Edgar Filing: URBAN TELEVISION NETWORK CORP

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-KSB

(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2002

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ______ to _____

Commission file number 000-23105

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URBAN TELEVISION NETWORK CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)

Nevada 22-2800078
or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)

18505 Highway 377 South, 76126
Fort Worth, Texas (Zip Code)
(Address of Principal Executive offices)

Issuer's telephone number, including area code: (817) 512-3033
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Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value

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Indicate by check mark whether the issuer (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 such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes / X / No / /

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge in the definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. / X /

State issuer's revenues for its most recent fiscal year: $ 31,922

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity as of a
specified date within the past 60 days. The aggregate market value of our common
stock held by non-affiliates as of December 20, 2002 was approximately $894,048.
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date. As of December 20, 2002, there were
approximately 1,416,585 shares of our common stock issued and outstanding.

Transitional Small Business Disclosure Format: Yes / / No / X /

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Effective April 30, 2002, Waste Conversion Systems, Inc. acquired assets from
Urban Television Network Corporation, a Texas corporation and in June 2002
changed its name to Urban Television Network Corporation and its Over the
Counter Bulletin Board trading symbol was changed to "UNTV."

In August 2002 the Company's application was approved to be listed on the Over
the Counter Bulletin Board.

In November 2002, the Company effectuated a 1 for 20 reverse split of its common
stock and its Over the Counter Bulletin Board trading symbol was changed to
"URBT".

Urban Television NETWORK CORPORATION
TABLE CONTENTS

Page

PART I

Item 1. Business.............................................................4
Item 2. Properties..........................................................19
Item 3. Legal Proceedings...................................................19
Item 4. Submission of Matters to a Vote of Security Holders.................20

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.............................................................20
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................21
Item 7. Financial Statements and Supplementary Data.........................26
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure............................................26

PART III

Item 9. Directors and Executive Officers of the Registrant..................26
Item 10. Executive Compensation..............................................28
Item 11. Security Ownership of Certain Beneficial Owners and
Management..........................................................29
Item 12. Certain Relationships and Related Transactions......................30
Item 13. Exhibits, Lists and Reports on Form 8-K.............................30

PART I

This Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 24A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements appear in a number of places
including Item 1. "Business-Overview," Item 2. "Properties," Item 3. "Legal
Proceedings and Administrative Matters," Item 5. "Market for Registrant's Common
Equity and Related Stockholder Matters," and Item 6. "Management's Discussion
and Analysis of Financial Condition and Results of Operations." Such statements
can be identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "estimates," "will," "should," "plans" or "anticipates" or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy. Readers are cautioned that any such forward-looking
statements are not guarantees of future performance and involve significant
risks and uncertainties, and that actual results could differ materially from
those projected in the forward-looking statements. This report also identifies
other factors that could cause such differences. No assurance can be given that
these are all of the factors that could cause actual results to vary materially
from the forward-looking statements.

Item 1. Business

Overview

Urban Television Network Corporation ("Urban Television", "The Company")
operates the only U.S. based, broadcast television network (as opposed to cable
networks discussed in the competition section) focused primarily on serving the
African American population and other ethnic populations in the urban markets.
The Company has branded the broadcast television network, for marketing
purposes, as Urban America Television (UATV). The Company operates and has an
option to acquire one television station, KlHO-LP Channel 17 in the Oklahoma
City, Oklahoma market.

Urban Television delivers first run and syndicated programming 24 hours a day,
seven days a week. We have the broadcast rights to a variety of sports and
entertainment programming. Urban Television broadcasts a variety of other shows,
including, sports, movies, news, entertainment, variety, and family programming.
We obtain our programming from a variety of sources.

We are targeting the African American market because we believe that it contains
vast marketing opportunities and is currently under-served. According to Census
Bureau statistics, the African American population totals approximately 34
million, and is located largely in urban areas. As a whole this population group
has a GNP equal to the 11th richest nation in the world. The income of this
group has increased by 170% over the last 17 years and exceeds the growth rate
of 112% for other ethnic groups over that same period. According to the Selig
Center for Economic Growth at the University of Georgia, African American buying
power - the personal income available after taxes for spending on goods and
services - this year stands at $645.9 billion and will increase to $852.8
billion in 2007.

The vision of the Company focuses on operating a dynamic, quality broadcast
television and cable network oriented towards the urban market, which is
predominately African-American and multi-ethnic. In turn, the successful
broadcast television and cable network will serve as the engine of growth for an
exciting media company that capitalizes on its position of owning/operating
broadcast media properties, possessing excellent talent relations and
controlling its capabilities to finance, produce, and distribute
entertainment-driven products. The Company's goal is to be a ground-breaking
media company that is publicly traded, has significant African-American/Minority
ownership and control, and presents a positive image of African-American and
urban America's varied multi-ethnic culture.

Additionally, the Company has a goal of qualifying as a "Minority Business
Enterprise" under the standards established by the National Minority Supplier
Development Council. The Company believes that as a certified minority business
it may achieve significant advantages when it comes to major advertisers
allocating their advertising budgets. Among other requirements, the definition
requires that at least 51% of the Company's ownership be held by investors who
are minority persons.

Urban Television Network

We operate and have the option to purchase one television station that is
currently broadcasting Urban Television programming. We have a goal of operating
stations through a local marketing agreement, or LMA, pursuant to which we would
control all programming, be entitled to all revenues and be liable for all
expenses pending acquisition of the stations. We broadcast our programming to a
combination of full-power and low-power stations, the latter of which are
generally located close to or are directed at urban areas.

In July 2002, the Company assumed the operations and executed an option to
purchase KLHO-LP Channel 17 in Oklahoma City, Oklahoma that is rated as the 46th
DMA (Designated Market Area) in the country. This station serves the Oklahoma
City, Norman and Enid markets. Combined, these markets have a total population
of 1.2 million, of which 125,000 are African American or 99% of the African
American population in this DMA. Once the acquisition is completed the Company
will file for FCC approval of the assignment of this license to Urban Television
Network Corporation.

Programming

The Company's mission is "to chronicle the beauty, depth and breadth of
African-American and other ethnic groups' cultures and histories from yesterday
to today and into the future." There are approximately 35.5 million
African-American citizens living in the United States, or 12.7% of the total
population. They have an estimated spending power of $600 billion.

The Company's policy will be that all programming shown by the Network will be
suitable for viewing families, primarily African-American, but will also include
other ethnic demographics as the network grows. Further, the goal is to give the
African-American community a network that will demonstrate more of its
traditional culture and heritage. Urban Television broadcasts first-run and
syndicated programming 24 hours a day, seven days a week. To insure the quality
of our programming, we have decided that we will limit the airing of
"infomercials," or program-like commercials on the Urban Television Network.

Urban Television will not air programming for adult-only audiences. As a new
network, Urban Television will initially rely totally on outside sources of
programming for the Network. As cash flow allows, the network will look to
develop programming for the network. The Company does not currently have
sufficient capital to allow it to develop more that an fraction of its
programming for the network, and it will have to rely on outside sources of
programming for the foreseeable future.

