% of the equity of EBI and any transfer of value from ERF to non-controlling interest holders. Non-controlling interest is adjusted for the non-controlling interest holders’ proportionate share of the earnings or losses of EBI. Any excess losses applicable to the non-controlling interests have been and are borne by the Company as there is no obligation of the non-controlling interests to fund any losses in excess of their original investment. There is also no obligation or commitment on the part of the Company to fund operating losses of any subsidiary whether wholly-owned or majority-owned.

Reclassification

Certain amounts in the 2012 financial statements have been reclassified to conform to the 2013 financial presentation. These reclassifications have no impact on the total comprehensive loss.

6

ERF WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013
(Unaudited)

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):

	June 30,			December 31,
	2013			2012
Accounts receivable	$	752		$	838
Allowance for doubtful accounts		(27	)		(10	)
Accounts receivable, net	$	725		$	828

NOTE 3 - 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 June 30, 2013 and December 31, 2012, in thousands:

	June 30,		December 31,
	2013		2012
Raw material	$	46	$	46
Work in process		76		115
Finished goods		241		216
Total inventory	$	363	$	377

NOTE 4 - DEBT CONVERSION

(a) Line of Credit

During the six months ended June 30, 2013, the Company issued 2,080,000 shares of its Common Stock (as defined below) for the settlement of $916,000 of principal and $197,000 of accrued interest for a total amount of $1,113,000 owed to Angus Capital Partners. The Company issued Common Stock at an average price of $0.53 per share calculated based on the closing price the day the debt was settled. See Note 9 for additional information on this facility.

(b) Other Debt

During the six months ended June 30, 2013, the Company issued 1,546,000 and 408,000 shares of its Common Stock for the settlement of principal amount of $1,139,000 and $197,000 of accrued interest, respectively, for a total of $1,336,000. The Company issued Common Stock at an average price of $.68 per share calculated based on the closing price the day the debt was settled.

7

ERF WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013
(Unaudited)

NOTE 5 - COMMON STOCK , PREFERRED STOCK AND WARRANTS

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 $0.001 per share ("Preferred Stock"), and 975,000,000 shall be shares of common stock with a par value of $0.001 per share ("Common Stock").

Common Stock

As of June 30, 2013 and December 31, 2012, there were 10,244,153 and 5,487,072 shares of its Common Stock issued and outstanding, respectively.

During the six months ended June 30, 2013, the Company issued 4,757,081 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).

June 30, 2013	Supplemental Non-Cash Disclosure
Professional fees	$	247
Services and compensation		255
Other services rendered		207
Total for services, compensation and interest	$	709
Notes payable	$	1,139
Line of credit and interest	$	1,113

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 (“Series A Preferred Stock”). There were 8,426,982 shares of Series A Preferred Shares issued and outstanding at June 30, 2013 and December 31, 2012. With respect to the Series A Preferred Stock outstanding at June 30, 2013, the Company would be required to issue 8,426,982 shares of its Common Stock upon conversion.

ERF Wireless, Inc Distribution of EBI Equities to Non-controlling Interest

As of June 30, 2013, the Company had issued 725,611 shares of EBI as a stock dividend and three year warrant expiring December 31, 2014, to purchase 725,611 shares of EBI Common Stock at an exercise price of $4.00 per share and three year warrant expiring December 31, 2014, to purchase 725,611 shares of EBI Common Stock at an exercise price of $6.00; such issuances are valued at $107,000. The Company expects to issue the remaining stock dividends during calendar year 2013. No stock dividends were issued during the six months ended June 30, 2013.

Warrants

During 2013, the Company entered into a convertible promissory note with Tonaquint, Inc for $791,500 and issued five year warrants to purchase 148,406 shares of common stock at $.80 per share, expiring March 2018.

During 2013, the Company entered into a convertible promissory note with Willow Creek Capital for $244,200 and issued five year warrants to purchase 48,775 shares of common stock at $.751 per share, expiring April 2018.

During 2013, the Company entered into a convertible promissory note with Vista Capital for $60,500 and issued five year warrants to purchase 14,405 shares of common stock at $.80 per share, expiring April 2018.

The following tables set forth summarized warrants that are issued, outstanding and exercisable for the six months ended June 30, 2013:

8

ERF WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013
(Unaudited)

Warrants Outstanding

Weighted Average Exercise Price

Expiration Date

December 31, 2012

Issued

Exercised

Expired

June 30, 2013

$

0.80

Mar-18

–

148,406

–

–

148,406

$

0.80

Apr-18

–

14,405

–

–

14,405

$

0.75

Apr-18

–

48,775

–

–

48,775

Total Warants

–

211,586

–

–

211,586

NOTE 6 – STOCK PLAN

In May 2013, the board of directors adopted a non-qualified stock option plan whereby 1,000,000 shares were reserved for issuance. As of June 30, 2013, 108,636 shares of Common Stock were issued and outstanding to certain employees and consultants for services rendered under the plan. This plan is for key employees, officers, directors, and consultants of ERF Wireless, Inc.

Non-Qualified Stock Option Plan, May 2013	2013-A
	Plan
Shares initially reserved		1,000,000
Shares issued during 2013		108,636
Remaining shares available to be issued at June 30, 2013		891,364
Shares issued and outstanding as of June 30, 2013		108,636

In December 2012, the board of directors adopted a non-qualified stock option plan whereby 450,000 shares were reserved for issuance. As of June 30, 2013, 450,000 shares of Common Stock were issued and outstanding to certain employees and consultants for services rendered under the plan. This plan is for key employees, officers, directors, and consultants of ERF Wireless, Inc.

Non-Qualified Stock Option Plan, December 2012	2013
	Plan
Shares initially reserved		450,000
Shares issued during 2012 and 2013		450,000
Remaining shares available to be issued at June 30, 2013		–
Shares issued and outstanding as of June 30, 2013		450,000

9

ERF WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013
(Unaudited)

NOTE 7 - EARNINGS PER SHARE:

The following table sets forth the computation of basic and diluted earnings per share of Common Stock (in thousands, except per share amount):

	For the three months ended June 30, 2013
	Net loss			Shares		Per-Share
	(Numerator)			(Denominator)		Amount
Basic EPS:
Net loss	$	(2,260	)		9,600	$	(0.24	)
Income attributable to non-controlling interest	$	4			9,600	$	–
Net loss attributable to ERF Wireless, Inc.	$	(2,256	)		9,600	$	(0.24	)
Diluted EPS:
Net loss	$	(2,260	)		9,600	$	(0.24	)
Income attributable to non-controlling interest	$	4			9,600	$	–
Net loss attributable to ERF Wireless, Inc.	$	(2,256	)		9,600	$	(0.24	)

		For the three months ended June 30, 2012
		Net loss		Shares		Per-Share
		(Numerator)		(Denominator)		Amount
Basic EPS:
Net loss	$	(1,352	)	2,919	$	(0.46	)
Loss attributable to non-controlling interest	$	(3	)	2,919	$	–
Net loss attributable to ERF Wireless, Inc.	$	(1,355	)	2,919	$	(0.46	)
Diluted EPS:
Net loss	$	(1,352	)	2,919	$	(0.46	)
Loss attributable to non-controlling interest	$	(3	)	2,919	$	–
Net loss attributable to ERF Wireless, Inc.	$	(1,355	)	2,919	$	(0.46	)

	For the six months ended June 30, 2013
	Net loss			Shares		Per-Share
	(Numerator)			(Denominator)		Amount
Basic EPS:
Net loss	$	(3,913	)		8,219	$	(0.48	)
Income attributable to non-controlling interest	$	1			8,219	$	–
Net loss attributable to ERF Wireless, Inc.	$	(3,912	)		8,219	$	(0.48	)
Diluted EPS:
Net loss	$	(3,913	)		8,219	$	(0.48	)
Income attributable to non-controlling interest	$	1			8,219	$	–
Net loss attributable to ERF Wireless, Inc.	$	(3,912	)		8,219	$	(0.48	)

		For the six months ended June 30, 2012
		Net loss		Shares		Per-Share
		(Numerator)		(Denominator)		Amount
Basic EPS:
Net loss	$	(2,312	)	2,653	$	(0.87	)
Loss attributable to non-controlling interest	$	(8	)	2,653	$	–
Net loss attributable to ERF Wireless, Inc.	$	(2,320	)	2,653	$	(0.87	)
Diluted EPS:
Net loss	$	(2,312	)	2,653	$	(0.87	)
Loss attributable to non-controlling interest	$	(8	)	2,653	$	–
Net loss attributable to ERF Wireless, Inc.	$	(2,320	)	2,653	$	(0.87	)

For the six months ended June 30, 2013, dilutive securities existed, but due to the Company’s net loss there is an anti-dilutive effect. Diluted earnings per share reflect the potential dilution of security that could share in the earnings of an entity, such as convertible preferred stock, stock options, warrants or convertible securities.

10

ERF WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013
(Unaudited)

The calculation of diluted earnings per share for the six months ended June 30, 2013 does not include 622,000 shares of Common Stock underlying the Bonds (as define below); 211,586 of warrants underlying promissory convertible debt, 2,742,400 shares of Common stock underlying promissory convertible debt and 8,426,982 shares of Common Stock underlying the Series A Preferred Stock, due to their anti-dilutive effect.

NOTE 8 - MAJOR CUSTOMERS

The Company had gross sales of approximately $3,477,000 and $3,335,000 for the six months ended June 30, 2013 and 2012, respectively. The Company had two customers that met the required disclosure of 10% that represented 33% and 12% of the gross sales and 46% and 24% of total accounts receivable during the six months ended June 30, 2013. Additionally, the Company had two customers that met the required disclosure of 10% that represented 36% and 16% of the gross sales and 34% and 24% of total accounts receivable during the six months ended June 30, 2012.

NOTE 9 – NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES

Notes payable, long-term debts and capital leases consist of the following as of June 30, 2013 (in thousands):

	Terms	Maturity Date	Interest Rate			Gross Balance		Debt Discount		Balance
Banc leasing, Inc.	$10,660 / Month including interest	January-15		11.62	%	$	184	$	–	$	184
Advantage leasing associates	$7,186 / Month including interest	Various		Various			122		–		122
Legacy laser services Dallas, LLC	$7,252 / Month including interest	May-16		42.00	%		145		–		145
MP Nexlevel LLC	$7,043 / Month including interest	May-14		10.00	%		74		–		74
Tonaquint	$791,500 / Lump sum payment including interest	September-13		12.00	%		792		308		484
JMJ Financial	$165,000 / Lump sum payment including interest	March-14		12.00	%		275		260		15
Vista capital	$60,500 / Lump sum payment including interest	October-13		12.00	%		60		42		18
Willow creek capital	$244,200 / Lump sum payment including interest	October-13		12.00	%		244		165		79
TCA global line of credit	$139,523 / Month including interest	July-14		12.00	%		1,500		238		1,262
Investor financing	$495,000 / Lump sum payment including interest	September-13		12.00	%		488		–		488
Premium assignment	$1,495 / Month including interest	July-13		6.00	%		6		–		6
Dakota capital equipment financing	$178,031 / Quarterly including interest	March-16		18.00	%		1,623		42		1,581
E-bond investor notes	3 years/ Semiannual interest (See below)	Various		7.50	%		311		212		99
Line of credit	2 years/ Quarterly interest (See below)	December-15		12.00	%		3,027		–		3,027
Total debt						$	8,851	$	1,267		7,584
Less current maturities											(3,193	)
Long-term debt										$	4,391

Notes payable, long-term debts and capital leases consist of the following as of December 31, 2012 (in thousands):

	Terms	Maturity Date	Interest Rate			Gross Balance		Debt Discount		Balance
Banc leasing, Inc.	$10,660 / Month including interest	January-15	11.62	%	$	227	$	–	$	227
Advantage leasing associates	$7,186 / Month including interest	Various	Various			156		–		156
MP Nexlevel LLC	$7,043 / Month including interest	May-14	10.00	%		111		–		111
Investor financing	$765,000 / Lump sum payment including interest	January-13	12.00	%		765		–		765
Premium assignment	$1,495 / Month including interest	July-13	6.00	%		17		–		17
Dakota capital equipment financing	$178,031 / Quarterly including interest	March-16	18.00	%		1,820		57		1,763
E-bond investor notes	3 years/ Semiannual interest (See below)	Various	7.50	%		687		566		121
Line of credit	2 years/ Quarterly interest (See below)	December-15	12.00	%		3,168		–		3,168
Total debt					$	6,951	$	623		6,328
Less current maturities										(1,527	)
Long-term debt									$	4,801

11

ERF WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013
(Unaudited)

Line of Credit

During December 2012, the Company extended its maturity date of its $12.0 million unsecured revolving credit facility with Angus Capital Partners, a related party, from December 31, 2013 to December 30, 2015. 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 June 30, 2013, the outstanding balance on the line of credit totaled $3,027,000 with a remaining line of credit available of $8,973,000.

During the six months ended June 30, 2013, the Company issued 2,080,000 shares of its Common Stock for the settlement of $916,000 of principal and $197,000 of accrued interest for a total amount of $1,113,000 owed to Angus Capital Partners. The Company issued Common Stock at an average price of $0.53 per share calculated based on the closing price the day the debt was settled.

E-Series Bond Investor Note

During the six months ended June 30, 2013, the Company issued to certain accredited investors a principal amount of $325,000 of E-Series bonds (the "Bonds") in addition to the $687,000 which was outstanding at December 31, 2012. At June 30, 2013, the outstanding principal balance of the Bonds totaled $311,000. 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. 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 average closing price 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 three-year warrant to purchase one share of EBI Common Stock at a price of $4.00 for every $2.00 of Bond principal.

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 redeemed in cash or in shares of our Common Stock, valued at the average last sales price over the 20-trading-day period preceding any payment date. If the Company chooses to issue Common Stock as redemption of the Bond principal, we will issue shares representing a value equal to 125% of the Bond principal and shares representing a value equal to 100% of the Bond interest through redemption date.

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 of 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 statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $492,895 for the six months ended June 30, 2013. The estimated debt accretion for subsequent years is $29,637, $92,678, and $89,560 for years ending December 31, 2013, 2014, and 2015, respectively.

The following table summarizes the convertible debt activity for the period January 1, 2013, thru June 30, 2013:

Description	Bonds			Compound Derivative Liability			Total
Fair value at December 31, 2012	$	121,446		$	492,043		$	613,489
Fair value issuances during 2013 (principal amount)		325,000			–			325,000
Fair value issuances during 2013 (debt discount)		(139,216	)		139,216			–
Change in fair value		492,895			(59,079	)		433,816
Conversions		(701,000	)		(443,611	)		(1,144,611	)
Fair value at June 30, 2013	$	99,125		$	128,569		$	227,694

The Company recorded a net change in fair value of derivatives of $59,079 and a gain on debt redemption of $156,791 for a total net derivative income of $215,870 for the six months ended June 30, 2013.

12

ERF WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013
(Unaudited)

Dakota Capital Fund LLC Equipment Financing

In November 2011, the Company entered into debt financing agreement with Dakota Capital Fund LLC, for financing of up to $3,000,000. During the fourth quarter of 2011, the Company received proceeds of $2,000,000 and had the option of additional funding of $1,000,000 for equipment purchases. This debt facility is secured by certain ERF Wireless assets and there is no prepayment penalty. At June 30, 2013, the outstanding balance on the debt financing agreement totaled $1,623,000 and the Company has elected not to request any additional funds under this credit facility. The payment terms are $178,031 per quarter including interest, at an annual rate of 18% per annum plus 10% of positive operational cash flow as determined on a quarterly basis for repayment of additional principal beginning July 1, 2012. The funding was utilized to purchase equipment to build out networks in oil and gas exploration regions of North America.

The Company issued 30,000 shares of Common Stock for the consummation of the initial $2,000,000 debt financing agreement from Dakota Capital Fund LLC resulting in a debt discount of $93,600. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $15,890 for the six months ended June 30, 2013. The estimated debt accretion for subsequent years is $17,124 and $24,611 for years ending December 31, 2013, and 2014, respectively.