The Company will seek to develop a library of interest for its African-American
markets that includes documentaries, biographies, comedies, kids programming,
music, dramas, film shorts, animation, international lifestyle and news. The
Company's goal is to target the "trendsetter" marketing demographic (young,
urban, African-American teens) that companies such as Nike, Coke, Pepsi, Proctor
and Gamble, General Electric, Dell, Microsoft, Apple, General Motors, Ford,
Chrysler, Nissan, Exxon-Mobil, Texaco, Prudential Securities, Merrill Lynch,
American Airlines, Delta Airlines, and music companies pursue as the major focal
point for network, during pivotal prime-time viewing hours. The plan is to
"adapt and improve on" key original and other ethnic programming that other
networks successfully offer, (e.g., A&E's Biography, a multi-ethnic Soul Train,
the Discovery Channel's documentaries, MTV's and Vh-1's music based programming
around stars, groups, genres of music, "behind the scenes" looks, etc.) and
various other shows that will resonate with the network's audience. The network
will only have a small amount of original programming from its inception but
plans to increase its original programming going forward to set it apart from
other minority focused networks. The network's programming can be seen at
www.uatvn.com by clicking the "Programming" link.

Urban Television believes that there is adequate programming available from
program syndicators, independent companies and other minority networks with
which it will be bundling (sharing) programming. The network is broadcasting 24
hours daily, seven days per week with a diversified programming schedule that it
is continually revising for new programming coming to the network.

A typical 24 hour schedule during the week of network programming is as follows:

Urban America Television Network Program Schedule
October 7, 2002 through October 13, 2002

------------------------|------------------------------------------------------------|--------------|--------------|----------
EST |Mon 10/7/2002|Tues 10/8/2002|Wed 10/9/2002|Thurs 10/10/2002|Fri 10/11/2002|Sat 10/12/2002|Sun 10/13/2002| EST
----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|----------
6:00 A.M.| Agday | Agday | Agday | Agday | Agday | Black Forum | | 6:00 A.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------| Backstage |----------
| Rise And | Rise And | Rise And | Rise And | Animal | Animal | Live |
6:30 A.M.| Shine | Shine | Shine | Shine | Rescue | Rescue | | 6:30 A.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|----------
| American | American | American | American | American | Wkend | |
7:00 A.M.| Review | Review | Review | Review | Review | Marketplace | Outdoorsman | 7:00 A.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|----------
| Black | Black | Black | Black | Black | First | Hunting |
7:30 A.M.|Perspective | Perspective | Perspective | Perspective | Perspective | Business | Adventures | 7:30 A.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|-----------
| First | First | First | First | First | | Sport |
8:00 A.M.| Business | Business | Business | Business | Business | Zebby Zoo | Fishing | 8:00 A.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|----------
| First | First | First | First | First | Cartoon | World |
8:30 A.M.| Business | Business | Business | Business | Business | Arcade | Ministry | 8:30 A.M.
----------| | | | | |--------------|--------------|----------
| | | | | | What's Up | |
9:00 A.M.| | | | | | Spike | T.D. Jakes | 9.00 A.M.
----------| | | | | |--------------|--------------|----------
| Urban | Urban | Urban | Urban | Urban | Tama And | World |
9:30 A.M.| Television | Television | Television | Television | Television | Friends | Changes | 9:30 A.M.
----------| Movie | Movie | Movie | Movie | Movie |--------------|--------------|----------
.| Ultimate | The Cape | Catholics | The Affair | Charade | Teen | Dr. Sherman |
10:00 A.M.| Thrill | Town Affair | (1973) | (1973) | 1863) | Tyme | Allen |10:00 A.M.
----------| (1974) | (1977) | | | |--------------|--------------|----------
| | | | | | Cartoon | One Child |
10:30 A.M.| | | | | | Junction | One Voice |10:30 A.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|----------
11:00 A.M.| Jon | Jon | Jon | Jon | Jon | Raceline |Bible Answers |11:00 A.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|----------
11:30 A.M.| We The Jury | We The Jury | We The Jury | We The Jury | We The Jury | Car Clinic | Time For Hope|11:30 A.M.
----------| | | | | |--------------|--------------|----------
| | | | | | |American Town |
12:00 P.M.| I Spy | I Spy | I Spy | I Spy | I Spy | Racers Edge | Hall |12:00 P.M.
----------| | | | | |--------------|--------------|----------
12:30 P.M.| | | | | | In Pursuit |Awakening Hour|12:30 P.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|----------
| | | | | | Major Black | |
1:00 P.M.| Family Film | Family Film | Family Film | Family Film | Family Film | Sports | Family Film | 1:00 P.M.
----------| Festival | Festival | Festival | Festival | Festival | | Festival |----------
| For Us The | Solomon | Charlotte | It's Good To Be| The Landlord| | For Us The |
1:30 P.M.| Living | Northrop's | Fourteen's | Alive | (1970) | | Living | 1:30 P.M.
----------| (Howard | Odyssey | Mission | (1976) | | | (Howard |----------
| Rollins) | 1983 | (1985) | | | | Rollins) |
2:00 P.M.| 1983 | | | | | | | 2:00 P.M.
----------| | | | | | | |----------
2:30 P.M.| | | | | | Major College| | 2:30 P.M.
----------|-------------|--------------|-------------|----------------|--------------| Football | |---------
3:00 P.M.|State Police | State Police | State Police| State Police | State Police | Lane vs. | | 3:00 P.M.
----------|-------------|--------------|-------------|----------------|--------------| Kentucky | |----------
3:30 P.M.| Crimestrike | Crimestrike | Crimestrike | Crimestrike | Crimestrike | State | Family Film | 3:30 P.M.
----------|-------------|--------------|-------------|----------------|--------------|@Frankfort, KY| Festival |----------
| What's Up | | What's Up | | What's Up | | It's Good To |
4:00 P.M.| Spike | Teen Tyme | Spike | Teen Tyme | Spike | | Be Alive | 4:00 P.M.
----------|-------------|--------------|-------------|----------------|--------------| | (1976) |----------
| Cartoon | Cartoon | Cartoon | Cartoon | Cartoon | | |
4:30 P.M.| Arcade | Arcade | Arcade | Arcade | Arcade | | | 4:30 P.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|----------
| Cartoon | Cartoon | Cartoon | Cartoon | Cartoon | | |
5:00 P.M.| Junction | Junction | Junction | Junction | Junction | | | 5:00 P.M.
----------|-------------|--------------|-------------|----------------|--------------| Reggae World | |----------
5:30 P.M.|Real Families| Real Families|Real Families| Real Families | Real Families| | Family Film | 5:30 P.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------| Festival |----------
|Urban America| Urban America|Urban America| Urban America | Urban America| Urban | The Landlord |
6:00 P.M.| Video | Video | Video | Video | Video | Lifestyle | (1970) | 6:00 P.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------| |----------
| Urban | Urban | Urban | Urban | Urban | | |
| Television | Television | Television | Television | Television | | |
6:30 P.M.| News | News | News | News | News | Main Floor | | 6:30 P.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|----------
7:00 P.M.| We The Jury | We The Jury | We The Jury | We The Jury | We The Jury | | |
| | | | | | | Club Jam | 7:00 P.M.
----------|-------------|--------------|-------------|----------------|--------------| Power Play |--------------|----------
| American | American | American | American | American | /Special | Animal |
7:30 P.M.| Review | Review | Review | Review | Review | | Rescue | 7:30 P.M.

----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|----------
| | | | | | | Sports |
8:00 P.M.| | | | | | | Lifestyle | 8:00 P.M.
----------| I Spy | I Spy | I Spy | I Spy | I Spy | I Spy |--------------|----------
| | | | | | | American |
8:30 P.M.| | | | | | | Adventurer | 8:30 P.M.
----------|-------------| | | | | |--------------|----------
9:00 P.M.| Black Forum | Ballroom | | | | | Crimestrike | 9:00 P.M.
----------|-------------| Boxing | Urban | Urban | Urban | Urban |--------------|----------
9:30 P.M.|Ameican Adven| | Television | Television | Television | Television | Crimestrike | 9:30 P.M.
----------|-------------|--------------| Movie | Movie | Movie |Saturday Night|--------------|----------
| Sports | | Barnaby | Talons of | Address | Movie | |
10:00 P.M.| Lifestyle | | And Me | the Eagles | Unknown | Expect No | State Police |10:00 P.M.
----------|------------ | NWA Total | (1977) | | (1997) | Mercy |--------------|----------
| Spiritual |Nonstop Action| | | | (1995) | Black Forum |
10:30 P.M.| Impact | | | | | | 02-24 |10:30 P.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|----------
| | | | | | | Entertain |
11:00 P.M.| Crimestrike | Crimestrike | Crimestrike | Crimestrike | Crimestrike | Thunderbox | Las Vegas |11:00 P.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|----------
11:30 P.M.| | | | | | | Sandy Hackett|11:30 P.M.
----------| The Show | The Show | The Show | The Show | The Show | |--------------|----------
12:00 A.M.| | | | | | NWA Southwest| |12:00 A.M.
----------|-------------|--------------|-------------|----------------|--------------| Wrestling | Noche Del |----------
|Urban America| Urban America|Urban America| Urban America | Urban America| | Salsa |
12:30 A.M.| Video | Video | Video | Video | Video | | |12:30 A.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|----------
| | | | | | | |
1:00 A.M.| | | | | | | | 1:00 A.M.
----------| Rhythems | Rhythems | Rhythems | Rhythems | Hit 10 | NWA Wildside | Underground |----------
1:30 A.M.| | | | | | | Video | 1:30 A.M.
----------| | | | | | | |----------
2:00 A.M.| | | | | | American | | 2:00 A.M.
----------| | | | | | International| I Spy |----------
2:30 A.M.| Urban | Urban | Urban | Urban | Urban | Wrestling | | 2:30 A.M.
----------| Television | Television | Television | Television | Television |--------------|--------------|----------
3:00 A.M.| Movie | Movie | Movie | Movie | Movie |Smooth Grooves| | 3:00 A.M.
----------| Ultimate | The Cape | Catholics | The Affair | Charade |--------------| I Spy |----------
3:30 A.M.| Thrill | Town Affair | (1973) | (1973) | (1963) | Sizzle | | 3:30 A.M.
----------| (1974) | (1967) | | | |--------------| |----------
4:00 A.M.| | | | | | | | 4:00 A.M.
----------| | | | | | Urban | I Spy |----------
4:30 A.M.| Family Film | Family Film | Family Film | Family Film | Family Film | Television | | 4:30 A.M.
----------| Festival | Festival | Festival | It's Good To | Festival |Saturday Night|--------------|----------
5:00 A.M.| For Us The | Solomon | Charlotte | Be Alive | The Landlord | Movie | | 5:00 A.M.
----------| Living | Northrop's | Fourteen's | (1978) | (1970) | Expect | I Spy |----------
| (Howard | Odyssey | Mission | | | No Mercy | |
| Rollins) | (1985) | | | | | |
5:30 A.M.| 1983 | | | | | | | 5:30 A.M.
----------|-------------|--------------|-------------|----------------|--------------|--------------|--------------|----------

Programming Costs

Urban Television obtains virtually all of the existing programming from outside
sources in exchange for allowing the provider to fill a portion of the
advertising slots. For example, a thirty-minute program routinely contains five
to six minutes of advertisements or spots that are available to Urban
Television. Urban Television generally allows the provider to fill up to 50% of
these slots in exchange for use of the programming.

Programming Distribution

There are a number of mediums for distribution of the Urban Television network
programming to viewing audiences. Generally, the three largest are traditional
broadcast television stations, cable television systems and direct satellite
broadcasters such as DirectTV and Dish Network. Presently, the Urban Television
network has affiliate agreements with approximately 60 broadcast television
stations (which can be seen at www.uatvn.com and clicking the "Affiliates" link)
of which a number are also on cable in their local markets.

The Company's goal is to negotiate with the operators of cable television
systems and satellite broadcasters for these operators to carry the network for
nominal or no charges, especially with the network having a minority focused
programming grid. The Company believes that many of these operators may be
willing to offer attractive terms because of their desire to carry additional
programming addressed to the African-American and other minority viewers.
Because none of these arrangements have yet been negotiated, there can be no
assurance that these goals will come to fruition.

The Broadcast Facilities and Satellite Signal.

In the Company's purchase of assets from Urban Television Corporation, a Texas
corporation, the Company assumed a Satellite Transponder Service Agreement with
Hispanic Television Network, Inc. ("HTVN") which leased satellite transponder
space from affiliates of the General Electric Corporation (collectively called
"GE Americom") that provided that HTVN had the right to uplink signals to the
satellite transponder within a designated bandwidth off the GE-3 communications
satellite.

In September of 2002, the Company and HTVN entered into a mutual termination
agreement for the Satellite Transponder Service Agreement. Currently the Company
has an agreement with Loral Skynet for 6 MHZ of bandwidth on the Telstar 5 for
satellite space and with Verestar, Inc. to uplink the Urban Television Network
signal to the satellite. The cost to the Company for both agreements is a total
of $26,000 per month for three years. SEE EXHIBIT 10.5

Our basic form of licensing rights agreement with program suppliers contains
barter terms pursuant to which the Company obtains broadcasting rights to
certain identified programming and in exchange, we give the licensor advertising
time during the broadcast of such programs. Generally speaking, in a thirty (30)
minute program there are normally seven (7) minutes of commercial time, which
time is allocated as follows:

o two and one-half (2.5) minutes to the licensor;

o two (2) minutes to our affiliate station; and

o two and one-half (2.5) minutes to Urban Television Network.

The licensor can then sell this advertising time to outside parties, thereby
earning income on the licensing of their program. Our licensing agreements are
generally for a term of 52 weeks and are cancelable by either party upon two (2)
weeks written notice. We also have the right to refuse any program, without
prior notice, if the content, subject matter, or production quality does not
meet our standards.

Affiliates

Currently, we have approximately 60 affiliates located in over 48 markets and
reaching approximately 17 million households. Our affiliates are comprised of
both television and cable stations.

Generally, we require that an affiliate broadcast a minimum of 12 hours of our
programming within a 24 hour period. Approximately 15 of our affiliates
broadcast 18 hours or more of our Urban Television programming, with the
remaining affiliates airing at least 12 hours or less. Generally the revenues
for network advertising are calculated only for that portion of time that the
affiliate broadcasts our programming.

We grant the Urban Television affiliates a limited license pursuant to an
affiliate license agreement. This limited license permits our affiliates to
receive Urban Television programming via satellite transmissions and to exhibit
and rebroadcast our programming. Affiliates may rebroadcast any portion of the
programming received up to a maximum of two times within 24 hours of receipt.
They must broadcast the programming received in its entirety at least one time
between the hours of 7:00 a.m. and 1:00 a.m. Additionally, we request
affiliates' to submit weekly broadcast logs in order to monitor compliance with
these requirements. Our affiliates agree that they will not preempt, cover or in
any way disrupt national advertisements contained in any program or portion
thereof that they broadcast with the exception of two (2) two-minute spots per
hour as well as two (2) ten-second station breaks per hour. Additionally, our
affiliate agreements generally provide that each affiliate may use approximately
four (4) minutes per hour for local commercials or other announcements. Either
the network or our affiliate may cancel the agreement at any time with thirty
(30) days written notice.