Tonaquint Convertible Promissory Note

On March 5, 2013, the Company entered into a six-month secured convertible promissory note secured debt financing agreement with Tonaquint, Inc. (“holder”), for $791,500, bearing interest at a rate of 12% per annum and maturing September 5, 2013. The note also includes an original issue discount (“OID”) of $65,000 based on the consideration funded, prepaid interest of $71,500 and $5,000 in legal and other expense. The Company also paid holder an origination fee in the amount of $227,500 in 144 Stock (284,375 shares) at the closing bid price on March 5, 2013, plus 50,000 shares (valued at $40,000) of the Company’s Common Stock. The holder may require the Company to convert the outstanding principal balance (including any unpaid interest) into shares of 144 Common Stock at any time during the six-month term of the note or thereafter. The Common Stock issued will be valued using a conversion factor of 80% of the average of the lowest two (2) trading prices for common shares during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. If the average two (2) lowest trading prices is less than $0.33, then the conversion factor will be reduced to 70%. The holder received the option to purchase five-year warrants expiring March 5, 2018 to purchase 148,406 shares of ERF Common Stock at an exercise price of $0.80 or the per-share price at which the Common Stock is sold in an underwritten public offering that closes on or before the date that is six (6) months from the issue date, as may be adjusted from time to time pursuant to the terms and conditions of this warrant.

The Tonaquint promissory note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature, conversion price reset feature and the redemption option (compound embedded derivative liability). At the date of issuance of the Tonaquint note, 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 statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $280,799 for the six months ended June 30, 2013. The estimated debt accretion for the remainder of 2013 is $307,925.

The following table summarizes the convertible debt activity for the period March 5, 2013, through June 30, 2013:

Description	Tonaquint			Warrant Compound Derivative Liability			Compound Derivative Liability			Total
Fair value issuances at inception	$	791,500		$	–		$	–		$	791,500
Fair value issuances during 2013 (debt discount)		(588,724	)		16,400			256,224			(316,100	)
Change in fair value		280,799			(7,211	)		(3,049	)		270,539
Conversions during		–						–			–
Fair value at June 30, 2013	$	483,575		$	9,189		$	253,175		$	745,939

The Company recorded a net change in fair value of derivative income of $16,485 for the six months ended June 30, 2013.

13

ERF WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013
(Unaudited)

JMJ Financial Convertible Promissory Note

On March 20, 2013, the Company entered into a one year unsecured promissory note debt financing agreement with JMJ Financial for (“JMJ”) up to $500,000 at the sole discretion of additional consideration with the Lender. The note includes a 10% original issue discount that is prorated based on the consideration funded. The Company also paid holder an origination fee in the amount of $40,500 in 144 Stock (50,000 shares) at the closing bid price of the Company’s Common Stock. As of June 30, 2013 the Company has received funding of $250,000, bearing interest at a rate of 12% per annum and maturing in one year from the effective date of each payment. The conversion price is the lesser of $0.59 or 60% of the lowest trade price in the 25 trading days previous to the conversion.

The JMJ promissory note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature, conversion price reset feature and the redemption option (compound embedded derivative liability). At the date of issuance of the JMJ note, 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 statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $14,506 for the six months ended June 30, 2013. The estimated debt accretion for subsequent years is $80,926 and $179,568 for years ending December 31, 2013 and 2014, respectively.

The following table summarizes the convertible debt activity for the period March 20, 2013, through June 30, 2013:

Description	JMJ			Compound Derivative Liability			Total
Fair value issuances at inception	$	275,000		$	–		$	275,000
Fair value issuances during 2013 (debt discount)		(275,000	)		323,307			48,307
Change in fair value		14,506			(29,144	)		(14,638	)
Conversions during		–			–			–
Fair value at June 30, 2013	$	14,506		$	294,163		$	308,669

The Company recorded a net change in fair value of derivatives income of $29,144 for the six months ended June 30, 2013.

Willow Creek Capital Convertible Promissory Note

On April 2, 2013, the Company entered into a six month convertible promissory note secured debt financing agreement with Willow Creek Capital, LLC, for $244,200, bearing interest at a rate of 12% per annum and maturing October 01, 2013. The note also includes a 10% OID of $20,000 based on the consideration funded, prepaid interest of $22,200 and $2,000 in legal and other expense. The Company also paid holder an origination fee in the amount of $109,890 in 144 Stock (146,325 shares) at the closing bid price of the Company’s Common Stock. The holder may require the Company to convert the outstanding principal balance (including any unpaid interest) into shares of 144 Common Stock at any time during the six months term of the note or thereafter. The Common Stock issued will be valued using a conversion factor of 80% the average of the lowest two (2) trading prices common shares during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. If the average two (2) lowest trading prices is less than $0.33, then the conversion factor will be reduced to 70%. The holder will be entitled to purchase from the Company five year warrants expiring April 2, 2018 to purchase 48,775 shares of ERF Common Stock at an exercise price of $0.751 or the per-share price at which the Common Stock is sold in an underwritten public offering that closes on or before the date that is six (6) months from the issue date, as may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

The Willow Creek promissory note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature, conversion price full ratchet reset feature and the redemption option (compound embedded derivative liability). At the date of issuance of the Willow Creek note, 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 statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $78,827 for the six months ended June 30, 2013. The estimated debt accretion for the remaining 2013 is $165,373.

The following table summarizes the convertible debt activity for the period April 2, 2013, thru June 30, 2013:

14

ERF WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013
(Unaudited)

Description	Willowcreek			Compound Derivative Liability			Total
Fair value issuances at inception	$	244,200		$	–		$	244,200
Fair value issuances during 2013 (debt discount)		(244,200	)		255,000			10,800
Change in fair value		78,827			(33,198	)		45,629
Conversions during		–			–			–
Fair value at June 30, 2013	$	78,827		$	221,802		$	300,629

The Company recorded a net change in fair value of derivative income of $33,198 for the six months ended June 30, 2013.

Vista Capital Convertible Promissory Note

On April 4, 2013, the Company entered into a six month convertible promissory note secured debt financing agreement with Vista Capital Investments, LLC, for $60,500, bearing interest at a rate of 12% per annum and maturing October 04, 2013. The note also includes a 10% OID of $5,000 based on the consideration funded, prepaid interest of $5,500. The Company also paid holder an origination fee in the amount of $21,175 in 144 Stock (33,611 shares) at the closing bid price plus of the Company’s Common Stock. The holder may require the Company to convert the outstanding principal balance (including any unpaid interest) into shares of 144 Common Stock at any time during the six months term of the note or thereafter. The Common Stock issued will be valued using a conversion factor of 80% the average of the lowest two (2) trading prices common shares during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. If the average two (2) lowest trading prices is less than $0.33, then the conversion factor will be reduced to 70%. The holder will be entitled to purchase from the Company five year warrants expiring April 04, 2018 to purchase 14,405 shares of ERF Common Stock at an exercise price of $0.80 or the per-share price at which the Common Stock is sold in an underwritten public offering that closes on or before the date that is six (6) months from the issue date, as may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

The Vista promissory note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature, conversion price full ratchet reset feature and the redemption option (compound embedded derivative liability). At the date of issuance of the Vista note, 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 statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $18,340 for the six months ended June 30, 2013. The estimated debt accretion for the remaining 2013 is $42,160.

The following table summarizes the convertible debt activity for the period April 4, 2013, thru June 30, 2013:

Description	Vista			Compound Derivative Liability			Total
Fair value issuances at inception	$	60,500		$	–		$	60,500
Fair value issuances during 2013 (debt discount)		(60,500	)		70,967			10,467
Change in fair value		18,340			(10,560	)		7,780
Conversions during		–			–			–
Fair value at June 30, 2013	$	18,340		$	60,407		$	78,747

The Company recorded a net change in fair value of derivatives income of $10,560 for the six months ended June 30, 2013.

15

ERF WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013
(Unaudited)

TCA Global Convertible Promissory Note

On June 28, 2013, the Company entered into a twelve month convertible promissory note secured debt financing agreement with TCA Global Credit Master Fund for $1,500,000, bearing interest at a rate of 12% per annum and maturing July 28, 2014. The note also includes $153,300 in commitment fees; due diligence fees; document review fees; service fees; legal; and other expense. The holder may require the Company to convert the outstanding principal balance (including any unpaid interest) into shares of 144 Common Stock at any time during the twelve months term of the note or thereafter. The Common Stock issued will be valued using a conversion factor of 85% the average VWAP trading price during the five (5) trading day period ending on the latest complete trading day prior to the conversion date.

The TCA Global promissory note was 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 of the TCA Global note, 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 statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $362 for the six months ended June 30, 2013. The estimated debt accretion for the remaining 2013 is $237,950.

The following table summarizes the convertible debt activity for the period June 28, 2013, thru June 30, 2013:

Description	TCA Global			Compound Derivative Liability		Total
Fair value issuances at inception	$	1,500,000		$	–	$	1,500,000
Fair value issuances during 2013 (debt discount)		(238,312	)		138,312		(100,000	)
Change in fair value		362			1,738		2,100
Conversions during		–			–		–
Fair value at June 30, 2013	$	1,262,050		$	140,050	$	1,402,100

The Company recorded a net change in fair value of derivatives expense of $1,738 for the six months ended June 30, 2013.

Investor Financing

On July 13, 2012, the Company entered into a three-month secured debt financing agreement with individuals for $1,000,000 with an interest rate of 12% per annum. Under the agreement, as amended, the maturity date was extended to September, 2013. Both parties under the amendment agreed to apply the Dakota Capital Fund payment of $181,235 including interest as a subset to the bridge note incurring an interest rate at .5% interest per day on a 360 day calendar year. At June 30, 2013, the outstanding principal balance totaled $488,000. The Company is in negotiations of extending the investor financing note through 3rd quarter 2013.

Capital Leases

Banc Leasing Inc. Included in property and equipment at June 30, 2013, the cost of the equipment was $610,900 and the accumulated amortization was $432,721. Amortization of assets under capital leases is included in depreciation expense. The equipment is the primary collateral securing the financing.

Advantage Leasing Inc. Included in vehicles at June 30, 2013, the cost of the vehicles was $234,614 and the accumulated amortization was $113,126. Amortization of assets under capital leases is included in depreciation expense. The vehicles are the primary collateral securing the financing.

Legacy Laser Services Dallas, LLC Included in property and equipment at June 30, 2013, the cost of the equipment was $148,003 and the accumulated amortization was $6,000. Amortization of assets under capital leases is included in depreciation expense. The equipment is the primary collateral securing the financing.

16

ERF WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013
(Unaudited)

The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of June 30, 2013 (in thousands):

Year Ending December 31,
2013	$	151
2014		290
2015		113
2016		36
Thereafter		–
Total minimum lease payments		590
Less amount representing interest		(139	)
Present value of net minimum lease payments		451
Current maturities of capital lease obligations		(220	)
Long-term portion of capital lease obligations	$	231

NOTE 10 - COMMITMENTS

Leases and License Agreements

For the six months ended June 30, 2013 and 2012, rental expenses of approximately $596,000 and $476,000, 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 December 2018, and requiring payment of property taxes, insurance, maintenance and utilities.

Future minimum lease payments under non-cancelable operating leases as of December 31, 2013 were as follows (in thousands):

Year Ending December 31,		Amount
	2013		468
	2014		779
	2015		707
	2016		610
	Thereafter		125
	Total	$	2,689

Banc Leasing Inc.

During August 2007, the Company entered into a contract with Banc Leasing Inc. to fund the Company’s US-Banknet System. 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 Note 9.

NOTE 11 – COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS

Costs and estimated earnings in excess of billings on uncompleted contracts for the six months ended June 30, 2013, are summarized as follows (in thousands):

	June 30,
	2013
Costs incurred on uncompleted contracts	$	51
Estimated profit		57
Gross revenue		108
Less: billings to date		108
Costs and profit in excess of billings	$	–

17

ERF WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013
(Unaudited)

Such amounts are included in the accompanying balance sheet at June 30, 2013, are summarized as follows (in thousands):

		June 30,
		2013
Cost and estimated earnings in excess of billings on uncompleted contracts	$	–
Billings in excess of costs and estimated earnings on uncompleted contracts		–
	$	–

NOTE 12 - RELATED PARTY TRANSACTIONS

In May 2013, the Company entered into a capital lease agreement with Legacy Laser Services Dallas, LLC and Principal and Managing Member Manny M. Carter, a related party whereby Manny M. Carter is a Board of Director of ERF Wireless Inc. At June 30, 2013, the outstanding balance on the capital leases totaled $145,000. The payment terms are $7,252 per month including interest, at an annual rate of 42% per annum. The capital leased equipment is to be utilized in our networks in oil and gas exploration regions. The equipment is the primary collateral securing the financing.

NOTE 13 - INDUSTRY SEGMENTS

This summary reflects the Company's current segments, as described below.

Energy Broadband, Inc. (EBI)

EBI provides wireless connectivity to rural oil and gas locations primarily via Mobile Broadband Trailers (“MBTs”). 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.

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 in certain regions of North America to serve private entities, cities, municipalities and the general public. All sales from external customers are located within the United States.

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. All sales from external customers are located within the United States.

18

ERF WIRELESS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013
(Unaudited)

For the six months ended June 30, 2013 and 2012 (in thousands):

Three Months Ended June 30, 2013	EBI			WBS			ENS			Total Segment			ERF Corporate			Total Consolidated
Revenue	$	809		$	597		$	157		$	1,563		$	–		$	1,563
Segment income (loss) from operations		(128	)		(350	)		25			(453	)		(894	)		(1,347	)
Total assets		2,857			1,690			521			5,068			1,734			6,802
Capital expenditures		186			45			–			231			–			231
Depreciation		215			205			59			479			8			487
Three Months Ended June 30, 2012		EBI			WBS			ENS			Total Segment			ERF Corporate			Total Consolidated
Revenue	$	1,022		$	579		$	86		$	1,687		$	–		$	1,687
Segment income (loss) from operations		74			(143	)		(75	)		(144	)		(906	)		(1,050	)
Total assets		3,235			2,155			702			6,092			211			6,303
Capital expenditures		199			215			–			414			3			417
Depreciation		165			157			58			380			13			393

Six Months Ended June 30, 2013	EBI			WBS			ENS			Total Segment			ERF Corporate			Total Consolidated
Revenue	$	2,014		$	1,208		$	255		$	3,477		$	–		$	3,477
Segment income (loss) from operations		(19	)		(672	)		5			(686	)		(1,801	)		(2,487	)
Total assets		2,857			1,690			521			5,068			1,734			6,802
Capital expenditures		196			105			–			301			15			316
Depreciation		430			412			117			959			17			976
Six Months Ended June 30, 2012		EBI			WBS			ENS			Total Segment			ERF Corporate			Total Consolidated
Revenue	$	2,035		$	1,149		$	151		$	3,335		$	–		$	3,335
Segment income (loss) from operations		234			(191	)		(167	)		(124	)		(1,610	)		(1,734	)
Total assets		3,235			2,155			702			6,092			211			6,303
Capital expenditures		530			440			–			970			9			979
Depreciation		319			269			117			705			26			731

Reconciliation of Segment Assets to Total Assets	June 30, 2013		December 31, 2012
Total segment assets	$	5,068	$	5,989
Total corporate assets		1,734		282
Total assets	$	6,802	$	6,271

The Company evaluates the performance of its operating segments based on income before net interest expense, income taxes, depreciation expense, accounting changes and non-recurring items.

For the six months ended June 30, 2013, two customers accounted for $1,138,000 and $425,000 of EBI revenues each.

NOTE 14 - SUBSEQUENT EVENTS

Subsequent to June 30, 2013, the Company issued 1,349,650 shares of common stock valued at approximately $569,000 for services rendered, and conversion of debt.

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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

Our Company provides critical infrastructure wireless broadband communication products and services to a broad spectrum of customers in primarily rural oil and gas exploration areas of North America. We plan to devote a majority of our financial and personnel resources to develop a long term, internet solution for the energy industry in North America and Canada. The Company’s recent financial results reflect our focus on providing turnkey communications services to the oil and gas industry. These results include but are not limited to the following attributes:

The Company’s financial results reflect the Company’s continued focus on expanding our turnkey communications services to the oil and gas industry. The following reflects the three and six month activity ended June 30, 2013.

· The Company reported overall consolidated revenues of $1,563,000 for the quarter ended June 30, 2013 as compared to $1,687,000 for the same prior year quarter ended June 30, 2012; a decrease of $124,000 or 7%. The overall decrease was comprised of a $213,000 decrease in revenues in our oil and gas operations subsidiary, Energy Broadband, Inc., due to lower oil and gas sales to one of our major customers and an overall drop in U.S. rig count, offset with an increase of $18,000 from our wireless bundled services and a $71,000 increase in our enterprise network services.

· The Company’s Energy Broadband, Inc. subsidiary reported revenues of $2,014,000 for the six months ended June 30, 2013 as compared to revenues of $2,035,000 for the same prior year six month quarter ended June 30, 2012; a decrease of $21,000 or 1%.

· The Company reported Gross Profit of $564,000 for the quarter ended June 30, 2013 as compared to $639,000 for the same prior year quarter ended June 30, 2012; a decrease of $75,000 or 12%. This 12% decrease in Gross Profits is primarily due to lower oil and gas sales to one of our major customers. The Gross Profit for the six months ended June 30, 2013 as compared to June 30, 2012 reflects showed no change in the margins.

· The Company reported a Consolidated Net Loss of $2,256,000 for the quarter ended June 30, 2013 as compared to a Consolidated Net Loss of $1,355,000 for the same prior quarter ended June 30, 2012.

· The Company reported an increase of $222,000 or 13% increase in Operating Expenses in the quarter ended June 30, 2013 as compared to the same prior year quarter ended June 30, 2012 to support the continued aggressive strategy to grow our Energy Broadband business unit.

· The Company has received an additional $1,500,000 of debt to fund the expansion of the wireless networks and related oil and gas assets.

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.

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RESULTS OF OPERATIONS

THREE AND SIX MONTHS ENDED JUNE 30, 2013, COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 2012

The following table sets forth summarized consolidated financial information for the three and six months ended June 30, 2013 and 2012:

	Three Months Ended June 30,												Six Months Ended June 30,
($ in thousands)	2013			2012			$ Change			% Change			2013			2012			$ Change			% Change
Total sales	$	1,563		$	1,687		$	(124	)		-7	%	$	3,477		$	3,335		$	142			4	%
Total Cost of goods sold		999			1,048			(49	)		-5	%		2,024			1,877			147			8	%
Gross profit		564			639			(75	)		-12	%		1,453			1,458			(5	)		0	%
Percent of total sales		36	%		38	%								42	%		44	%
Total operating expenses		1,911			1,689			222			13	%		3,940			3,192			748			23	%
Loss from operations		(1,347	)		(1,050	)		(297	)		28	%		(2,487	)		(1,734	)		(753	)		43	%
Total other income/(expense)		(913	)		(302	)		(611	)		202	%		(1,426	)		(578	)		(848	)		147	%
Consolidated net loss		(2,260	)		(1,352	)		(908	)		-67	%		(3,913	)		(2,312	)		(1,601	)		-69	%
Net income attributable to non-controlling interest		4			(3	)		7			100	%		1			(8	)		9			100	%
Other comprehensive loss		–			(2	)		2			-100	%		–			(6	)		6			-100	%
Total comprehensive loss	$	(2,256	)	$	(1,357	)	$	(899	)		66	%	$	(3,912	)	$	(2,326	)	$	(1,586	)		68	%

For the three months ended June 30, 2013, the Company's business operations reflected a decrease in sales for EBI, offset with increase sales in WBS and ENS subsidiaries. For the three months ended June 30, 2013, the Company's consolidated operations generated net sales of $1,563,000 compared to prior-year period net sales of $1,687,000. The $124,000 decrease in total sales is primarily attributable to $213,000 decreased sales in EBI from declining deployment of our Mobile Broadband Trailers (MBT’s) in the oil and gas regions. Service sales decreased $96,000 and product sales decreased $28,000. For the three months ended June 30, 2013, the Company had a gross profit margin of 36%, compared to a gross profit margin 38% for the prior year period. The $75,000 decrease in gross profit margin is primarily attributed to; (i) approximately $89,000 decrease in gross margin in EBI attributable to decreased sales associated with declining deployment of MBT’s in oil and gas regions and increased depreciation, (ii) $16,000 decrease in gross margin in WBS primarily related to increased depreciation, fuel cost and tower rent cost, and (iii) offset with a $30,000 increase in gross margins in ENS due to increase sales in bank network construction.

For the six months ended June 30, 2013, the Company's business operations reflected an increase in sales for its WBS, ENS subsidiaries and offset with decrease sales in EBI subsidiary. For the six months ended June 30, 2013, the Company's consolidated operations generated net sales of $3,477,000 compared to prior-year period net sales of $3,335,000. The $142,000 increase in total sales is primarily attributable to $21,000 decreased sales in EBI from declining deployment of our Mobile Broadband Trailers (MBT’s) in the oil and gas regions. Service sales increased $175,000 and product sales decreased $33,000. For the six months ended June 30, 2013, the Company had a gross profit margin of 42%, compared to a gross profit margin 44% for the prior year period. The $5,000 decrease in gross profit margin is primarily attributed to; (i) approximately $62,000 increase in gross margin in EBI attributable to increased sales associated with deployment of MBT’s in oil and gas regions, (ii) $41,000 increase in gross margins in ENS due to increase sales in bank network construction, and (iii) offset with a $108,000 decrease in gross margin in WBS primarily related to increased depreciation and tower rent cost.

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SALES INFORMATION

Set forth below are tables presenting summarized sales information for our business segments for the three and six months ended June 30, 2013 and 2012:

($ in thousands)	Three Months Ended June 30,
Business Segment	2013		% of Total			2012		% of Total			$ Change			$ Change
Energy Broadband, Inc.	$	809		52	%	$	1,022		61	%	$	(213	)	-21%
Wireless Bundled Services		597		38	%		579		34	%		18		3%
Enterprise Network Services		157		10	%		86		5	%		71		83%
Total Sales	$	1,563		100	%	$	1,687		100	%	$	(124	)	-7%
($ in thousands)		Six Months Ended June 30,
Business Segment		2013		% of Total			2012		% of Total			$ Change		% Change
Energy Broadband, Inc.	$	2,014		58	%		2,035		61	%	$	(21	)	-1%
Wireless Bundled Services		1,208		35	%		1,149		34	%		59		5%
Enterprise Network Services		255		7	%		151		5	%		104		69%
Total Sales	$	3,477		100	%	$	3,335		100	%	$	142		4%

For the three months ended June 30, 2013, net sales decreased to $1,563,000 from $1,687,000 for the three months ended June 30, 2012. The overall decrease of 7% was attributable to decreased sales of $213,000 in EBI offset with increased sales of $18,000 in WBS and increased sales in ENS of $71,000. The $124,000 decrease in net sales is primarily attributable to $213,000 decreased sales in EBI from declining deployment of our MBT’s in the oil and gas regions.

For the six months ended June 30, 2013, net sales increased to $3,477,000 from $3,335,000 for the six months ended June 30, 2012. The overall increase of 4% was attributable to decreased sales of $21,000 in EBI offset with increased sales of $59,000 in WBS and increased sales in ENS of $104,000. The $142,000 increase in net sales is primarily attributable to $104,000 increased sales in ENS from construction of bank networks.

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COST OF GOODS SOLD

The following tables set forth summarized cost of goods sold information for the three months ended June 30, 2013 and 2012:

($ in thousands)	Three Months Ended June 30,
Business Segment		2013	% of Total		2012	% of Total		$ Change	% Change
Energy Broadband, Inc.	$	513	51%	$	638	61%	$	(125)	-20%
Wireless Bundled Services		356	36%		321	31%		35	11%
Enterprise Network Services		130	13%		89	8%		41	46%
Total cost of sales	$	999	100%	$	1,048	100%	$	(49)	-5%

	Three Months Ended June 30,
($ in thousands)	2013		2012		$ Change			% Change
Products and integration service	$	366	$	537	$	(171	)		-32	%
Rent and maintenance		198		173		25			14	%
Depreciation		435		338		97			29	%
Total cost of sales	$	999	$	1,048	$	(49	)		-5	%

For the three months ended June 30, 2013, cost of goods sold decreased by $49,000, to $999,000 from $1,048,000 as compared to the three months ended June 30, 2012. The decrease of $49,000 in cost of goods sold is primarily attributable to a decreased cost of $125,000 in EBI due to decreased sales affecting a reduction in our third party services during the quarter in the oil and gas regions, offset with increased cost in WBS of $35,000 due to increased depreciation and tower rents for expansion and upgrade of networks and increased cost in ENS of $41,000 due to banking network construction project.

The following tables set forth summarized cost of goods sold information for the six months ended June 30, 2013 and 2012:

($ in thousands)	Six Months Ended June 30,
Business Segment		2013	% of Total		2012	% of Total		$ Change	% Change
Energy Broadband, Inc.	$	1,101	55%	$	1,184	63%	$	(83)	-7%
Wireless Bundled Services		675	33%		508	27%		167	33%
Enterprise Network Services		248	12%		185	10%		63	34%
Total cost of sales	$	2,024	100%	$	1,877	100%	$	147	8%

	Six Months Ended June 30,
($ in thousands)	2013		2012		$ Change			% Change
Products and integration service	$	759	$	953	$	(194	)		-20	%
Rent and maintenance		393		300		93			31	%
Depreciation		872		624		248			40	%
Total cost of sales	$	2,024	$	1,877	$	147			8	%

For the six months ended June 30, 2013, cost of goods sold increased by $147,000, to $2,024,000 from $1,877,000 as compared to the six months ended June 30, 2012. The increase of $147,000 in cost of goods sold is primarily attributable to a decreased cost of $83,000 in EBI due to decreased sales affecting a reduction in our third party services in the oil and gas regions, offset with increased cost in WBS of $167,000 due to increased depreciation and tower rents for expansion and upgrade of networks and increased cost in ENS of $63,000 due to banking network construction project.

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OPERATING EXPENSES

The following table sets forth summarized operating expense information for the three and six months ended June 30, 2013 and 2012:

	Three Months Ended June 30,										Six Months Ended June 30,
($ in thousands)	2013		2012		$ Change			% Change			2013		2012		$ Change			% Change
Employment expenses	$	990	$	1,013	$	(23	)		-2	%	$	2,166	$	1,855	$	311			17	%
Professional services		501		336		165			49	%		959		561		398			71	%
Rent and maintenance		111		95		16			17	%		234		199		35			18	%
Depreciation		52		55		(3	)		-5	%		104		107		(3	)		-3	%
Other general and administrative		257		190		67			35	%		477		470		7			1	%
Total operating expenses	$	1,911	$	1,689	$	222			13	%	$	3,940	$	3,192	$	748			23	%

For the three months ended June 30, 2013, operating expenses increased by 13% to $1,911,000, as compared to $1,689,000 for the three months ended June 30, 2012, resulting from:

· A $23,000 decrease in employment expense - primarily attributable to decreased employee headcount occurring during the second quarter to 64 at June 30, 2013 from 68 at June 30, 2012;

· A $165,000 increase in professional services - primarily attributable to consulting, accounting and legal services;

· A $16,000 increase in rent and maintenance;

· A $3,000 decrease in depreciation; and

· A $67,000 increase in other general and administrative.

For the six months ended June 30, 2013, operating expenses increased by 23% to $3,940,000, as compared to $3,192,000 for the six months ended June 30, 2012, resulting from:

· A $311,000 increase in employment expense - primarily attributable to increased employee headcount during the first quarter of the year as compared to prior quarter;

· A $398,000 increase in professional services - primarily attributable to consulting, accounting and legal services;

· A $35,000 increase in rent and maintenance;

· A $3,000 decrease in depreciation; and

· A $7,000 increase in other general and administrative.

OTHER (INCOME) EXPENSE, NET

For the three months ended June 30, 2013, other expense, net increases to $913,000 from $302,000 as compared to three months ended June 30, 2012. The increase in other expense of $611,000 from the prior year period is primarily attributable to an increase in our interest expense, net on debt obligations totaling $710,000 and offset with a increase in our net derivative income of $86,000 and gain on sale of assets of $13,000 as compared to interest expense, net of $320,000 and offset with derivative income of $18,000 for the three months ended June 30, 2012. The derivative expense/income represents the net unrealized (non-cash) charge during the three months ended June 30, 2013 and 2012, 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 six months ended June 30, 2013, other expense, net increases to $1,426,000 from $578,000 as compared to six months ended June 30, 2012. The increase in other expense of $848,000 from the prior year period is primarily attributable to an increase in our interest expense, net on debt obligations totaling $1,110,000 and offset with a increase in our net derivative income of $238,000 and gain on sale of assets of $24,000 as compared to interest expense, net of $679,000 and offset with derivative income of $101,000 for the six months ended June 30, 2012. The derivative expense/income represents the net unrealized (non-cash) charge during the six months ended June 30, 2013 and 2012, 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.

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COMPREHENSIVE LOSS

For the six months ended June 30, 2013, our total comprehensive loss was $3,912,000 compared to comprehensive loss of $2,326,000 for the six months ended June 30, 2012. The increased comprehensive loss for the six months ended June 30, 2013, as compared to the comprehensive loss for six months ended June 30, 2012 is primarily attributable to the factors described above.

CASH FLOWS

The Company's operating activities increased net cash used by operating activities to $1,675,000 in the six months ended June 30, 2013, compared to net cash used of $651,000 in the six months ended June 30, 2012. The increase in net cash used by operating activities was primarily attributable to accounts payable and accrued liabilities compared to the prior year.

The Company's investing activities used net cash of $133,000 in the six months ended June 30, 2013, compared to net cash used of $875,000 in the six months ended June 30, 2012. The decrease in cash provided by investing activities is primarily attributable to specific targeted oil and gas network upgrades to utilize our MBTs to provide service to our customers.

The Company's financing activities provided net cash of $2,977,000 in the six months ended June 30, 2013, compared to $1,084,000 of cash used in the six months ended June 30, 2012. The cash provided in the six months ended June 30, 2013, was primarily associated with proceeds from debt financings.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2013, the Company's current assets totaled $3,121,000 (including cash and cash equivalents of $1,287,000); and total current liabilities were $6,300,000, resulting in negative working capital of $3,179,000. The Company has funded operations during the last six months primarily through borrowings. These borrowings during the six months ended June 30, 2013 were incurred from the Company's line of credit, net totaling $774,000, and convertible debt financing of $2,916,000.

DEBT FACILITIES AND INSTRUMENTS

During December 2012, the Company extended its maturity date of its $12.0 million unsecured revolving credit facility with Angus Capital Partners, a related party, from December 31, 2013 to December 30, 2015. 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 June 30, 2013, the outstanding balance on the line of credit totaled $3,027,000 with a remaining line of credit available of $8,973,000.During the six months ended June 30, 2013, the Company issued 2,080,000 shares of its Common Stock for the settlement of $916,000 of principal and $197,000 of accrued interest for a total amount of $1,113,000 owed to Angus Capital Partners. The Company issued Common Stock at an average price of $0.53 per share calculated based on the closing price the day the debt was settled.

In November 2011, the Company entered into debt financing agreement with Dakota Capital Fund LLC, for financing of up to $3,000,000. During the fourth quarter of 2011, the Company received proceeds of $2,000,000 and had the option of additional funding of $1,000,000 for equipment purchases. This debt facility is secured by certain ERF Wireless assets and there is no prepayment penalty. At June 30, 2013, the outstanding balance on the debt financing agreement totaled $1,623,000 and the Company has elected not to request any additional funds under this credit facility. The payment terms are $178,031 per quarter including interest, at an annual rate of 18% per annum plus 10% of positive operational cash flow as determined on a quarterly basis for repayment of additional principal beginning July 1, 2012. The funding was utilized to purchase equipment to build out networks in oil and gas exploration regions of North America.

During the six months ended June 30, 2013, the Company issued to certain accredited investors a principal amount of $325,000 of E-Series bonds (the "Bonds") in addition to the $687,000 which was outstanding at December 31, 2012. At June 30, 2013, the outstanding principal balance of the Bonds totaled $311,000. 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. 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 average closing price 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 three-year warrant to purchase one share of EBI Common Stock at a price of $4.00 for every $2.00 of Bond principal.

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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 redeemed in cash or in shares of our Common Stock, valued at the average last sales price over the 20-trading-day period preceding any payment date. If the Company chooses to issue Common Stock as redemption of the Bond principal, we will issue shares representing a value equal to 125% of the Bond principal and shares representing a value equal to 100% of the Bond interest through redemption date.