In exchange for providing the affiliate with programming and commercial time, we
retain the remainder of the advertising time, which we sell to advertising firms
and independent advertisers, or use it to barter with third-parties to acquire
additional programs.

Marketing

The Company plans to use (although it has none hired at this time) marketing
professionals, known as account executives, to target advertisers and
advertising agencies in key Urban markets. They will consist of network and
national spot account executives and local spot account executives. Account
executives targeting network advertisers will serve a dual role as national spot
sellers. These sales personnel will have the flexibility of offering a network
wide sales package or a market specific sales package. Generally, the majority
of network and national spot advertising sales is generated from the same
advertising agencies. This efficiency will allow us to generate greater profits
while controlling our own sales efforts. Account executives responsible for
local spot sales will be located in each of operated stations markets. They will
target advertising agencies, businesses and service providers in their
individual markets.

These marketing efforts will be enhanced through the use of research developed
by our in-house research department (which is to be established) utilizing both
qualitative and quantitative information. This research will allow the sales
departments to better negotiate and price our commercial inventory. The research
department will further help our sales efforts by identifying and targeting
advertisers in this utilized market.

As the Company grows, its goal is to have national and network sales offices in
the major markets such as Los Angeles, New York, Miami, Chicago, Dallas.

Competition

The broadcast industry is highly competitive and, as a result of the wide range
of programming available in both the broadcast and cable formats; the network
will compete with a large number of competitors in the television, cable and
direct television markets. The network will compete for available airtime,
channel capacity, advertiser revenues, revenue from license fees, number of
viewing households, and programming material. The Company believes that its
strongest competitive advantages are: (1) the quality of and vision of its
African-American oriented programming; (2) its competitive advertising rates;
(3) the African-American nature of the network's broadcasts and programming; (4)
cross promotional and advertising opportunities with other media; (5) its
technology plan that will give its affiliates tools that they have never had to
manage their stations; and (6) its intention to become a publicly traded
primarily minority company, which will enable it to access diversity spending by
major advertisers and access large capital at cost-effective rates to grow its
core business and synergistic entertainment opportunities in film, television,
music, the internet and intellectual property.

In its operations, Urban Television will experience substantial competition from
others with substantially greater financial resources than the Company. The
telecommunications and entertainment industries are very competitive, and many
of the other companies are large, well-capitalized entities. The networks
currently directed to the African-American market are cable networks with little
or no broadcast station distribution. The largest network currently directed to
African-American audiences in the United States is BET Holdings, Inc., which is
now part of Viacom, Inc., a Fortune 500 company. A number of other networks that
will be competitors are owned by some well capitalized companies in the United
States. There is no assurance that the Company will be able to compete
successfully.

Recently the Company has agreed to bundle (share) programming with two other
minority networks (that have significant cable distribution) that will give the
Company substantial cable coverage to add to its broadcast households. In return
the other minority networks will be able to count the network's broadcast
households in their distribution coverage in substantially increase their
coverage totals. The Company sees this as a coming trend to increase the total
household coverage numbers to give our company and others the critical mass
(total household coverage) needed to sell national advertising quicker than each
could achieve on its own.

Some of the competition in our market niche are:

Black Entertainment Television (BET): BET, formed and headed by Bob
Johnson, and now owned by Viacom, has been in business for 20 years and
currently reaches approximately 55 million homes. BET's annual revenues have
hover at around $160 million. BETs programming basically consists of no-cost
music videos, low-cost standup comic shows, infomercials and some talk shows.
Programming has always been a sore spot for BET with its relationships with the
Multiple Systems Operators (MSOs) and the African-American Community. Bob
Johnson's, and now Viacom's, retort has been over the years, "We are a business
first and a black network second." This is clear to many and provides Urban
Television with a great opportunity to provide a different programming
philosophy that the African American community can take pride in and support.
BET will try to obtain more channel space on cable networks to thwart the
competition, including the Company's Urban Television network. BET.com, a great
website and venture with major media entities as partners, has been launched.

Major Broadcasting Corporation: MBC launched in 1999 as a cable network
but has not acquired the distribution it expected. Our estimate is that MBC has
cable subscriber service of less than ten million. Headed by celebrities:
Evander Holyfield, Marlon Jackson, Cecil Fielder, attorney Willie Gary and
businessman, Alvin James, MBC has chosen to go after the African-American,
Christian family audience. The "esprit de corps" and corporate culture are to of
MBC's assets.

New Urban Entertainment (NUE): NUE, headed by Quincy Jones has had
plans to launch for sometime, but they have been delayed because of lack of
distribution and operating capital and has recently undergone a reorganization.
NUE licensed programming from Sony, but they have no significant distribution
system on which to air the programming. Quincy Jones has the strongest
relationships with Time Warner. Urban Television and others can expect for
Warner Bros. Studio and Time Warner cable to assist Mr. Jones in his endeavor,
if and when NUE launches. Quincy Jones is an icon in music and has strong talent
relationships and an identity with the African-American television community by
virtue of his hit series, THE FRESH PRINCE OF BEL AIR, THE JENNY JONES SHOW, and
his involvement with Vibe magazine. We should expect similar, quality products
coming from this competitor.

Overall, Urban Television expects for BET and possibly MBC to be its strongest
competitors. BET will try an anti-competitive move by launching additional BET
channels for Family, Movies and Jazz. BET, as part of Viacom, has deep pockets
and has one of cable's most important entrepreneurs ever, John Malone, as a
significant minority investor. MBC is not an immediate threat, but poses a
threat if each successive MSO that carries MBC will not then carry Urban
Television. In addition, there are and always have been other entities, trying
to launch similar-themed networks.

Urban Television's response to the competition includes (1) developing a network
grid format with family oriented programs that the minority community will
endorse and support (2) producing, owning and programming quality shows to make
the Urban Television network more appealing to the broadcast television
stations, the direct to home broadcast systems, the MSOs and the
African-American television consumer; (3) developing a technology component that
will set it and its affiliate partners apart from all others in the television
industry; and (4) become a publicly traded company with significant minority
ownership.

For Urban Television to continue to grow particular emphasis has to be placed on
(1) securing affiliations from broadcast television stations, cable MSOs and
direct to home systems in the major African American demographic markets, (2)
implementation of an effective sales force and (3) securing innovative
programming to attract advertisers, sponsors and viewers.

Perhaps the major competitive strengths and resources that, Urban Television has
and will utilize, is its distribution system of approximately 60 affiliate
broadcast television stations, its revenue sources from the beginning, and the
intellectual power and resources that Urban Television management brings to the
Company. The Company believes that its management brings significant added value
to take advantage of the present opportunities available to it in focusing on
the African American market.

Competitive Strategy

Urban Television has the goal of being the best managed, highest quality,
multimedia company that focuses on the African-American and other minority
ethnic markets. Led, initially, by its broadcast television station network and
later as it adds cable and direct-to-home systems, Urban Television plans to
build a network that will make it one of the predominate television programming
networks focusing on the depth, breadth, history and beauty of African-American
people and their culture. Urban Television will pursue a strategy of
differentiation within the broadcast television, cable and direct to home
industry.

Urban Television's competitive strategy consists of the following key
points:

1. Hire and retain a strong management team. Develop a Board of
Directors and Advisory Board who will help lead and advise
Urban Television, in addition to bringing in valuable
resources and relationships.

2. Produce (or partner with producers) and broadcast as many
high-concept, quality original programs and series as it can
economically and prudently afford to do each year. Such
original productions will enable Urban Television to build
brand loyalty, attract advertisers and sponsors and build a
library of media copyrights to exploit worldwide

3. In regards to cost and risk management, Urban Television will
seek to minimize overhead; obtain no-cost, low-cost and barter
programming, and establish strong financial relationships with
strategic partners;

4. Pursue parallel strategies of distribution for the network
with MSOs for analog and digital cable carriage, satellite
systems, and broadcast television stations;

5. Pursue affiliate and distribution deals with independent
television stations and MSOs where there is a heavy
African-American and/or multi-ethnic population;

6. Obtain and maintain the status of being a certified Minority
Business Enterprise to attract major corporate and
governmental advertisers/sponsors;

7. Establish a strong sales presence in New York, Los Angeles,
Dallas-Fort Worth, Chicago, San Antonio, Detroit, Orlando,
Houston, Philadelphia, Memphis, Washington D.C., Nashville,
New Orleans, Atlanta to obtain the maximum penetration of the
African American market which will translate into higher
advertising rates;

8. Establish a lobbying presence in Washington, DC to push for
Urban Television's interest with the FCC, congress,
governmental agencies and to certify Urban Television as a
minority vendor;

9. Establish a working committee for Business Development to
serve as an incubator for ventures utilizing Urban
Television's management skills and unsold commercial
inventory;

10. Feature prominent stars and writer-producers for Urban
Television's programming;

11. Develop and launch a cost-effective, profitable, strategic
internet business(s);

12. Use corporate sponsors; especially other media entities, to
co-finance and co-promote Urban Television programming;

13. Develop "franchise" intellectual properties in-house to
develop revenue streams in all media;

14. Develop a merchandising/licensing arm to create revenue
streams for Urban Television's intellectual properties;

15. Develop a music division at the appropriate time to take
advantage of opportunities, when they arise in the future to
brand Urban Television products;

16. Establish a technology relationship with Cresson Technology,
Inc. to help Urban Television maximize its technology
opportunities in all areas of media distribution;

17. Program the most profitable shows for the day-part, especially
in regards to the late night and early morning time slots;

18. When appropriate, develop, produce and sell television
programming to other networks and/or syndicators via the
Company's in-house production unit as capital sources allow;

19. Develop and nurture strong community relations through the use
of fund raisers, scholarships, tie-ins to national and local
groups, contests for viewers, awards shows, programming, use
of the web sites, education and information, etc.

Our affiliate stations also face competition from direct broadcast satellite
services which transmit programming directly to homes equipped with special
receiving antennas and from video signals delivered over telephone lines.
Satellites may be used not only to distribute non-broadcast programming and
distant broadcasting signals but also to deliver certain local broadcast
programming which otherwise may not be available to a station's audience.

The broadcasting industry is continuously faced with technological change and
innovation and the possible rise in popularity of competing entertainment and
communications media. The rules and the policies of the FCC also encourage
increased competition among different electronic communications media. As a
result, we may experience increased competition from other free or pay systems
that deliver entertainment programming directly to consumers and this could
possibly have a material adverse effect on our operations and results. For
example, commercial television broadcasting may face future competition from
interactive video and data services that provide two-way interaction with
commercial video programming, along with information and data services that may
be delivered by commercial television stations, cable television, direct
broadcast satellites, multi-point distribution systems, multi-channel
multi-point distribution systems, Class A low-power television stations, digital
television and radio technologies, or other video delivery systems.

In addition, actions by the FCC, Congress and the courts all presage significant
future involvement in the provision of video services by telephone companies.
The Telecommunications Act of 1996 lifts the prohibition on the provision of
cable television services by telephone companies in their own telephone areas
subject to regulatory safeguards and permits telephone companies to own cable
systems under certain circumstances. It is not possible to predict the effect on
our television stations of any future relaxation or elimination of the existing
limitations on the ownership of cable systems by telephone companies. The
elimination or further relaxation of the restriction, however, could increase
competition that our television stations face from other distributors of video
programming.

Factors that are material to a television station's competitive position include
signal coverage, local program acceptance, network affiliation, audience
characteristics, assigned frequency and strength of local competition. Although
there is competition for our target market, we believe that we possess certain
competitive advantages over our competitors, including:

Our Ability to Broadcast in Digital. Unlike many television networks,
we broadcast our programming in a digital format from a fully-digital
earth station. We chose this format in anticipation of an FCC
regulation requiring all television stations to broadcast in digital by
2006. The operation of a digital control room requires much less input
and effort than a traditional analog station. Although, not all of our
affiliate stations have the ability to broadcast in digital, sending
out a digital signal helps reduce our operating costs because the cost
of a digital signal is less than leasing an analog signal on the
satellite transponder.

Our Management Team Reflects our Target Audience. From consultant Tony
Brown, to Executive Vice President of Network Operations, David Simon,
our team is expected to be comprised of many African Americans. We
believe that the best way to understand the needs and wants of our
target market is to include people that share a similar cultural
background to our target audience. The nature of our management team is
also reflective of our dedication to the creation of an African
American television network.

In the course of its business, our network uses various trademarks, trade names
and service marks, including its logo in its advertising and promotions. We
believe the strength of our trademark, trade name and service mark are important
to our business and intend to continue to protect and promote our marks as
appropriate. Currently, we have applied for trademark protection on Urban
Television and certain other brand identification. There can be no assurance
that we will receive each of these trademarks. Other than these pending
trademarks, we do not hold or depend upon any material patent, government
license, franchise or concession.

Federal Communications Commission Regulation

FCC Licenses

Television broadcasting is a regulated industry and is subject to the
jurisdiction of the FCC under the Communications Act of 1934, as amended from
time to time. The Communications Act prohibits the operation of television
broadcasting stations except under a license issued by the FCC. The
Communications Act empowers the FCC, among other things:

o to issue, revoke and modify broadcast licenses;

o to decide whether to approve a change of ownership or control
of station licenses;

o to regulate the equipment used by stations; and

o to adopt and implement regulations to carry out the provisions
of the Communications Act.

Failure to observe FCC or other governmental rules and policies can result in
the imposition of various sanctions, including monetary forfeitures, the grant
of short, or less than maximum, license renewal terms or, for particularly
egregious violations, the denial of a license renewal application, the
revocation of a license or denial of FCC consent to acquire additional broadcast
properties.

License Grant & Renewal

Television broadcast licenses are granted for a maximum period of eight years
upon a finding by the FCC that the "public interest, convenience and necessity"
would be served thereby. Television licenses are subject to renewal upon
application to the FCC, which is required under the Communications Act to grant
the renewal application if it finds that the station: (1) has served the public
interest, convenience and necessity; (2) has committed no serious violations of
the Communications Act or the FCC's rules; and (3) has committed no other
violations of the Communications Act or the FCC's rules which would constitute a
pattern of abuse. If the FCC cannot make such a finding, it may deny a renewal
application, and only then may the FCC accept other applications to operate the
station of the former licensee. Under the Telecommunications Act of 1996 ("1996
Act"), as implemented in the FCC's rules, a competing application for authority
to operate a station and replace the incumbent licensee may not be filed against
a renewal application and considered by the FCC in deciding whether to grant a
renewal application. FCC licenses generally are renewed. Although there can be
no assurance that our current licenses will be renewed, we are not aware of any
facts or circumstances that would prevent such license renewals.