On July 13, 2012, the Company entered into a three-month secured debt financing agreement with individuals for $1,000,000 with an interest rate of 12% per annum. Under the agreement, as amended, the maturity date was extended to September, 2013. Both parties under the amendment agreed to apply the Dakota Capital Fund payment of $181,235 including interest as a subset to the bridge note incurring an interest rate at 180% per annum. At June 30, 2013, the outstanding principal balance totaled $488,000.

On March 20, 2013, the Company entered into a one year unsecured promissory note debt financing agreement with JMJ Financial for (“JMJ”) up to $500,000 at the sole discretion of additional consideration with the Lender. The note includes a 10% original issue discount that is prorated based on the consideration funded. The Company also paid holder an origination fee in the amount of $40,500 in 144 Stock (50,000 shares) at the closing bid price of the Company’s Common Stock. As of June 30, 2013 the Company has received funding of $250,000, bearing interest at a rate of 12% per annum and maturing in one year from the effective date of each payment. The conversion price is the lesser of $0.59 or 60% of the lowest trade price in the 25 trading days previous to the conversion.

On June 28, 2013, the Company entered into a twelve month convertible promissory note secured debt financing agreement with TCA Global Credit Master Fund for $1,500,000, bearing interest at a rate of 12% per annum and maturing July 28, 2014. The note also includes $153,300 in commitment fees; due diligence fees; document review fees; service fees; legal; and other expense. The holder may require the Company to convert the outstanding principal balance (including any unpaid interest) into shares of 144 Common Stock at any time during the twelve months term of the note or thereafter. The Common Stock issued will be valued using a conversion factor of 85% the average VWAP trading price during the five (5) trading day period ending on the latest complete trading day prior to the conversion date.

ISSUANCE OF COMMON STOCK

During the three months ended June 30, 2013, we issued to various accredited investors 1,692,359 shares for services rendered and debt conversions. We relied on Section 4(2) of the Securities Act in effecting these transactions. During the three months ended June 30, 2013, we issued 269,985 shares of common stock to employees and business consultants, for aggregate consideration of $154,147 of services rendered, pursuant to a registration statement on Form S-8.

During the six months ended June 30, 2013, we issued to various accredited investors 4,216,796 shares for services rendered and debt conversions. We relied on Section 4(2) of the Securities Act in effecting these transactions. During the six months ended June 30, 2013, we issued 540,285 shares of common stock to employees and business consultants, for aggregate consideration of $374,640 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 through June 30, 2014. We anticipate that we will need additional capital in the future to continue to expand our business operations. We have historically financed our operations through private equity and debt financings. We do not have any commitments for equity or debt 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 June 30, 2013, 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 Form 10-K.

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.

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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; and

· 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.

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 disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet their objectives.

27

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2013, our disclosure controls and procedures were effective at the reasonable assurance level.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

On January 13, 2009, ERF Wireless entered into exclusive reseller agreements with Schlumberger Technology Corporation and Schlumberger Canada Limited (“Schlumberger”) for all of North America. The contracts completed their three year initial terms in January 2012. During the fourth quarter of 2010, ERF Wireless initiated a contractual mediation with Schlumberger to attempt to resolve various financial issues in the reseller agreements. Mediation was unsuccessful, and in 2011 ERF Wireless availed itself of the right to submit a claim against Schlumberger Technology Corporation in binding arbitration as mandated in the parties’ reseller agreement. The hearings and other associated formal submittals of this arbitration were completed on June 17, 2013 and a ruling by the three members of the arbitration panel will be the final phase of the arbitration process.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously disclosed under Item 1 of the Company’s Form 10-K for the fiscal year ended December 31, 2012 filed with the SEC on March 29, 2013.

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.

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.

In April 2013, 778,743 shares of Common Stock at average price of $0.60 were issued for services and debt conversions.

In May 2013, 539,199 shares of Common Stock at average price of $0.50 were issued for services and debt conversions.

In June 2013, 374,417 shares of common stock at average price of $0.44 were issued for debt conversions.

ITEM 3. DEFAULT IN SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

28

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* 101.SCH* 101.CAL* 101.LAB* 101.PRE* 101.DEF*	XBRL Instance Document XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document

* Filed herewith. As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Section 11 and 12 of the Securities Act of 1933, as amended, and Section 18 of the Securities Exchange Act of 1934, as amended.

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:	August 14, 2013
By:	/s/ Richard R. Royall
	Richard R. Royall
	Chief Financial Officer
Date:	August 14, 2013

29

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, H. Dean Cubley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ERF Wireless, Inc.;

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

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

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to theregistrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 14, 2013

/s/H. Dean Cubley
H. Dean Cubley
Chief Executive Officer and authorized officer on behalf of the registrant

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Richard R. Royall, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ERF Wireless, Inc.;

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

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

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to theregistrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 14, 2013

/s/Richard R. Royall

Richard R. Royall

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT
TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, the undersigned Officer of ERF Wireless, Inc. (the "Company"), hereby certifies, that the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 14, 2013

/s/H. Dean Cubley
H. Dean Cubley
Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT
TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, the undersigned Officer of ERF Wireless, Inc. (the "Company"), hereby certifies, that the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 14, 2013

/s/Richard R. Royall

Richard R. Royall

Chief Financial Officer

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11. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS

6 Months Ended

Jun. 30, 2013

Costs And Estimated Earnings In Excess Of Billings On Uncompleted Contracts

11. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS

Costs and estimated earnings in excess of billings on uncompleted contracts for the six months ended June 30, 2013, are summarized as follows (in thousands):

	June 30,
	2013
Costs incurred on uncompleted contracts	$	51
Estimated profit		57
Gross revenue		108
Less: billings to date		108
Costs and profit in excess of billings	$	–

Such amounts are included in the accompanying balance sheet at June 30, 2013, are summarized as follows (in thousands):

		June 30,
		2013
Cost and estimated earnings in excess of billings on uncompleted contracts	$	–
Billings in excess of costs and estimated earnings on uncompleted contracts		–
	$	–

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13. INDUSTRY SEGMENTS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Revenue	$ 1,563	$ 1,687	$ 3,477	$ 3,335
Loss from continuing operations	(1,347)	(1,050)	(2,487)	(1,734)
Total assets	6,802	6,303	6,802	6,303	6,271
Capital expenditures	231	417	316	979
Depreciation	487	393	976	731
EBI
Revenue	809	1,022	2,014	2,035
Loss from continuing operations	(128)	74	(19)	234
Total assets	2,857	3,235	2,857	3,235
Capital expenditures	186	199	196	530
Depreciation	215	165	430	319
WBS
Revenue	597	579	1,208	1,149
Loss from continuing operations	(350)	(143)	(672)	(191)
Total assets	1,690	2,155	1,690	2,155
Capital expenditures	45	215	105	440
Depreciation	205	157	412	269
ENS
Revenue	157	86	255	151
Loss from continuing operations	25	(75)	5	(167)
Total assets	521	702	521	702
Depreciation	59	58	117	117
Total Segment
Revenue	1,563	1,687	3,477	3,335
Loss from continuing operations	(453)	(144)	(686)	(124)
Total assets	5,068	6,092	5,068	6,092	5,989
Capital expenditures	231	414	301	970
Depreciation	479	380	959	705
ERF Corporate
Revenue
Loss from continuing operations	(894)	(906)	(1,801)	(1,610)
Total assets	1,734	211	1,734	211	282
Capital expenditures		3	15	9
Depreciation	$ 8	$ 13	$ 17	$ 26

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Sales:
Products		$ 28	$ 11	$ 44
Services	1,563	1,659	3,466	3,291
Total sales	1,563	1,687	3,477	3,335
Costs of goods sold:
Products and integration services	366	537	759	953
Rent, repairs and maintenance	198	173	393	300
Depreciation	435	338	872	624
Total costs of goods sold	999	1,048	2,024	1,877
Gross profit	564	639	1,453	1,458
Operating expenses:
Selling, general and administrative	1,859	1,634	3,836	3,085
Depreciation	52	55	104	107
Total operating expenses	1,911	1,689	3,940	3,192
Loss from operations	(1,347)	(1,050)	(2,487)	(1,734)
Other income (expenses):
Interest expense, net	(1,030)	(320)	(1,789)	(679)
Derivative income	104	18	339	101
Gain on sale of assets	13		24
Total other (expense) income	(913)	(302)	(1,426)	(578)
Consolidated net loss	(2,260)	(1,352)	(3,913)	(2,312)
Net increase attributable to non-controlling interest	4	(3)	1	(8)
Net loss attributable to ERF Wireless Inc.	(2,256)	(1,355)	(3,912)	(2,320)
Other comprehensive loss:
Unrealized loss on securities held for resale		(2)		(6)
Total other comprehensive loss		(2)		(6)
Total comprehensive loss	$ (2,256)	$ (1,357)	$ (3,912)	$ (2,326)
Basic loss per common share:
Net loss	$ (0.24)	$ (0.46)	$ (0.48)	$ (0.87)
Net loss attributable to ERF Wireless, Inc.	$ (0.24)	$ (0.46)	$ (0.48)	$ (0.87)
Diluted loss income per common share:
Net loss	$ (0.24)	$ (0.46)	$ (0.48)	$ (0.87)
Net loss attributable to ERF Wireless, Inc.	$ (0.24)	$ (0.46)	$ (0.48)	$ (0.87)

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4. DEBT CONVERSION

6 Months Ended

Jun. 30, 2013

Debt Conversion

NOTE 4 - DEBT CONVERSION

(a) Line of Credit

During the six months ended June 30, 2013, the Company issued 2,080,000 shares of its Common Stock (as defined below) for the settlement of $916,000 of principal and $197,000 of accrued interest for a total amount of $1,113,000 owed to Angus Capital Partners. The Company issued Common Stock at an average price of $0.53 per share calculated based on the closing price the day the debt was settled. See Note 9 for additional information on this facility.

(b) Other Debt

During the six months ended June 30, 2013, the Company issued 1,546,000 and 408,000 shares of its Common Stock for the settlement of principal amount of $1,139,000 and $197,000 of accrued interest, respectively, for a total of $1,336,000. The Company issued Common Stock at an average price of $.68 per share calculated based on the closing price the day the debt was settled.

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5. COMMON STOCK AND PREFERRED STOCK (Tables)

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

Common Stock

During the six months ended June 30, 2013, the Company issued 4,757,081 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).

June 30, 2013	Supplemental Non-Cash Disclosure
Professional fees	$	247
Services and compensation		255
Other services rendered		207
Total for services, compensation and interest	$	709
Notes payable	$	1,139
Line of credit and interest	$	1,113

Warrants

The following tables set forth summarized warrants that are issued, outstanding and exercisable for the six months ended June 30, 2013:

Warrants Outstanding

Weighted Average Exercise Price

Expiration Date

December 31, 2012

Issued

Exercised

Expired

June 30, 2013

$

0.80

Mar-18

–

148,406

–

–

148,406

$

0.80

Apr-18

–

14,405

–

–

14,405

$

0.75

Apr-18

–

48,775

–

–

48,775

Total Warants

–

211,586

–

–

211,586

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12. RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2013

Related Party Transactions [Abstract]

12. RELATED PARTY TRANSACTIONS

In May 2013, the Company entered into a capital lease agreement with Legacy Laser Services Dallas, LLC and Principal and Managing Member Manny M. Carter, a related party whereby Manny M. Carter is a Board of Director of ERF Wireless Inc. At June 30, 2013, the outstanding balance on the capital leases totaled $145,000. The payment terms are $7,252 per month including interest, at an annual rate of 42% per annum. The capital leased equipment is to be utilized in our networks in oil and gas exploration regions. The equipment is the primary collateral securing the financing.

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10. COMMITMENTS (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Commitments and Contingencies Disclosure [Abstract]
2013	$ 468
2014	779
2015	707
2016	610
Thereafter	125
Total	$ 2,689

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7. EARNINGS PER SHARE (Details Narrative)	6 Months Ended
	Jun. 30, 2013
Bond
Common Stock shares excluded from computation of Earning Per Share	622,000
Warrants
Common Stock shares excluded from computation of Earning Per Share	211,586
Convertible Debt
Common Stock shares excluded from computation of Earning Per Share	2,742,400
Series A Preferred Stock
Common Stock shares excluded from computation of Earning Per Share	8,426,982

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9. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES (Tables)

6 Months Ended

Jun. 30, 2013

Notes payable, long-term debts and capital leases

Notes payable, long-term debts and capital leases consist of the following as of June 30, 2013 (in thousands):

	Terms	Maturity Date	Interest Rate			Gross Balance		Debt Discount		Balance
Banc leasing, Inc.	$10,660 / Month including interest	January-15		11.62	%	$	184	$	–	$	184
Advantage leasing associates	$7,186 / Month including interest	Various		Various			122		–		122
Legacy laser services Dallas, LLC	$7,252 / Month including interest	May-16		42.00	%		145		–		145
MP Nexlevel LLC	$7,043 / Month including interest	May-14		10.00	%		74		–		74
Tonaquint	$791,500 / Lump sum payment including interest	September-13		12.00	%		792		308		484
JMJ Financial	$165,000 / Lump sum payment including interest	March-14		12.00	%		275		260		15
Vista capital	$60,500 / Lump sum payment including interest	October-13		12.00	%		60		42		18
Willow creek capital	$244,200 / Lump sum payment including interest	October-13		12.00	%		244		165		79
TCA global line of credit	$139,523 / Month including interest	July-14		12.00	%		1,500		238		1,262
Investor financing	$495,000 / Lump sum payment including interest	September-13		12.00	%		488		–		488
Premium assignment	$1,495 / Month including interest	July-13		6.00	%		6		–		6
Dakota capital equipment financing	$178,031 / Quarterly including interest	March-16		18.00	%		1,623		42		1,581
E-bond investor notes	3 years/ Semiannual interest (See below)	Various		7.50	%		311		212		99
Line of credit	2 years/ Quarterly interest (See below)	December-15		12.00	%		3,027		–		3,027
Total debt						$	8,851	$	1,267		7,584
Less current maturities											(3,193	)
Long-term debt										$	4,391

Notes payable, long-term debts and capital leases consist of the following as of December 31, 2012 (in thousands):

	Terms	Maturity Date	Interest Rate			Gross Balance		Debt Discount		Balance
Banc leasing, Inc.	$10,660 / Month including interest	January-15	11.62	%	$	227	$	–	$	227
Advantage leasing associates	$7,186 / Month including interest	Various	Various			156		–		156
MP Nexlevel LLC	$7,043 / Month including interest	May-14	10.00	%		111		–		111
Investor financing	$765,000 / Lump sum payment including interest	January-13	12.00	%		765		–		765
Premium assignment	$1,495 / Month including interest	July-13	6.00	%		17		–		17
Dakota capital equipment financing	$178,031 / Quarterly including interest	March-16	18.00	%		1,820		57		1,763
E-bond investor notes	3 years/ Semiannual interest (See below)	Various	7.50	%		687		566		121
Line of credit	2 years/ Quarterly interest (See below)	December-15	12.00	%		3,168		–		3,168
Total debt					$	6,951	$	623		6,328
Less current maturities										(1,527	)
Long-term debt									$	4,801

Future minimum lease payments under capital leases

The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of June 30, 2013 (in thousands):

Year Ending December 31,
2013	$	151
2014		290
2015		113
2016		36
Thereafter		–
Total minimum lease payments		590
Less amount representing interest		(139	)
Present value of net minimum lease payments		451
Current maturities of capital lease obligations		(220	)
Long-term portion of capital lease obligations	$	231

E Series Bond Investor Note

Convertible debt activity

Description	Bonds			Compound Derivative Liability			Total
Fair value at December 31, 2012	$	121,446		$	492,043		$	613,489
Fair value issuances during 2013 (principal amount)		325,000			–			325,000
Fair value issuances during 2013 (debt discount)		(139,216	)		139,216			–
Change in fair value		492,895			(59,079	)		433,816
Conversions		(701,000	)		(443,611	)		(1,144,611	)
Fair value at June 30, 2013	$	99,125		$	128,569		$	227,694

Tonaquint

Convertible debt activity

Description	Tonaquint			Warrant Compound Derivative Liability			Compound Derivative Liability			Total
Fair value issuances at inception	$	791,500		$	–		$	–		$	791,500
Fair value issuances during 2013 (debt discount)		(588,724	)		16,400			256,224			(316,100	)
Change in fair value		280,799			(7,211	)		(3,049	)		270,539
Conversions during		–						–			–
Fair value at June 30, 2013	$	483,575		$	9,189		$	253,175		$	745,939