We recently executed a lease agreement with an option to acquire KLHO Channel
17, which is a low power UHF television station in Oklahoma City, Oklahoma.

Transfers or Assignment of License

The Communications Act prohibits the assignment of a broadcast license or
transfer of control of a broadcast licensee without the prior approval of the
FCC. In determining whether to permit the assignment or transfer of control of,
or the grant or renewal of, a broadcast license, the FCC considers a number of
factors pertaining to the licensee, including:

o compliance with various rules limiting common ownership of
media properties;

o the character of the licensee and those persons holding
attributable interests therein; and

o compliance with the Communications Act's limitations on alien
ownership.

Character generally refers to the likelihood that the licensee or applicant will
comply with applicable law and regulation. Attributable interests generally
refers to the level of ownership or other involvement in station operations that
would result in the FCC attributing ownership of that station or other media
outlets to the person or entity in determining compliance with FCC ownership
limitations.

To obtain the FCC's prior consent to assign a broadcast license or transfer
control of a broadcast licensee, an application must be filed with the FCC. If
the application involves a substantial change in ownership or control, the
application must be placed on public notice for a period of no less than 30 days
during which petitions to deny the application or other objections may be filed
by interested parties, including certain members of the public. If the FCC
grants the application, interested parties have no less than 30 days from the
date of public notice of the grant to seek reconsideration or review of that
grant by the full commission or, as the case may be, a court of competent
jurisdiction. The full FCC has an additional 10 days to set aside on its own

motion any action taken by the FCC's staff acting under delegated authority.
When passing on an assignment or transfer application, the FCC is prohibited
from considering whether the public interest might be served by an assignment or
transfer to any party other than the assignee or transferee specified in the
application.

Multiple and Cross-Ownership Restrictions

The FCC imposes significant restrictions on certain positional and ownership, or
"attributable", interests that a single entity can hold in broadcast television
stations, cable systems and other media. These rules limit the number of
television stations that a single entity can own, control or influence in both
national and local markets, and also limit the permissible ownership
combinations involving television stations and other types of media, such as
radio, cable and newspapers.

Under the FCC's rules, officers, directors and equity holders who own 5% or more
of the outstanding voting stock of a licensee are deemed to have an
"attributable" interest in the Company. Certain institutional investors who
exert no control or influence over a licensee may, however, own up to 20% of the
outstanding voting stock before their interest will be attributed. Nonvoting
stockholders, minority voting stockholders in companies controlled by a single
majority stockholder, and holders of options and warrants are generally exempt
from attribution under current rules. However, under the FCC's new equity-debt
plus rule, a party will be deemed to be attributable if it owns a non-voting
interest exceeding 33% of the total asset value (including debt and equity) of
the licensee and it either provides 15% of the station's weekly programming or
owns an attributable interest in another broadcast station, cable system or
daily newspaper in the market, even if there is a single majority shareholder.

Under the FCC's rules, an individual or entity may hold attributable interests
in an unlimited number of television stations nationwide, subject to the
restriction that no individual or entity may have an attributable interest in
television stations reaching, in the aggregate, more than 35% of the national
viewing audience. For purposes of this calculation, stations in the UHF band,
which covers channels 14 - 69, are attributed with only 50% of the households
attributed to stations in the VHF band, which covers channels 2 - 13. Under its
recently revised ownership rules, if an entity has attributable interests in two
television stations in the same market, the FCC will count the audience reach of
that market only once for purposes of applying the national ownership cap.

The FCC has relaxed it "television duopoly" rule, which previously barred any
entity from having an attributable interest in two television stations with
overlapping service areas. The FCC's new television duopoly rule permits a party
to have attributable interests in two television stations without regard to
signal contour overlap provided the stations are licensed to separate Designated
Market Areas ("DMA"), as determined by Nielsen. In addition, the new rule
permits parties to own up to two television stations in the same DMA as long as
at least eight independently owned and operating full-power television stations
remain in the market at the time of acquisition, and at least one of the two
stations is not among the top four ranked stations in the DMA based on specified
audience share measures. The FCC also may grant a waiver of the television
duopoly rule if one of the two television stations is a "failed" or "failing"
station, if the proposed transaction would result in the construction of an
unbuilt television station, or if extraordinary public interest factors are
present.

The FCC has also relaxed its "one-to-a-market" rule, which restricts the common
ownership of television and radio stations in the same market. One entity may
now own up to two television stations and six radio stations in the same market
provided that: (1) 20 independent voices (including certain newspapers and a
single cable system) will remain in the relevant market following consummation
of the proposed transaction, and (2) the proposed combination is consistent with
the television duopoly and local radio ownership rules. If fewer than 20 but
more than 9 independent voices will remain in a market following a proposed
transaction, and the proposed combination is consistent with the FCC's rules, a
single entity may have attributable interests in up to two television stations
and four radio stations. If neither of these various "independent voices" tests
are met, a party generally may have an attributable interest in no more than one
television station and one radio station in a market. The FCC's rules restrict
the holder of an attributable interest in a television station from also having
an attributable interest in a daily newspaper or cable television system serving
a community located within the coverage area of that television station.

Although the FCC's recent revisions to its broadcast ownership rules became
effective on November 16, 1999, several petitions have been filed at the FCC
seeking reconsideration of the new rules. The Company cannot predict the outcome
of these reconsideration requests.

Restrictions on Foreign Ownership

The Communications Act prohibits the issuance of broadcast licenses to, or the
holding of a broadcast license by foreign citizens or any corporation of which
more than 20% of the capital stock is owned of record or voted by non-U.S.
citizens or their representatives or by a foreign government or a representative
thereof, or by any corporation organized under the laws of a foreign country.

The Communications Act also authorizes the FCC to prohibit the issuance of a
broadcast license to, or the holding of a broadcast license by, any corporation
controlled by any other corporation of which more than 25% of the capital stock
is owned of record or voted by aliens. The FCC has interpreted these
restrictions to apply to other forms of business organizations, including
partnerships.

Programming and Operation

The Communications Act requires broadcasters to serve the public interest,
convenience and necessity. The FCC has gradually restricted or eliminated many
of the more formalized procedures it had developed to promote the broadcast of
programming responsive to the needs of the station's community of license.
Licensees continue to be required, however, to present programming that is
responsive to community problems, needs and interests and to maintain certain
records demonstrating such responsiveness. Complaints from listeners concerning
a station's programming will be considered by the FCC when it evaluates the
licensee's renewal application, but these complaints may be filed and considered
at any time.

Stations must also pay regulatory and application fees and follow
various FCC rules that regulate, among other things:

o political advertising;

o children's programming;

o commercial advertising on children's programming;

o the broadcast of obscene or indecent programming;

o sponsorship identification; and

o technical operations and equal employment opportunity
requirements.

Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
short or less than the maximum renewal terms, or for particularly egregious
violations, the denial of a license renewal application or the revocation of a
license.