JMJ

Convertible debt activity

Description	JMJ			Compound Derivative Liability			Total
Fair value issuances at inception	$	275,000		$	–		$	275,000
Fair value issuances during 2013 (debt discount)		(275,000	)		323,307			48,307
Change in fair value		14,506			(29,144	)		(14,638	)
Conversions during		–			–			–
Fair value at June 30, 2013	$	14,506		$	294,163		$	308,669

Willowcreek [Member]

Convertible debt activity

Description	Willowcreek			Compound Derivative Liability			Total
Fair value issuances at inception	$	244,200		$	–		$	244,200
Fair value issuances during 2013 (debt discount)		(244,200	)		255,000			10,800
Change in fair value		78,827			(33,198	)		45,629
Conversions during		–			–			–
Fair value at June 30, 2013	$	78,827		$	221,802		$	300,629

Vista Capital

Convertible debt activity

Description	Vista			Compound Derivative Liability			Total
Fair value issuances at inception	$	60,500		$	–		$	60,500
Fair value issuances during 2013 (debt discount)		(60,500	)		70,967			10,467
Change in fair value		18,340			(10,560	)		7,780
Conversions during		–			–			–
Fair value at June 30, 2013	$	18,340		$	60,407		$	78,747

TCA Global

Convertible debt activity

Description	TCA Global			Compound Derivative Liability		Total
Fair value issuances at inception	$	1,500,000		$	–	$	1,500,000
Fair value issuances during 2013 (debt discount)		(238,312	)		138,312		(100,000	)
Change in fair value		362			1,738		2,100
Conversions during		–			–		–
Fair value at June 30, 2013	$	1,262,050		$	140,050	$	1,402,100

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7. EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Computation of basic and diluted earnings per share

The following table sets forth the computation of basic and diluted earnings per share of Common Stock (in thousands, except per share amount):

	For the three months ended June 30, 2013
	Net loss			Shares		Per-Share
	(Numerator)			(Denominator)		Amount
Basic EPS:
Net loss	$	(2,260	)		9,600	$	(0.24	)
Income attributable to non-controlling interest	$	4			9,600	$	–
Net loss attributable to ERF Wireless, Inc.	$	(2,256	)		9,600	$	(0.24	)
Diluted EPS:
Net loss	$	(2,260	)		9,600	$	(0.24	)
Income attributable to non-controlling interest	$	4			9,600	$	–
Net loss attributable to ERF Wireless, Inc.	$	(2,256	)		9,600	$	(0.24	)

		For the three months ended June 30, 2012
		Net loss		Shares		Per-Share
		(Numerator)		(Denominator)		Amount
Basic EPS:
Net loss	$	(1,352	)	2,919	$	(0.46	)
Loss attributable to non-controlling interest	$	(3	)	2,919	$	–
Net loss attributable to ERF Wireless, Inc.	$	(1,355	)	2,919	$	(0.46	)
Diluted EPS:
Net loss	$	(1,352	)	2,919	$	(0.46	)
Loss attributable to non-controlling interest	$	(3	)	2,919	$	–
Net loss attributable to ERF Wireless, Inc.	$	(1,355	)	2,919	$	(0.46	)

	For the six months ended June 30, 2013
	Net loss			Shares		Per-Share
	(Numerator)			(Denominator)		Amount
Basic EPS:
Net loss	$	(3,913	)		8,219	$	(0.48	)
Income attributable to non-controlling interest	$	1			8,219	$	–
Net loss attributable to ERF Wireless, Inc.	$	(3,912	)		8,219	$	(0.48	)
Diluted EPS:
Net loss	$	(3,913	)		8,219	$	(0.48	)
Income attributable to non-controlling interest	$	1			8,219	$	–
Net loss attributable to ERF Wireless, Inc.	$	(3,912	)		8,219	$	(0.48	)

		For the six months ended June 30, 2012
		Net loss		Shares		Per-Share
		(Numerator)		(Denominator)		Amount
Basic EPS:
Net loss	$	(2,312	)	2,653	$	(0.87	)
Loss attributable to non-controlling interest	$	(8	)	2,653	$	–
Net loss attributable to ERF Wireless, Inc.	$	(2,320	)	2,653	$	(0.87	)
Diluted EPS:
Net loss	$	(2,312	)	2,653	$	(0.87	)
Loss attributable to non-controlling interest	$	(8	)	2,653	$	–
Net loss attributable to ERF Wireless, Inc.	$	(2,320	)	2,653	$	(0.87	)

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9. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES (Details 6) (USD $) In Thousands, unless otherwise specified	0 Months Ended	2 Months Ended	3 Months Ended		0 Months Ended		3 Months Ended
	Jun. 30, 2013	May 30, 2013	Jun. 30, 2013	Jun. 30, 2013	Jun. 30, 2013 TCA Global [Member]	Jun. 30, 2013 Compound Derivative Liability	Jun. 30, 2013 Compound Derivative Liability	Jun. 30, 2013 Compound Derivative Liability	Jun. 30, 2013 Compound Derivative Liability
Convertible Debt Activity
Fair value issuances at inception	$ 1,500,000	$ 60,500	$ 244,200	$ 275,000	$ 1,500,000
Fair value issuances during 2013 (debt discount)	(100,000)	10,467	10,800	48,307	(238,312)	138,312	70,967	255,000	323,307
Change in fair value	2,100	7,780	45,629	(14,638)	362	1,738	(10,560)	(33,198)	(29,144)
Conversions during
Fair value at June 30, 2013	$ 1,402,100	$ 78,747	$ 300,629		$ 1,262,050	$ 140,050	$ 60,407	$ 221,802

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5. COMMON STOCK (Details) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Common stock issued for services, shares	4,757,081
Common stock issued for services, value	$ 709
Common stock issued for notes payable, value	1,139
Common stock issued for line of credit and interest, value	1,113
Services and Compensation
Common stock issued for services, value	255
Other services
Common stock issued for services, value	207
Professional Fees
Common stock issued for services, value	$ 247

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9. NOTES PAYABLE, LONG-TERM DEBT, LINE OF CREDIT AND CAPITAL LEASES (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Gross Balance	$ 7,193	$ 6,951
Debt Discount	967	623
Balance		6,328
Total debt	7,584
Less current maturities	(3,193)	(1,527)
Long-term debt	4,391	4,801
Banc leasing Inc [Member]
Terms	$10,660 / Month including interest	$10,660 / Month including interest
Maturity Date	Jan-15	Jan-15
Interest Rate	11.62%	11.62%
Gross Balance	184	227
Debt Discount
Balance	184	227
Advantage leasing associates [Member]
Terms	$7,186 / Month including interest	$7,186/ Month including interest
Maturity Date	Various	Various
Gross Balance	122	156
Debt Discount
Balance	122	156
Legacy laser services Dallas, LLC [Member]
Terms	7,252 / Month including interest
Maturity Date	May-16
Interest Rate	42.00%
Gross Balance	145
Debt Discount
Balance	145
MP Nexlevel LLC
Terms	$7,043 / Month including interest	$7,043 / Month including interest
Maturity Date	May-14	May-14
Interest Rate	10.00%	10.00%
Gross Balance	74	111
Balance	74	111
Tonaquint
Terms	$791,500/Lump sum payment including interest
Maturity Date	September-13
Interest Rate	12.00%
Gross Balance	792
Debt Discount	308
Balance	484
JMJ
Terms	$165,000/Lump sum payment including interest
Maturity Date	March-14
Interest Rate	12.00%
Gross Balance	275
Debt Discount	260
Balance	15
Vista captial [Member]
Terms	60,500 / Lump sum payment including interest
Maturity Date	October-13
Interest Rate	12.00%
Gross Balance	60
Debt Discount	42
Balance	18
TCA global line of credit [Member]
Terms	244,200 / Lump sum payment including interest
Maturity Date	October-13
Interest Rate	12.00%
Gross Balance	244
Debt Discount	165
Balance	79
Willow creek capital [Member]
Terms	139,523 / Month including interest
Maturity Date	July-14
Interest Rate	12.00%
Gross Balance	1,500
Debt Discount	238
Balance	1,262
Investor Financing Member
Terms	$495,000 / Lump sum payment including interest	$795,000/Lump sum payment including interest
Maturity Date	September-13	January -13
Interest Rate	12.00%	12.00%
Gross Balance	488	765
Balance	488	765
Premium assignment [Member]
Terms	$1,495 / Month including interest	$1,495 / Month including interest
Maturity Date	Jul-13	Jul-13
Interest Rate	6.00%	6.00%
Gross Balance	6	17
Balance	6	17
Dakota capital line of credit [Member]
Terms	$178,031 / Quarterly including interest	$178,031 / Quarterly including interest
Maturity Date	Mar-16	Mar-16
Interest Rate	18.00%	18.00%
Gross Balance	1,623	1,820
Debt Discount	42	57
Balance	1,581	1,763
E-bond investor notes [Member]
Terms	3 years/ Semiannual interest -See below)	3 years/ Semiannual interest -See below)
Maturity Date	Various	Various
Interest Rate	7.50%	7.50%
Gross Balance	311	687
Debt Discount	212	566
Balance	99	121
Line Of Credit [Member]
Terms	2 years/ Quarterly interest -See below)	2 years/ Quarterly interest -See below)
Maturity Date	Dec-15	Dec-15
Interest Rate	12.00%	12.00%
Gross Balance	3,027	3,168
Debt Discount
Balance	$ 3,027	$ 3,168

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10. COMMITMENTS (Details Narrative) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Commitments and Contingencies Disclosure [Abstract]
Rental expenses	$ 596,000	$ 476,000

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2. ACCOUNTS RECEIVABLE (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Receivables [Abstract]
Accounts receivable	$ 752	$ 838
Allowance for doubtful accounts	(27)	(10)
Accounts receivable, net	$ 725	$ 828

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9. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES (Details 3) (USD $) In Thousands, unless otherwise specified	0 Months Ended	2 Months Ended	3 Months Ended			0 Months Ended	3 Months Ended
	Jun. 30, 2013	May 30, 2013	Jun. 30, 2013	Jun. 30, 2013	Jun. 30, 2013 JMJ	Jun. 30, 2013 Compound Derivative Liability	Jun. 30, 2013 Compound Derivative Liability	Jun. 30, 2013 Compound Derivative Liability	Jun. 30, 2013 Compound Derivative Liability
Convertible Debt Activity
Fair value issuances at inception	$ 1,500,000	$ 60,500	$ 244,200	$ 275,000	$ 275,000
Fair value issuances during 2013 (debt discount)	(100,000)	10,467	10,800	48,307	(275,000)	138,312	70,967	255,000	323,307
Change in fair value	2,100	7,780	45,629	(14,638)	14,506	1,738	(10,560)	(33,198)	(29,144)
Conversions during
Fair value at June 30, 2013	$ 308,669		$ 308,669	$ 308,669	$ 14,506	$ 221,802	$ 221,802	$ 221,802	$ 221,802

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6. STOCK PLAN (Tables)

6 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Option Plan

In May 2013, the board of directors adopted a non-qualified stock option plan whereby 1,000,000 shares were reserved for issuance. As of June 30, 2013, 108,636 shares of Common Stock were issued and outstanding to certain employees and consultants for services rendered under the plan. This plan is for key employees, officers, directors, and consultants of ERF Wireless, Inc.

Non-Qualified Stock Option Plan, May 2013	2013-A
	Plan
Shares initially reserved		1,000,000
Shares issued during 2013		108,636
Remaining shares available to be issued at June 30, 2013		891,364
Shares issued and outstanding as of June 30, 2013		108,636

In December 2012, the board of directors adopted a non-qualified stock option plan whereby 450,000 shares were reserved for issuance. As of June 30, 2013, 450,000 shares of Common Stock were issued and outstanding to certain employees and consultants for services rendered under the plan. This plan is for key employees, officers, directors, and consultants of ERF Wireless, Inc.

Non-Qualified Stock Option Plan, December 2012	2013
	Plan
Shares initially reserved		450,000
Shares issued during 2012 and 2013		450,000
Remaining shares available to be issued at June 30, 2013		–
Shares issued and outstanding as of June 30, 2013		450,000

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY DEFICIT (USD $) In Thousands, except Share data, unless otherwise specified	Common Stock	Preferred Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Comprehensive Income	Noncontrolling Interest	Total
Beginning Balance, Amount at Dec. 31, 2011	$ 2	$ 9	$ 49,121	$ (51,198)	$ (25)		$ (2,091)
Beginning Balance, Shares at Dec. 31, 2011	2,161	8,579
Net loss				(4,814)		21	(4,793)
New stock issued to shareholders:
Conversion of preferred stock to common stock, Amount		(1)	1
Conversion of preferred stock to common stock, Shares	270	(270)
For retirement of debt, Amount	1		534				535
For retirement of debt, Shares	393
Conversion of LOC and interest to preferred stock, Amount			124				124
Conversion of LOC and interest to preferred stock, Shares		118
Conversion of LOC and interest to common stock, Amount	2		2,587				2,589
Conversion of LOC and interest to common stock, Shares	2,223
Transfer of subsidiary equity to non-controlling interest						107	107
Unrealized loss on securties held for resale					(7)		(7)
For services, compensation, interest and prepaids, Amount	1		620				621
For services, compensation, interest and prepaids, Shares	440
Ending balance, Amount at Dec. 31, 2012	6	8	52,987	(56,012)	(32)	128	(2,915)
Ending balance, Shares at Dec. 31, 2012	5,487	8,427
Net loss				(3,912)		(1)	(3,913)
New stock issued to shareholders:
For services, compensation and interest, Amount	1		708				709
For services, compensation and interest, Shares	1,131
For retirement of debt, Amount	1		1,138				1,139
For retirement of debt, Shares	1,546
Conversion of LOC and interest to common stock, Amount	2		1,111				1,113
Conversion of LOC and interest to common stock, Shares	2,080
Derivative liability			(22)				(22)
Ending balance, Amount at Jun. 30, 2013	$ 10	$ 8	$ 55,922	$ (59,924)	$ (32)	$ 127	$ (3,889)
Ending balance, Shares at Jun. 30, 2013	10,244	8,427

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2. ACCOUNTS RECEIVABLE

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

NOTE 2 - ACCOUNTS RECEIVABLE

Accounts receivable consists of the following (in thousands):

	June 30,			December 31,
	2013			2012
Accounts receivable	$	752		$	838
Allowance for doubtful accounts		(27	)		(10	)
Accounts receivable, net	$	725		$	828

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5. COMMON STOCK, PREFERRED STOCK, AND WARRANTS

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

NOTE 5 - COMMON STOCK, PREFERRED STOCK, AND COMMON 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 $0.001 per share ("Preferred Stock"), and 975,000,000 shall be shares of common stock with a par value of $0.001 per share ("Common Stock").

Common Stock

As of June 30, 2013 and December 31, 2012, there were 10,244,153 and 5,487,072 shares of its Common Stock issued and outstanding, respectively.

During the six months ended June 30, 2013, the Company issued 4,757,081 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).

June 30, 2013	Supplemental Non-Cash Disclosure
Professional fees	$	247
Services and compensation		255
Other services rendered		207
Total for services, compensation and interest	$	709
Notes payable	$	1,139
Line of credit and interest	$	1,113

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 (“Series A Preferred Stock”). There were 8,426,982 shares of Series A Preferred Shares issued and outstanding at June 30, 2013 and December 31, 2012. With respect to the Series A Preferred Stock outstanding at June 30, 2013, the Company would be required to issue 8,426,982 shares of its Common Stock upon conversion.

ERF Wireless, Inc Distribution of EBI Equities to Non-controlling Interest

As of June 30, 2013, the Company had issued 725,611 shares of EBI as a stock dividend and three year warrant expiring December 31, 2014, to purchase 725,611 shares of EBI Common Stock at an exercise price of $4.00 per share and three year warrant expiring December 31, 2014, to purchase 725,611 shares of EBI Common Stock at an exercise price of $6.00; such issuances are valued at $107,000. The Company expects to issue the remaining stock dividends during calendar year 2013. No stock dividends were issued during the six months ended June 30, 2013.

Warrants

During 2013, the Company entered into a convertible promissory note with Tonaquint, Inc for $791,500 and issued five year warrants to purchase 148,406 shares of common stock at $.80 per share, expiring March 2018.