Must-Carry / Retransmission Consent

As part of the Cable Television Consumer Protection and Competition Act of 1992,
television broadcasters are required to make triennial elections to exercise
either "must-carry" or "retransmission consent" rights with respect to their
carriage by cable systems in each broadcaster's local market. By electing
must-carry rights, a broadcaster demands carriage on a specified channel on
cable systems within its television market or DMA. Alternatively, if a
broadcaster chooses to exercise retransmission consent rights, it can negotiate
the terms under which the cable system will carry its broadcast signal.

The United States Supreme Court upheld the validity of the must-carry rules in a
1997 decision. These must-carry rights are not absolute and their exercise is
dependent on a variety of factors, including: (i) the number of active channels
on the cable system; (ii) the location and size of the cable system; and (iii)
the amount of programming on a broadcast station that duplicates the programming
of another broadcast station carried by the cable system. Therefore, under
certain circumstances, a cable system may decline to carry a given station.

Under the FCC's rules, television stations were required to make their election
between must-carry and retransmission consent status by October 1, 1999, for the
period from January 1, 2000 through December 31, 2002. Television stations that
failed to make an election by the specified deadline were deemed to have elected
must-carry status for the relevant three-year period.

The FCC is currently conducting a rulemaking proceeding to determine the scope
of the cable systems' carriage obligations with respect to digital broadcast
signals during and following the transition from analog to digital broadcasting.

Review of Must Carry Rules

FCC regulations implementing the Cable Television Consumer Protection and
Competition Act of 1992 require each full-power television broadcaster to elect,
at three year intervals beginning October 1,1993, to either:

o require carriage of its signal by cable systems in the
station's market, which is referred to as must carry rules; or

o negotiate the terms on which such broadcast station would
permit transmission of its signal by the cable systems within
its market, which is referred to as retransmission consent.

The United States Supreme Court upheld the must-carry rules in a 1997 decision.
These must carry rights are not absolute, and their exercise is dependent on a
variety of factors such as:

o the number of active channels on the cable system;

o the location and size of the cable system; and

o the amount of programming on a broadcast station that
duplicates the programming of another broadcast station
carried by the cable system.

Therefore, under certain circumstances, a cable system may choose to decline to
carry a given station. We are currently negotiating with cable providers to
obtain carriage for our low-power stations. We can offer no assurances, however,
that we will obtain such carriage.

Local Marketing Agreements

We may, from time to time, enter into local marketing agreements, or LMAs,
generally in connection with pending station acquisitions. By using LMAs, we can
provide programming and other services to a station that we intend to acquire
before we receive all applicable FCC and other governmental approvals that are
necessary to consummate that assignment.

FCC rules and policies generally permit LMAs if the station licensee retains
ultimate responsibility for and control of the applicable station, including
finances, personnel, programming and compliance with the FCC's rules and
policies. We cannot be sure that we will be able to air all of our scheduled
programming on a station with which we have LMAs or that we will receive the
anticipated revenue from the sale of advertising for such programming.

For purposes of its national and local multiple ownership rules, the FCC
attributes LMAs that involve more than 15% of the brokered station's weekly
program time. Thus, if an entity owns one television station in a market and has
a qualifying LMA with another station in the same market, this arrangement must
comply with all of the FCC's ownership rules including the television duopoly
rule. LMA arrangements entered into prior to November 5, 1996 are grandfathered
until 2004. LMAs entered into on or after November 5, 1996 have until
approximately August 2001 to comply with this requirement. Petitions for
reconsideration have been filed against the FCC order that adopted these
requirements.

Digital Television Services

The FCC has adopted rules for implementing digital television service in the
United States. Implementation of digital television will improve the technical
quality of television signals and provide broadcasters the flexibility to offer
new services, including high-definition television and data broadcasting. The
FCC has established service rules and adopted a table of allotments for digital
television. The table of digital allotments provides each existing television
station licensee or permittee with a second broadcast channel to be used during
the transition to digital television, conditioned upon the surrender of one of
the channels at the end of the digital television transition period.

The spectrum to provide a variety of ancillary or supplemental services
including, for example, data transfer, subscription video, interactive
materials, and audio signals, subject to the digital television implementing
rules permit broadcasters to use their assigned digital requirement that they
continue to provide at least one free, over-the-air television service. The FCC
established May 1, 2002 as the deadline for initiation of digital television
service for all television stations and 2006 as the date that television
broadcasters must return their analog license to the FCC unless specified
conditions exist, that in effect limit the public's access to digital television
in a particular market. These dates are subject to biennial reviews that will
evaluate the progress of the DTV transition, including consumer acceptance. The
FCC also has adopted rules that require broadcasters to pay a fee of 5% of gross
revenues received from ancillary or supplementary uses of the digital spectrum
for which they receive subscription fees or compensation other than advertising
revenues derived from free over-the-air broadcasting services.

Equipment and other costs associated with the digital television transition,
including the necessity of temporary dual-mode operations, will impose some
near-term financial costs on television stations providing the services. The
potential also exists for new sources of revenue to be derived from digital
television. We cannot predict the overall effect the transition to digital
television might have on our business.

Satellite Home Viewer Improvement Act

The Satellite Home Viewer Improvement Act ("SHVIA") enables satellite carriers
to provide more television programming to subscribers. Specifically, SHVIA: (1)
provides a statutory copyright license to enable satellite carriers to
retransmit a local television broadcast station into the station's local market
(i.e., provide "local-into-local" service); (2) permits the continued
importation of distant network signals (i.e., network signals that originate
outside of a satellite subscriber's local television market or DMA) for certain
existing subscribers; (3) provides broadcast stations with retransmission
consent rights; and (4) mandates carriage of broadcast signals on a
"local-into-local" basis after a phase-in period. "Local markets" are defined to
include both a station's DMA and its county of license.

SHVIA requires that, with several exceptions, satellite carriers may not
retransmit the signal of a television broadcast station without the express
authority of the originating station. Such express authorization is not needed,
however, when satellite carriers retransmit a station's signal into its local
market (i.e., provide local-into-local transmissions) prior to May 28, 2000.
This retransmission can occur without the station's consent. Beginning May 29,
2000, however, a satellite carrier must obtain a station's consent before
retransmitting its signal within the local market. Additional exceptions to the
retransmission consent requirement exist for noncommercial stations, certain
superstations and broadcast stations that have asserted their must-carry rights.

In addition, SHVIA permits satellite carriers to provide distant or nationally
broadcast programming to subscribers in "unserved" households (i.e., households
are unserved by a particular network if they do not receive a signal of at least
Grade B intensity from a station affiliated with that network) until December
31, 2004. However, satellite television providers can retransmit the distant
signals of no more than two stations per day for each television network.

SHVIA also provides for mandatory carriage of all television broadcast stations
by satellite carriers, effective January 1, 2002, under certain circumstances.
Effective January 1, 2002, a satellite carrier that retransmits one local
television broadcast station into its local market under a retransmission
consent agreement, must carry upon request all television broadcast stations in
that same market. Satellite carriers are not required, however, to carry the

signal of a station that substantially duplicates the programming of another
station in the market, and are not required to carry more than one affiliate of
the same network in a given market unless the television stations are located in
different states.

In addition, SHVIA requires the FCC to commence a rulemaking proceeding that
extends the network nonduplication, syndicated exclusivity and sports blackout
rules to the satellite retransmission of nationally distributed superstations.
The FCC already has initiated several rulemaking proceedings, as required by
SHVIA, to implement certain aspects of this Act.