During 2013, the Company entered into a convertible promissory note with Willow Creek Capital for $244,200 and issued five year warrants to purchase 48,775 shares of common stock at $.751 per share, expiring April 2018.

During 2013, the Company entered into a convertible promissory note with Vista Capital for $60,500 and issued five year warrants to purchase 14,405 shares of common stock at $.80 per share, expiring April 2018.

The following tables set forth summarized warrants that are issued, outstanding and exercisable for the six months ended June 30, 2013:

Warrants Outstanding

Weighted Average Exercise Price

Expiration Date

December 31, 2012

Issued

Exercised

Expired

June 30, 2013

$

0.80

Mar-18

–

148,406

–

–

148,406

$

0.80

Apr-18

–

14,405

–

–

14,405

$

0.75

Apr-18

–

48,775

–

–

48,775

Total Warants

–

211,586

–

–

211,586

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3. INVENTORIES

6 Months Ended

Jun. 30, 2013

Inventory Disclosure [Abstract]

3. 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 June 30, 2013 and December 31, 2012, in thousands:

	June 30,		December 31,
	2013		2012
Raw material	$	46	$	46
Work in process		76		115
Finished goods		241		216
Total inventory	$	363	$	377

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9. NOTES PAYABLE, LONG-TERM DEBT, LINE OF CREDIT AND CAPITAL LEASES (Details 1) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Bonds
Convertible Debt Activity
Fair value	$ 121,446
Fair value issuances during 2013 (principal amount)	325,000
Fair value issuances during 2013 (debt discount)	(139,216)
Change in fair value	492,895
Conversions	(701,000)
Fair value at June 30, 2013	99,125
Compound Derivative Liability
Convertible Debt Activity
Fair value	492,043
Fair value issuances during 2013 (principal amount)
Fair value issuances during 2013 (debt discount)	139,216
Change in fair value	(59,079)
Conversions	(443,611)
Fair value at June 30, 2013	128,569
Convertible Debt Activity
Convertible Debt Activity
Fair value	613,489
Fair value issuances during 2013 (principal amount)	325,000
Fair value issuances during 2013 (debt discount)
Change in fair value	433,816
Conversions	(1,144,611)
Fair value at June 30, 2013	$ 227,694

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10. COMMITMENTS (Tables)

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Future minimum lease payments under non-cancelable operating leases

Future minimum lease payments under non-cancelable operating leases as of December 31, 2013 were as follows (in thousands):

Year Ending December 31,		Amount
	2013		468
	2014		779
	2015		707
	2016		610
	Thereafter		125
	Total	$	2,689

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3. INVENTORIES (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Inventory Disclosure [Abstract]
Raw material	$ 46	$ 46
Work in process	76	115
Finished goods	241	216
Total inventory	$ 363	$ 377

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7. EARNINGS PER SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Basic EPS - Numerator
Loss from continuing operations	$ (2,260)	$ (1,352)	$ (3,913)	$ (2,312)
Loss attributable to noncontrolling interest	4	(3)	1	(8)
Net loss attributable to ERF Wireless, Inc.	(2,256)	(1,355)	(3,912)	(2,320)
Diluted EPS - Numerator
Loss from continuing operations	(2,260)	(1,352)	(3,913)	(2,312)
Loss attributable to noncontrolling interest diluted	4	(3)	1	(8)
Net loss attributable to ERF Wireless, Inc.	$ (2,256)	$ (1,355)	$ (3,912)	$ (2,320)
Basic EPS - Shares Denominator
Loss from continuing operations, shares	9,600	2,919	8,219	2,653
Loss attributable to noncontrolling interest, shares	9,600	2,919	8,219	2,653
Net loss attributable to ERF Wireless, Inc., shares	9,600	2,919	8,219	2,653
Loss from continuing operations, shares	9,600	2,919	8,219	2,653
Loss attributable to non-controlling interests, shares	9,600	2,919	8,219	2,653
Net loss attributable to ERF Wireless, Inc., shares	9,600	2,919	8,219	2,653
Basic EPS - Per Share Amount
Loss from continuing operations	$ (0.24)	$ (0.46)	$ (0.48)	$ (0.87)
Loss attributable to noncontrolling interest
Net loss attributable to ERF Wireless, Inc.	$ (0.24)	$ (0.46)	$ (0.48)	$ (0.87)
Diluted EPS - Per Share Amount
Loss from continuing operations	$ (0.24)	$ (0.46)	$ (0.48)	$ (0.87)
Loss attributable to non-controlling interest
Net loss attributable to ERF Wireless, Inc.	$ (0.24)	$ (0.46)	$ (0.48)	$ (0.87)

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11. COSTS AND ESTIMATED EARINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Costs And Estimated Earnings In Excess Of Billings On Uncompleted Contracts
Costs incurred on uncompleted contracts	$ 51
Estimated profit	57
Gross revenue	108
Less: billings to date	108
Costs and profit in excess of billings

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9. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES (Details 5) (USD $) In Thousands, unless otherwise specified	0 Months Ended	2 Months Ended	3 Months Ended			0 Months Ended	3 Months Ended
	Jun. 30, 2013	May 30, 2013	Jun. 30, 2013	Jun. 30, 2013	Jun. 30, 2013 Vista [Member]	Jun. 30, 2013 Compound Derivative Liability	Jun. 30, 2013 Compound Derivative Liability	Jun. 30, 2013 Compound Derivative Liability	Jun. 30, 2013 Compound Derivative Liability
Convertible Debt Activity
Fair value issuances at inception	$ 1,500,000	$ 60,500	$ 244,200	$ 275,000	$ 60,500
Fair value issuances during 2013 (debt discount)	(100,000)	10,467	10,800	48,307	(60,500)	138,312	70,967	255,000	323,307
Change in fair value	2,100	7,780	45,629	(14,638)	18,340	1,738	(10,560)	(33,198)	(29,144)
Conversions during
Fair value at June 30, 2013	$ 1,402,100	$ 78,747	$ 300,629		$ 18,340	$ 140,050	$ 60,407	$ 221,802

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CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Shareholders' deficit:
Preferred stock par value (in Dollars per share)	$ 0.001	$ 0.001
Preferred stock authorized	25,000,000	25,000,000
Preferred stock Series A shares issued	8,426,982	8,426,982
Preferred stock Series A shares outstanding	8,426,982	8,426,982
Common stock par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock shares authorized	975,000,000	975,000,000
Common stock shares issued	10,244,153	5,487,072
Common stock shares outstanding	10,244,153	5,487,072

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8. MAJOR CUSTOMERS

6 Months Ended

Jun. 30, 2013

Risks and Uncertainties [Abstract]

NOTE 8 - MAJOR CUSTOMERS

The Company had gross sales of approximately $3,477,000 and $3,335,000 for the six months ended June 30, 2013 and 2012, respectively. The Company had two customers that met the required disclosure of 10% that represented 33% and 12% of the gross sales and 46% and 24% of total accounts receivable during the six months ended June 30, 2013. Additionally, the Company had two customers that met the required disclosure of 10% that represented 36% and 16% of the gross sales and 34% and 24% of total accounts receivable during the six months ended June 30, 2012.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities
Net loss	$ (3,913)	$ (2,312)
Adjustments to reconcile net loss to net cash used by operating activities:
Gain on sale of assets	(24)
Amortization of debt discount	892	128
Depreciation and amortization	976	731
Stock issued for services rendered, interest and compensation	709	214
Derivative income	(339)	(101)
Bad debt expense	17
Changes in:
Accounts receivable, net	86	(59)
Accounts receivable, other	2	(127)
Inventories	7	(53)
Prepaid expenses and other current assets	167	155
Costs and profits in excess of billings	35
Accounts payable	(181)	360
Accrued expenses	(97)	414
Deferred revenue	(12)	(1)
Total adjustment	2,238	1,661
Net cash used by operating activities	(1,675)	(651)
Cash flows from investing activities
Purchase of property and equipment	(168)	(906)
Proceeds from sale of assets	34
Change in other assets	1	31
Net cash used by investing activities	(133)	(875)
Cash flows from financing activities
Net proceeds from line of credit	774	319
Proceeds from long-term debt obligations	2,916	845
Payment of long-term debt obligations	(632)	(7)
Payment on capital lease obligations	(81)	(73)
Net cash provided by financing activities	2,977	1,084
Net change in cash and cash equivalents	1,169	(442)
Cash and cash equivalents at the beginning of the period	118	591
Cash and cash equivalents at the end of the period	1,287	149
Supplemental disclosure of cash flow information:
Net cash paid during the period for: Interest	125	209
Net cash paid during the period for: Income taxes
Supplemental non-cash investing and financing activities:
Conversion of debt through issuance of common stock	1,139	155
Conversion of preferred stock to common stock		70
Conversion of LOC and interest through issuance of common stock	1,113	1,275
Unrealized (loss) on securities held for resale		(6)
Transfer of subsidiary equity to non-controlling interest		107
Property and equipment financed with capital lease	$ 148	$ 73

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CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Current assets
Cash and cash equivalents	$ 1,287	$ 118
Accounts receivable, net	725	828
Accounts receivable, other	344	346
Inventories	363	377
Costs and estimated earnings in excess of billings on uncompleted contracts		35
Prepaid expenses and other current assets	402	221
Total current assets	3,121	1,925
Property and equipment
Property and equipment	11,946	11,644
Less: accumulated depreciation	(8,477)	(7,511)
Net property and equipment	3,469	4,133
Goodwill	176	176
Other assets	36	37
Total assets	6,802	6,271
Current liabilities:
Notes payable and current portion of long-term debt	2,973	1,358
Current portion of long-term capital leases	220	169
Accounts payable	1,045	1,226
Accrued expenses	947	1,120
Derivative liabilities	1,107	492
Deferred revenue	8	20
Total current liabilities	6,300	4,385
Line of credit (LOC)	3,027	3,168
Long-term debt, net of current portion	1,133	1,419
Long-term capital leases, net of current portion	231	214
Total liabilities	10,691	9,186
Commitments
Shareholders' deficit:
Preferred stock - $0.001 par value, 25,000,000 authorized Series A designated 10,000,000 shares issued and outstanding at June 30, 2013 and December 31, 2012 8,426,982 and 8,426,982 shares, respectively	8	8
Common stock - $0.001 par value Authorized 975,000,000 shares issued and outstanding at June 30, 2013 and December 31, 2012 10,244,153 and 5,487,072 shares, respectively	10	6
Additional paid in capital	55,922	52,987
Accumulated deficit	(59,924)	(56,012)
Accumulated other comprehensive loss	(32)	(32)
Total ERF wireless, Inc. shareholders' deficit	(4,016)	(3,043)
Noncontrolling interest	127	128
Total shareholders' deficit	(3,889)	(2,915)
Total liabilities and shareholders' deficit	$ 6,802	$ 6,271

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11. COSTS AND ESTIMATED EARINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Costs And Estimated Earnings In Excess Of Billings On Uncompleted Contracts
Cost and estimated earnings in excess of billings on uncompleted contracts
Billings in excess of costs and estimated earnings on uncompleted contracts
Total		$ 35

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11. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS (Tables)

6 Months Ended

Jun. 30, 2013

Costs And Estimated Earnings In Excess Of Billings On Uncompleted Contracts

Costs and estimated earnings in excess of billings on uncompleted contracts

Costs and estimated earnings in excess of billings on uncompleted contracts for the six months ended June 30, 2013, are summarized as follows (in thousands):

	June 30,
	2013
Costs incurred on uncompleted contracts	$	51
Estimated profit		57
Gross revenue		108
Less: billings to date		108
Costs and profit in excess of billings	$	–

Costs and billings summary

Such amounts are included in the accompanying balance sheet at June 30, 2013, are summarized as follows (in thousands):

		June 30,
		2013
Cost and estimated earnings in excess of billings on uncompleted contracts	$	–
Billings in excess of costs and estimated earnings on uncompleted contracts		–
	$	–

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3. INVENTORIES (Tables)

6 Months Ended

Jun. 30, 2013

Inventory Disclosure [Abstract]

Schedule of 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 June 30, 2013 and December 31, 2012, in thousands:

	June 30,		December 31,
	2013		2012
Raw material	$	46	$	46
Work in process		76		115
Finished goods		241		216
Total inventory	$	363	$	377

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9. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES (Details 4) (USD $) In Thousands, unless otherwise specified	0 Months Ended	2 Months Ended	3 Months Ended			0 Months Ended	3 Months Ended
	Jun. 30, 2013	May 30, 2013	Jun. 30, 2013	Jun. 30, 2013	Jun. 30, 2013 Willowcreek [Member]	Jun. 30, 2013 Compound Derivative Liability	Jun. 30, 2013 Compound Derivative Liability	Jun. 30, 2013 Compound Derivative Liability	Jun. 30, 2013 Compound Derivative Liability
Convertible Debt Activity
Fair value issuances at inception	$ 1,500,000	$ 60,500	$ 244,200	$ 275,000	$ 244,200
Fair value issuances during 2013 (debt discount)	(100,000)	10,467	10,800	48,307	(244,200)	138,312	70,967	255,000	323,307
Change in fair value	2,100	7,780	45,629	(14,638)	78,827	1,738	(10,560)	(33,198)	(29,144)
Conversions during
Fair value at June 30, 2013	$ 1,402,100	$ 78,747	$ 300,629		$ 78,827	$ 140,050	$ 60,407	$ 221,802

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13. INDUSTRY SEGMENTS (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Total assets	$ 6,802	$ 6,271	$ 6,303
Total Segment
Total assets	5,068	5,989	6,092
ERF Corporate
Total assets	$ 1,734	$ 282	$ 211

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8. MAJOR CUSTOMERS (Details Narrative) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Gross sales	$ 3,477,000	$ 3,335,000
Customer A | Accounts Receivable [Member]
Percentage concentration	46.00%	34.00%
Customer B | Accounts Receivable [Member]
Percentage concentration	24.00%	24.00%
Revenues | Customer A
Percentage concentration	33.00%	36.00%
Revenues | Customer B
Percentage concentration	12.00%	16.00%

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5. COMMON STOCK (Details 2) (USD $)	6 Months Ended
	Jun. 30, 2013
Warrants 1
Warrants outstanding, beginning balance
Weighted average exericse price	$ 0.80
Expiration date	Mar-18
Warrants issued	148,406
Warrants outstanding, ending balance	148,406
Warrants 2
Warrants outstanding, beginning balance
Weighted average exericse price	$ 0.80
Expiration date	Apr-18
Warrants issued	14,405
Warrants outstanding, ending balance	14,405
Warrants 3
Warrants outstanding, beginning balance
Weighted average exericse price	$ 0.75
Expiration date	Apr-18
Warrants issued	48,775
Warrants outstanding, ending balance	48,775
Warrants
Warrants outstanding, beginning balance
Warrants issued	211,586
Warrants outstanding, ending balance	211,586

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6. STOCK PLAN (Details) (2013-A Plan)	6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
2013-A Plan
Shares initially reserved	1,000,000
Shares issued	108,636
Remaining shares available to be issued		891,364
Shares issued and outstanding - ending balance	108,636

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7. EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

NOTE 7 - EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share of Common Stock (in thousands, except per share amount):

	For the three months ended June 30, 2013
	Net loss			Shares		Per-Share
	(Numerator)			(Denominator)		Amount
Basic EPS:
Net loss	$	(2,260	)		9,600	$	(0.24	)
Income attributable to non-controlling interest	$	4			9,600	$	–
Net loss attributable to ERF Wireless, Inc.	$	(2,256	)		9,600	$	(0.24	)
Diluted EPS:
Net loss	$	(2,260	)		9,600	$	(0.24	)
Income attributable to non-controlling interest	$	4			9,600	$	–
Net loss attributable to ERF Wireless, Inc.	$	(2,256	)		9,600	$	(0.24	)

		For the three months ended June 30, 2012
		Net loss		Shares		Per-Share
		(Numerator)		(Denominator)		Amount
Basic EPS:
Net loss	$	(1,352	)	2,919	$	(0.46	)
Loss attributable to non-controlling interest	$	(3	)	2,919	$	–
Net loss attributable to ERF Wireless, Inc.	$	(1,355	)	2,919	$	(0.46	)
Diluted EPS:
Net loss	$	(1,352	)	2,919	$	(0.46	)
Loss attributable to non-controlling interest	$	(3	)	2,919	$	–
Net loss attributable to ERF Wireless, Inc.	$	(1,355	)	2,919	$	(0.46	)

	For the six months ended June 30, 2013
	Net loss			Shares		Per-Share
	(Numerator)			(Denominator)		Amount
Basic EPS:
Net loss	$	(3,913	)		8,219	$	(0.48	)
Income attributable to non-controlling interest	$	1			8,219	$	–
Net loss attributable to ERF Wireless, Inc.	$	(3,912	)		8,219	$	(0.48	)
Diluted EPS:
Net loss	$	(3,913	)		8,219	$	(0.48	)
Income attributable to non-controlling interest	$	1			8,219	$	–
Net loss attributable to ERF Wireless, Inc.	$	(3,912	)		8,219	$	(0.48	)

		For the six months ended June 30, 2012
		Net loss		Shares		Per-Share
		(Numerator)		(Denominator)		Amount
Basic EPS:
Net loss	$	(2,312	)	2,653	$	(0.87	)
Loss attributable to non-controlling interest	$	(8	)	2,653	$	–
Net loss attributable to ERF Wireless, Inc.	$	(2,320	)	2,653	$	(0.87	)
Diluted EPS:
Net loss	$	(2,312	)	2,653	$	(0.87	)
Loss attributable to non-controlling interest	$	(8	)	2,653	$	–
Net loss attributable to ERF Wireless, Inc.	$	(2,320	)	2,653	$	(0.87	)

For the six months ended June 30, 2013, dilutive securities existed, but due to the Company’s net loss there is an anti-dilutive effect. Diluted earnings per share reflect the potential dilution of 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 six months ended June 30, 2013 does not include 622,000 shares of Common Stock underlying the Bonds (as define below); 211,586 of warrants underlying promissory convertible debt, 2,742,400 shares of Common stock underlying promissory convertible debt and 8,426,982 shares of Common Stock underlying the Series A Preferred Stock, due to their anti-dilutive effect.

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13. INDUSTRY SEGMENTS (Tables)

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Segment Information

For the six months ended June 30, 2013 and 2012 (in thousands):

Three Months Ended June 30, 2013	EBI			WBS			ENS			Total Segment			ERF Corporate			Total Consolidated
Revenue	$	809		$	597		$	157		$	1,563		$	–		$	1,563
Segment income (loss) from operations		(128	)		(350	)		25			(453	)		(894	)		(1,347	)
Total assets		2,857			1,690			521			5,068			1,734			6,802
Capital expenditures		186			45			–			231			–			231
Depreciation		215			205			59			479			8			487
Three Months Ended June 30, 2012		EBI			WBS			ENS			Total Segment			ERF Corporate			Total Consolidated
Revenue	$	1,022		$	579		$	86		$	1,687		$	–		$	1,687
Segment income (loss) from operations		74			(143	)		(75	)		(144	)		(906	)		(1,050	)
Total assets		3,235			2,155			702			6,092			211			6,303
Capital expenditures		199			215			–			414			3			417
Depreciation		165			157			58			380			13			393

Six Months Ended June 30, 2013	EBI			WBS			ENS			Total Segment			ERF Corporate			Total Consolidated
Revenue	$	2,014		$	1,208		$	255		$	3,477		$	–		$	3,477
Segment income (loss) from operations		(19	)		(672	)		5			(686	)		(1,801	)		(2,487	)
Total assets		2,857			1,690			521			5,068			1,734			6,802
Capital expenditures		196			105			–			301			15			316
Depreciation		430			412			117			959			17			976
Six Months Ended June 30, 2012		EBI			WBS			ENS			Total Segment			ERF Corporate			Total Consolidated
Revenue	$	2,035		$	1,149		$	151		$	3,335		$	–		$	3,335
Segment income (loss) from operations		234			(191	)		(167	)		(124	)		(1,610	)		(1,734	)
Total assets		3,235			2,155			702			6,092			211			6,303
Capital expenditures		530			440			–			970			9			979
Depreciation		319			269			117			705			26			731

Reconciliation of Segment Assets to Total Assets

Reconciliation of Segment Assets to Total Assets

Reconciliation of Segment Assets to Total Assets	June 30, 2013		December 31, 2012
Total segment assets	$	5,068	$	5,989
Total corporate assets		1,734		282
Total assets	$	6,802	$	6,271

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9. NOTES PAYABLE, LONG-TERM DEBT, LINE OF CREDIT AND CAPITAL LEASES (Details 2) (USD $) In Thousands, unless otherwise specified	4 Months Ended
	Jun. 30, 2013
Tonaquint
Fair value issuances at inception	$ 791,500
Fair value issuances during 2013 (debt discount)	(588,724)
Change in fair value	280,799
Conversions during
Fair value at June 30, 2013	483,575
Compound Derivative Liability
Fair value issuances at inception
Fair value issuances during 2013 (debt discount)	16,400
Change in fair value	(7,211)
Fair value at June 30, 2013	9,189
Compound Derivative Liability
Fair value issuances at inception
Fair value issuances during 2013 (debt discount)	256,224
Change in fair value	(3,049)
Conversions during
Fair value at June 30, 2013	253,175
Total
Fair value issuances at inception	791,500
Fair value issuances during 2013 (debt discount)	(316,100)
Change in fair value	270,539
Conversions during
Fair value at June 30, 2013	$ 745,939

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10. COMMITMENTS

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

NOTE 10 - COMMITMENTS

Leases and License Agreements

For the six months ended June 30, 2013 and 2012, rental expenses of approximately $596,000 and $476,000, 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 December 2018, and requiring payment of property taxes, insurance, maintenance and utilities.

Future minimum lease payments under non-cancelable operating leases as of December 31, 2013 were as follows (in thousands):

Year Ending December 31,		Amount
	2013		468
	2014		779
	2015		707
	2016		610
	Thereafter		125
	Total	$	2,689

Banc Leasing Inc.

During August 2007, the Company entered into a contract with Banc Leasing Inc. to fund the Company’s US-Banknet System. 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 Note 9.

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6. STOCK PLAN

6 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

NOTE 6 - STOCK PLAN

In May 2013, the board of directors adopted a non-qualified stock option plan whereby 1,000,000 shares were reserved for issuance. As of June 30, 2013, 108,636 shares of Common Stock were issued and outstanding to certain employees and consultants for services rendered under the plan. This plan is for key employees, officers, directors, and consultants of ERF Wireless, Inc.

Non-Qualified Stock Option Plan, May 2013	2013-A
	Plan
Shares initially reserved		1,000,000
Shares issued during 2013		108,636
Remaining shares available to be issued at June 30, 2013		891,364
Shares issued and outstanding as of June 30, 2013		108,636

In December 2012, the board of directors adopted a non-qualified stock option plan whereby 450,000 shares were reserved for issuance. As of June 30, 2013, 450,000 shares of Common Stock were issued and outstanding to certain employees and consultants for services rendered under the plan. This plan is for key employees, officers, directors, and consultants of ERF Wireless, Inc.

Non-Qualified Stock Option Plan, December 2012	2013
	Plan
Shares initially reserved		450,000
Shares issued during 2012 and 2013		450,000
Remaining shares available to be issued at June 30, 2013		–
Shares issued and outstanding as of June 30, 2013		450,000

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1. BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

NOTE 1 - BASIS OF PRESENTATION

Nature of the Company

ERF Wireless, Inc. (“Company” or “ERF Wireless”) provides critical infrastructure wireless broadband communications products and services to a broad spectrum of customers in primarily rural oil and gas exploration areas of North America. We also provide high quality broadband services and critical communications services to residential, oil and gas, educational, health care, and regional banks in rural areas utilizing our Company owned and operated wireless networks. As a total comprehensive solutions provider we offer a wide array of critical 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 wireless internet and network 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, educational, and healthcare networks and other services associated with providing wireless products and services to the regional banking, educational and healthcare industries.

Our internet revenues are recorded in “ERF Wireless Bundled Services, Inc. (WBS)”, revenues from construction of bank, healthcare and educational networks in our “ERF Enterprise Network Services, Inc. (ENS)” and wireless broadband products and services to rural oil and gas locations are recorded in “Energy Broadband, Inc. (EBI)”. Please refer to segment footnote 12 for additional information regarding segment operations.

Basis of Accounting

The accompanying unaudited interim consolidated 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, 2012 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 consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year ended December 31, 2012 as reported in form 10-K have been omitted.

Non-controlling Interest

Non-controlling interest in our majority owned subsidiary EBI, is included in the equity section of the consolidated balance sheets. Non-controlling interest represents 3.63% of the equity of EBI and any transfer of value from ERF to non-controlling interest holders. Non-controlling interest is adjusted for the non-controlling interest holders’ proportionate share of the earnings or losses of EBI. Any excess losses applicable to the non-controlling interests have been and are borne by the Company as there is no obligation of the non-controlling interests to fund any losses in excess of their original investment. There is also no obligation or commitment on the part of the Company to fund operating losses of any subsidiary whether wholly-owned or majority-owned.

Reclassification

Certain amounts in the 2012 financial statements have been reclassified to conform to the 2013 financial presentation. These reclassifications have no impact on the total comprehensive loss.

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.

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12. RELATED PARTY TRANSACTIONS (Details Narrative) (USD $)	Jun. 30, 2013
Related Party Transactions [Abstract]
Outstanding balance on the capital leases	$ 145,000
Captial lease payments	$ 7,252
Interest Rate	42.00%

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9. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES (Details 7) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Debt Disclosure [Abstract]
2013	$ 151
2014	290
2015	113
2016	36
Thereafter
Total minimum lease payments	590
Less amount representing interest	(139)
Present value of net minimum lease payments	451
Current maturities of capital lease obligations	(220)
Long-term portion of capital lease obligations	$ 231

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4. DEBT CONVERSION (Details Narrative) (USD $)	6 Months Ended
	Jun. 30, 2013
Line Of Credit [Member]
Shares issued in settlement of debt	2,080,000
Value of shares issued in settlement of debt	$ 1,113,000
Other Debt [Member]
Shares issued in settlement of debt	1,546,000
Value of shares issued in settlement of debt	$ 1,336,000

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13. INDUSTRY SEGMENTS

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

NOTE 13 - INDUSTRY SEGMENTS

This summary reflects the Company's current segments, as described below.

Energy Broadband, Inc. (EBI)

EBI provides wireless connectivity to rural oil and gas locations primarily via Mobile Broadband Trailers (“MBTs”). 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.

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 in certain regions of North America to serve private entities, cities, municipalities and the general public. All sales from external customers are located within the United States.

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. All sales from external customers are located within the United States.

For the six months ended June 30, 2013 and 2012 (in thousands):

Three Months Ended June 30, 2013	EBI			WBS			ENS			Total Segment			ERF Corporate			Total Consolidated
Revenue	$	809		$	597		$	157		$	1,563		$	–		$	1,563
Segment income (loss) from operations		(128	)		(350	)		25			(453	)		(894	)		(1,347	)
Total assets		2,857			1,690			521			5,068			1,734			6,802
Capital expenditures		186			45			–			231			–			231
Depreciation		215			205			59			479			8			487
Three Months Ended June 30, 2012		EBI			WBS			ENS			Total Segment			ERF Corporate			Total Consolidated
Revenue	$	1,022		$	579		$	86		$	1,687		$	–		$	1,687
Segment income (loss) from operations		74			(143	)		(75	)		(144	)		(906	)		(1,050	)
Total assets		3,235			2,155			702			6,092			211			6,303
Capital expenditures		199			215			–			414			3			417
Depreciation		165			157			58			380			13			393

Six Months Ended June 30, 2013	EBI			WBS			ENS			Total Segment			ERF Corporate			Total Consolidated
Revenue	$	2,014		$	1,208		$	255		$	3,477		$	–		$	3,477
Segment income (loss) from operations		(19	)		(672	)		5			(686	)		(1,801	)		(2,487	)
Total assets		2,857			1,690			521			5,068			1,734			6,802
Capital expenditures		196			105			–			301			15			316
Depreciation		430			412			117			959			17			976
Six Months Ended June 30, 2012		EBI			WBS			ENS			Total Segment			ERF Corporate			Total Consolidated
Revenue	$	2,035		$	1,149		$	151		$	3,335		$	–		$	3,335
Segment income (loss) from operations		234			(191	)		(167	)		(124	)		(1,610	)		(1,734	)
Total assets		3,235			2,155			702			6,092			211			6,303
Capital expenditures		530			440			–			970			9			979
Depreciation		319			269			117			705			26			731

Reconciliation of Segment Assets to Total Assets	June 30, 2013		December 31, 2012
Total segment assets	$	5,068	$	5,989
Total corporate assets		1,734		282
Total assets	$	6,802	$	6,271

The Company evaluates the performance of its operating segments based on income before net interest expense, income taxes, depreciation expense, accounting changes and non-recurring items.

For the six months ended June 30, 2013, two customers accounted for $1,138,000 and $425,000 of EBI revenues each.

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9. NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

NOTE 9 - NOTES PAYABLE, LONG-TERM DEBT AND CAPITAL LEASES

Notes payable, long-term debts and capital leases consist of the following as of June 30, 2013 (in thousands):

	Terms	Maturity Date	Interest Rate			Gross Balance		Debt Discount		Balance
Banc leasing, Inc.	$10,660 / Month including interest	January-15		11.62	%	$	184	$	–	$	184
Advantage leasing associates	$7,186 / Month including interest	Various		Various			122		–		122
Legacy laser services Dallas, LLC	$7,252 / Month including interest	May-16		42.00	%		145		–		145
MP Nexlevel LLC	$7,043 / Month including interest	May-14		10.00	%		74		–		74
Tonaquint	$791,500 / Lump sum payment including interest	September-13		12.00	%		792		308		484
JMJ Financial	$165,000 / Lump sum payment including interest	March-14		12.00	%		275		260		15
Vista capital	$60,500 / Lump sum payment including interest	October-13		12.00	%		60		42		18
Willow creek capital	$244,200 / Lump sum payment including interest	October-13		12.00	%		244		165		79
TCA global line of credit	$139,523 / Month including interest	July-14		12.00	%		1,500		238		1,262
Investor financing	$495,000 / Lump sum payment including interest	September-13		12.00	%		488		–		488
Premium assignment	$1,495 / Month including interest	July-13		6.00	%		6		–		6
Dakota capital equipment financing	$178,031 / Quarterly including interest	March-16		18.00	%		1,623		42		1,581
E-bond investor notes	3 years/ Semiannual interest (See below)	Various		7.50	%		311		212		99
Line of credit	2 years/ Quarterly interest (See below)	December-15		12.00	%		3,027		–		3,027
Total debt						$	8,851	$	1,267		7,584
Less current maturities											(3,193	)
Long-term debt										$	4,391

Notes payable, long-term debts and capital leases consist of the following as of December 31, 2012 (in thousands):

	Terms	Maturity Date	Interest Rate			Gross Balance		Debt Discount		Balance
Banc leasing, Inc.	$10,660 / Month including interest	January-15	11.62	%	$	227	$	–	$	227
Advantage leasing associates	$7,186 / Month including interest	Various	Various			156		–		156
MP Nexlevel LLC	$7,043 / Month including interest	May-14	10.00	%		111		–		111
Investor financing	$765,000 / Lump sum payment including interest	January-13	12.00	%		765		–		765
Premium assignment	$1,495 / Month including interest	July-13	6.00	%		17		–		17
Dakota capital equipment financing	$178,031 / Quarterly including interest	March-16	18.00	%		1,820		57		1,763
E-bond investor notes	3 years/ Semiannual interest (See below)	Various	7.50	%		687		566		121
Line of credit	2 years/ Quarterly interest (See below)	December-15	12.00	%		3,168		–		3,168
Total debt					$	6,951	$	623		6,328
Less current maturities										(1,527	)
Long-term debt									$	4,801

Line of Credit

During December 2012, the Company extended its maturity date of its $12.0 million unsecured revolving credit facility with Angus Capital Partners, a related party, from December 31, 2013 to December 30, 2015. 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 June 30, 2013, the outstanding balance on the line of credit totaled $3,027,000 with a remaining line of credit available of $8,973,000.

During the six months ended June 30, 2013, the Company issued 2,080,000 shares of its Common Stock for the settlement of $916,000 of principal and $197,000 of accrued interest for a total amount of $1,113,000 owed to Angus Capital Partners. The Company issued Common Stock at an average price of $0.53 per share calculated based on the closing price the day the debt was settled.

E-Series Bond Investor Note

During the six months ended June 30, 2013, the Company issued to certain accredited investors a principal amount of $325,000 of E-Series bonds (the "Bonds") in addition to the $687,000 which was outstanding at December 31, 2012. At June 30, 2013, the outstanding principal balance of the Bonds totaled $311,000. 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. 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 average closing price 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 three-year warrant to purchase one share of EBI Common Stock at a price of $4.00 for every $2.00 of Bond principal.

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 redeemed in cash or in shares of our Common Stock, valued at the average last sales price over the 20-trading-day period preceding any payment date. If the Company chooses to issue Common Stock as redemption of the Bond principal, we will issue shares representing a value equal to 125% of the Bond principal and shares representing a value equal to 100% of the Bond interest through redemption date.

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 of 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 statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $492,895 for the six months ended June 30, 2013. The estimated debt accretion for subsequent years is $29,637, $92,678, and $89,560 for years ending December 31, 2013, 2014, and 2015, respectively.

The following table summarizes the convertible debt activity for the period January 1, 2013, thru June 30, 2013:

Description	Bonds			Compound Derivative Liability			Total
Fair value at December 31, 2012	$	121,446		$	492,043		$	613,489
Fair value issuances during 2013 (principal amount)		325,000			–			325,000
Fair value issuances during 2013 (debt discount)		(139,216	)		139,216			–
Change in fair value		492,895			(59,079	)		433,816
Conversions		(701,000	)		(443,611	)		(1,144,611	)
Fair value at June 30, 2013	$	99,125		$	128,569		$	227,694

The Company recorded a net change in fair value of derivatives of $59,079 and a gain on debt redemption of $156,791 for a total net derivative income of $215,870 for the six months ended June 30, 2013.

Dakota Capital Fund LLC Equipment Financing

In November 2011, the Company entered into debt financing agreement with Dakota Capital Fund LLC, for financing of up to $3,000,000. During the fourth quarter of 2011, the Company received proceeds of $2,000,000 and had the option of additional funding of $1,000,000 for equipment purchases. This debt facility is secured by certain ERF Wireless assets and there is no prepayment penalty. At June 30, 2013, the outstanding balance on the debt financing agreement totaled $1,623,000 and the Company has elected not to request any additional funds under this credit facility. The payment terms are $178,031 per quarter including interest, at an annual rate of 18% per annum plus 10% of positive operational cash flow as determined on a quarterly basis for repayment of additional principal beginning July 1, 2012. The funding was utilized to purchase equipment to build out networks in oil and gas exploration regions of North America.

The Company issued 30,000 shares of Common Stock for the consummation of the initial $2,000,000 debt financing agreement from Dakota Capital Fund LLC resulting in a debt discount of $93,600. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $15,890 for the six months ended June 30, 2013. The estimated debt accretion for subsequent years is $17,124 and $24,611 for years ending December 31, 2013, and 2014, respectively.

Tonaquint Convertible Promissory Note

On March 5, 2013, the Company entered into a six-month secured convertible promissory note secured debt financing agreement with Tonaquint, Inc. (“holder”), for $791,500, bearing interest at a rate of 12% per annum and maturing September 5, 2013. The note also includes an original issue discount (“OID”) of $65,000 based on the consideration funded, prepaid interest of $71,500 and $5,000 in legal and other expense. The Company also paid holder an origination fee in the amount of $227,500 in 144 Stock (284,375 shares) at the closing bid price on March 5, 2013, plus 50,000 shares (valued at $40,000) of the Company’s Common Stock. The holder may require the Company to convert the outstanding principal balance (including any unpaid interest) into shares of 144 Common Stock at any time during the six-month term of the note or thereafter. The Common Stock issued will be valued using a conversion factor of 80% of the average of the lowest two (2) trading prices for common shares during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. If the average two (2) lowest trading prices is less than $0.33, then the conversion factor will be reduced to 70%. The holder received the option to purchase five-year warrants expiring March 5, 2018 to purchase 148,406 shares of ERF Common Stock at an exercise price of $0.80 or the per-share price at which the Common Stock is sold in an underwritten public offering that closes on or before the date that is six (6) months from the issue date, as may be adjusted from time to time pursuant to the terms and conditions of this warrant.

The Tonaquint promissory note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature, conversion price reset feature and the redemption option (compound embedded derivative liability). At the date of issuance of the Tonaquint note, 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 statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $280,799 for the six months ended June 30, 2013. The estimated debt accretion for the remainder of 2013 is $307,925.

The following table summarizes the convertible debt activity for the period March 5, 2013, through June 30, 2013:

Description	Tonaquint			Warrant Compound Derivative Liability			Compound Derivative Liability			Total
Fair value issuances at inception	$	791,500		$	–		$	–		$	791,500
Fair value issuances during 2013 (debt discount)		(588,724	)		16,400			256,224			(316,100	)
Change in fair value		280,799			(7,211	)		(3,049	)		270,539
Conversions during		–						–			–
Fair value at June 30, 2013	$	483,575		$	9,189		$	253,175		$	745,939

The Company recorded a net change in fair value of derivative income of $16,485 for the six months ended June 30, 2013.

JMJ Financial Convertible Promissory Note

On March 20, 2013, the Company entered into a one year unsecured promissory note debt financing agreement with JMJ Financial for (“JMJ”) up to $500,000 at the sole discretion of additional consideration with the Lender. The note includes a 10% original issue discount that is prorated based on the consideration funded. The Company also paid holder an origination fee in the amount of $40,500 in 144 Stock (50,000 shares) at the closing bid price of the Company’s Common Stock. As of June 30, 2013 the Company has received funding of $250,000, bearing interest at a rate of 12% per annum and maturing in one year from the effective date of each payment. The conversion price is the lesser of $0.59 or 60% of the lowest trade price in the 25 trading days previous to the conversion.

The JMJ promissory note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature, conversion price reset feature and the redemption option (compound embedded derivative liability). At the date of issuance of the JMJ note, 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 statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $14,506 for the six months ended June 30, 2013. The estimated debt accretion for subsequent years is $80,926 and $179,568 for years ending December 31, 2013 and 2014, respectively.

The following table summarizes the convertible debt activity for the period March 20, 2013, through June 30, 2013:

Description	JMJ			Compound Derivative Liability			Total
Fair value issuances at inception	$	275,000		$	–		$	275,000
Fair value issuances during 2013 (debt discount)		(275,000	)		323,307			48,307
Change in fair value		14,506			(29,144	)		(14,638	)
Conversions during		–			–			–
Fair value at June 30, 2013	$	14,506		$	294,163		$	308,669

The Company recorded a net change in fair value of derivatives income of $29,144 for the six months ended June 30, 2013.

Willow Creek Capital Convertible Promissory Note

On April 2, 2013, the Company entered into a six month convertible promissory note secured debt financing agreement with Willow Creek Capital, LLC, for $244,200, bearing interest at a rate of 12% per annum and maturing October 01, 2013. The note also includes a 10% OID of $20,000 based on the consideration funded, prepaid interest of $22,200 and $2,000 in legal and other expense. The Company also paid holder an origination fee in the amount of $109,890 in 144 Stock (146,325 shares) at the closing bid price of the Company’s Common Stock. The holder may require the Company to convert the outstanding principal balance (including any unpaid interest) into shares of 144 Common Stock at any time during the six months term of the note or thereafter. The Common Stock issued will be valued using a conversion factor of 80% the average of the lowest two (2) trading prices common shares during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. If the average two (2) lowest trading prices is less than $0.33, then the conversion factor will be reduced to 70%. The holder will be entitled to purchase from the Company five year warrants expiring April 2, 2018 to purchase 48,775 shares of ERF Common Stock at an exercise price of $0.751 or the per-share price at which the Common Stock is sold in an underwritten public offering that closes on or before the date that is six (6) months from the issue date, as may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

The Willow Creek promissory note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature, conversion price full ratchet reset feature and the redemption option (compound embedded derivative liability). At the date of issuance of the Willow Creek note, 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 statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $78,827 for the six months ended June 30, 2013. The estimated debt accretion for the remaining 2013 is $165,373.

The following table summarizes the convertible debt activity for the period April 2, 2013, thru June 30, 2013:

Description	Willowcreek			Compound Derivative Liability			Total
Fair value issuances at inception	$	244,200		$	–		$	244,200
Fair value issuances during 2013 (debt discount)		(244,200	)		255,000			10,800
Change in fair value		78,827			(33,198	)		45,629
Conversions during		–			–			–
Fair value at June 30, 2013	$	78,827		$	221,802		$	300,629

The Company recorded a net change in fair value of derivative income of $33,198 for the six months ended June 30, 2013.

Vista Capital Convertible Promissory Note

On April 4, 2013, the Company entered into a six month convertible promissory note secured debt financing agreement with Vista Capital Investments, LLC, for $60,500, bearing interest at a rate of 12% per annum and maturing October 04, 2013. The note also includes a 10% OID of $5,000 based on the consideration funded, prepaid interest of $5,500. The Company also paid holder an origination fee in the amount of $21,175 in 144 Stock (33,611 shares) at the closing bid price plus of the Company’s Common Stock. The holder may require the Company to convert the outstanding principal balance (including any unpaid interest) into shares of 144 Common Stock at any time during the six months term of the note or thereafter. The Common Stock issued will be valued using a conversion factor of 80% the average of the lowest two (2) trading prices common shares during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. If the average two (2) lowest trading prices is less than $0.33, then the conversion factor will be reduced to 70%. The holder will be entitled to purchase from the Company five year warrants expiring April 04, 2018 to purchase 14,405 shares of ERF Common Stock at an exercise price of $0.80 or the per-share price at which the Common Stock is sold in an underwritten public offering that closes on or before the date that is six (6) months from the issue date, as may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

The Vista promissory note was determined to include various embedded derivative liabilities. The derivative liabilities are the conversion feature, conversion price full ratchet reset feature and the redemption option (compound embedded derivative liability). At the date of issuance of the Vista note, 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 statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $18,340 for the six months ended June 30, 2013. The estimated debt accretion for the remaining 2013 is $42,160.

The following table summarizes the convertible debt activity for the period April 4, 2013, thru June 30, 2013:

Description	Vista			Compound Derivative Liability			Total
Fair value issuances at inception	$	60,500		$	–		$	60,500
Fair value issuances during 2013 (debt discount)		(60,500	)		70,967			10,467
Change in fair value		18,340			(10,560	)		7,780
Conversions during		–			–			–
Fair value at June 30, 2013	$	18,340		$	60,407		$	78,747

The Company recorded a net change in fair value of derivatives income of $10,560 for the six months ended June 30, 2013.

TCA Global Convertible Promissory Note

On June 28, 2013, the Company entered into a twelve month convertible promissory note secured debt financing agreement with TCA Global Credit Master Fund for $1,500,000, bearing interest at a rate of 12% per annum and maturing July 28, 2014. The note also includes $153,300 in commitment fees; due diligence fees; document review fees; service fees; legal; and other expense. The holder may require the Company to convert the outstanding principal balance (including any unpaid interest) into shares of 144 Common Stock at any time during the twelve months term of the note or thereafter. The Common Stock issued will be valued using a conversion factor of 85% the average VWAP trading price during the five (5) trading day period ending on the latest complete trading day prior to the conversion date.

The TCA Global promissory note was 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 of the TCA Global note, 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 statement of operations. The Company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $362 for the six months ended June 30, 2013. The estimated debt accretion for the remaining 2013 is $237,950.

The following table summarizes the convertible debt activity for the period June 28, 2013, thru June 30, 2013:

Description	TCA Global			Compound Derivative Liability		Total
Fair value issuances at inception	$	1,500,000		$	–	$	1,500,000
Fair value issuances during 2013 (debt discount)		(238,312	)		138,312		(100,000	)
Change in fair value		362			1,738		2,100
Conversions during		–			–		–
Fair value at June 30, 2013	$	1,262,050		$	140,050	$	1,402,100

The Company recorded a net change in fair value of derivatives expense of $1,738 for the six months ended June 30, 2013.

Investor Financing

On July 13, 2012, the Company entered into a three-month secured debt financing agreement with individuals for $1,000,000 with an interest rate of 12% per annum. Under the agreement, as amended, the maturity date was extended to September, 2013. Both parties under the amendment agreed to apply the Dakota Capital Fund payment of $181,235 including interest as a subset to the bridge note incurring an interest rate at .5% interest per day on a 360 day calendar year. At June 30, 2013, the outstanding principal balance totaled $488,000. The Company is in negotiations of extending the investor financing note through 3rd quarter 2013.

Capital Leases

Banc Leasing Inc. Included in property and equipment at June 30, 2013, the cost of the equipment was $610,900 and the accumulated amortization was $432,721. Amortization of assets under capital leases is included in depreciation expense. The equipment is the primary collateral securing the financing.

Advantage Leasing Inc. Included in vehicles at June 30, 2013, the cost of the vehicles was $234,614 and the accumulated amortization was $113,126. Amortization of assets under capital leases is included in depreciation expense. The vehicles are the primary collateral securing the financing.

Legacy Laser Services Dallas, LLC Included in property and equipment at June 30, 2013, the cost of the equipment was $148,003 and the accumulated amortization was $6,000. Amortization of assets under capital leases is included in depreciation expense. The equipment is the primary collateral securing the financing.

The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of June 30, 2013 (in thousands):

Year Ending December 31,
2013	$	151
2014		290
2015		113
2016		36
Thereafter		–
Total minimum lease payments		590
Less amount representing interest		(139	)
Present value of net minimum lease payments		451
Current maturities of capital lease obligations		(220	)
Long-term portion of capital lease obligations	$	231

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2. ACCOUNTS RECEIVABLE (Tables)

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Accounts Receivable

Accounts receivable consists of the following (in thousands):

	June 30,			December 31,
	2013			2012
Accounts receivable	$	752		$	838
Allowance for doubtful accounts		(27	)		(10	)
Accounts receivable, net	$	725		$	828

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14. SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2013

Subsequent Events [Abstract]

NOTE 14 - SUBSEQUENT EVENTS

Subsequent to June 30, 2013, the Company issued 1,349,650 shares of common stock valued at approximately $569,000 for services rendered, and conversion of debt.

XML

Document And Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 14, 2013
Document And Entity Information
Entity Registrant Name	ERF Wireless, Inc.
Entity Central Index Key	0001020646
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	Yes
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		11,593,803
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2013

XML

1. BASIS OF PRESENTATION (Policies)

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Nature of the Company

ERF Wireless, Inc. (“Company” or “ERF Wireless”) provides critical infrastructure wireless broadband communications products and services to a broad spectrum of customers in primarily rural oil and gas exploration areas of North America. We also provide high quality broadband services and critical communications services to residential, oil and gas, educational, health care, and regional banks in rural areas utilizing our Company owned and operated wireless networks. As a total comprehensive solutions provider we offer a wide array of critical 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 wireless internet and network 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, educational, and healthcare networks and other services associated with providing wireless products and services to the regional banking, educational and healthcare industries.

Our internet revenues are recorded in “ERF Wireless Bundled Services, Inc. (WBS)”, revenues from construction of bank, healthcare and educational networks in our “ERF Enterprise Network Services, Inc. (ENS)” and wireless broadband products and services to rural oil and gas locations are recorded in “Energy Broadband, Inc. (EBI)”. Please refer to segment footnote 12 for additional information regarding segment operations.

Basis of Accounting

The accompanying unaudited interim consolidated 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, 2012 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 consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year ended December 31, 2012 as reported in form 10-K have been omitted.

Noncontrolling Interest

Non-controlling interest in our majority owned subsidiary EBI, is included in the equity section of the consolidated balance sheets. Non-controlling interest represents 3.63% of the equity of EBI and any transfer of value from ERF to non-controlling interest holders. Non-controlling interest is adjusted for the non-controlling interest holders’ proportionate share of the earnings or losses of EBI. Any excess losses applicable to the non-controlling interests have been and are borne by the Company as there is no obligation of the non-controlling interests to fund any losses in excess of their original investment. There is also no obligation or commitment on the part of the Company to fund operating losses of any subsidiary whether wholly-owned or majority-owned.

Reclassification

Certain amounts in the 2012 financial statements have been reclassified to conform to the 2013 financial presentation. These reclassifications have no impact on the total comprehensive loss.

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.