Children's Television Act

The FCC's rules limit the amount of commercial matter that may be broadcast
during programming designed for children 12 years of age and younger to 12
minutes per hour on weekdays and 10.5 minutes per hour on weekends. Violations
of the children's commercial limitations may result in monetary fines or
non-renewal of a station's broadcast license. FCC rules further require
television stations to serve the educational and informational needs of children
16 years old and younger through the stations' own programming as well as
through other means. The FCC has guidelines for processing television station
renewals under which stations are found to have complied with the children's
programming requirements if they broadcast three hours per week of "core"
children's educational programming, which among other things, must have as a
significant purpose serving the educational and informational needs of children
16 years of age and younger. A television station that the FCC finds not to have
complied with the "core" programming processing guideline could face sanctions,
including monetary fines and the possible non-renewal of its broadcasting
license, if it has not demonstrated compliance with the children's programming
requirements in other ways. The FCC has indicated its intent to strictly enforce
its children's television rules. Television broadcasters must file periodic
reports with the FCC to document their compliance with foregoing obligations.

Proposed Regulations and Legislation

In 1995, the FCC issued notices of proposed rulemaking proposing to modify or
eliminate most of its remaining rules governing the broadcast network-affiliate
relationship. The network-affiliate rules were originally intended to limit
networks' ability to control programming aired by affiliates or to set station
advertising rates and to reduce barriers to entry by networks. The dual network
rule, which generally prevents a single entity from owning more than one
broadcast television network, is among the rules under consideration in these
proceedings. Although the Telecommunications Act substantially relaxed the dual
network rule by providing that an entity may own more than one television
network, none of the four major national television networks may merge with each
other or acquire certain other networks in existence on February 8, 1996. We
cannot predict how or when the FCC proceeding will be resolved or how those
proceedings or the relaxation of the dual network rule may affect our business.

Low-Power Television

Low-power television stations are regarded by the FCC as having secondary status
to full-power television stations and are subject to being displaced by changes
in full-power stations resulting from digital television allotments. On November
29, 1999, Congress enacted the Community Broadcasters Protection Act, which
created a new "Class A" low-power television station. Class A low-power
television stations are entitled to protection from future displacement by
full-power television stations under certain circumstances. The FCC has adopted
rules governing the extent of interference protection that must be afforded to
Class A stations and the eligibility criteria for these stations. Station
KLHO-LP Channel 18 in Oklahoma City, Oklahoma was granted a Class A License

In addition, the U.S. Congress and the FCC have under consideration, and in the
future may consider and adopt new laws, regulation and policies regarding a wide
variety of matters that could affect, directly or indirectly, the operation,
ownership and profitability of our broadcast stations. Any such changes could
result in the loss of audience share and advertising revenues for such station,
and affect our ability to acquire additional broadcast stations or finance such
acquisitions. In addition to the issues noted above, such changes may include:

o spectrum use fees;

o political advertising rates;

o potential restrictions on the advertising of certain products
(beer, wine and hard liquor);

o further revisions in the FCC's cross-interest, multiple
ownership and attribution policies;

o foreign ownership of broadcast licenses;

o technical and frequency allocation matters; and

o DTV tower siting issues.

The FCC also has initiated a notice of inquiry to examine whether additional
public interest obligations should be imposed on DTV licensees. We cannot
predict the resolution of these issues or other issues discussed above, although
their outcome could, over a period of time, affect, either adversely or
favorably, the broadcasting industry generally or us specifically.

The foregoing summary of FCC and other governmental regulations is not intended
to be comprehensive. For further information concerning the nature and extent of
federal regulation of broadcast stations, you should refer to the Communications
Act, the Telecommunications Act, other Congressional acts, FCC rules and the
public notices and rulings of the FCC.

Facilities

We currently lease our principal offices of approximately 2,000 square feet
located at 18505 Highway 377 South, Fort Worth, Texas 76126. The space is leased
from M3X Development, Inc. Marc Pace, a stockholder and director of the Company,
is a director and principal of M3X Development, Inc. The office space consist of
approximately 2,000 square feet located at 18505 Highway 377 South, Fort Worth,
Texas 76126. The term of the lease is three years at the rate of $2,000 per
month. The lease term ends March 31, 2005 with the total lease expense for the
term of the lease being $36,000.00. We use this space for our general office and
administrative purposes, as well as for programming services. We broadcast our
programming to our operated and affiliate stations from Verestar, Inc. in Cedar
Hill, Texas. The Company handles its own master control functions. We believe
that this space is adequate for our current needs.

Employees

As of September 30, 2002, we had 4 full time employees. Our employees are not
represented by any collective bargaining organization, and we have never
experienced a work stoppage. We believe that our relations with our employees
are satisfactory.

Item 2. Properties

A description of the Registrant's properties is included in Item 1,
Business, and is incorporated herein by reference.

Item 3. Legal Proceedings and Administrative Matters

The State of Colorado's tax liens, which were filed in 1994 and 1995,in the
total amount of $2,355 plus penalties and interest, were paid on January 15,
2002.

The 1995 judgment against the Company in Abacus Group Realty Holding Co. v.
Waste Conversion Systems, Inc. (Arapaho County District Court, Division 5, File
No. 95 CV 000010) totaled approximately $182,656.24 as of September 30, 2000,
including post-judgment interest. This judgment was settled during October 2001.
A Satisfaction of Judgement was entered on January 15, 2002.

On December 23, 1996, a judgment was entered against the Company in F.G.
Funding, Inc. v. Waste Conversion Systems, Inc. (Sup. Ct. N.Y. Queens County
Index File No. 95-007520) in the amount of $152,000, plus post-judgment
interest. On June 30, 2001, the Company entered into a settlement agreement with
F.G. Funding, Inc. whereby in exchange for the judgment, plus post-judgment
interest. On December 18, 2001, the Company issued and delivered 213,712 shares
of its restricted common stock to F.G. Funding, Inc. On August 28, 2002, a
Satisfaction of Judgment was entered on this case.

During the first week of October 2001, the Company was served as a defendant in
Jules Nordlicht v. Stan Abrams, individually; Waste Conversion Systems, Inc. in
the District Court for the City and County of Denver. Mr. Nordlicht alleges: (1)
that the Company breached a contract by failing market and resell certain
equipment and by failing to keep said equipment insured; and, (2) that the
Company was negligent or careless in causing some or all said equipment to be
shipped to Ireland. Mr. Nordlicht has asserted that he is owed $62,500 and
requests that he be awarded interest as provided by law, costs and any other
relief that the Court deems just and proper. The Company denies that it in any
way acted in breach of the alleged contract or that its actions were in any way
negligent. In addition, the Company believes that the action is subject to
certain valid defenses. During October 2001, the Company entered into an
Assumption of Liability, Indemnification and Hold Harmless Agreement with Stan
Abrams, the Company's former President, whereby Mr. Abrams has agreed, upon the
receipt of $20,000, to: (1) assume and promptly pay, any and all liability with
regard to this litigation, including any costs, expenses, attorney and expert
fees, and travel costs; and (2) indemnify and hold the Company harmless from
paying any and or all claims relating to this litigation. (See Exhibit 10.0
filed with the 10-QSB report for the period ending December 31, 2001).

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

During the fourth quarter of the fiscal year covered by this report, our
majority shareholder executed a majority consent in lieu of a special meeting of
the shareholders. The majority shareholder consent represented 71.9% of the
voting shares. The shareholder approved (1) a one for twenty (1:20) reverse
split of our issued and outstanding common shares, (2) a change in our common
stock capital increasing authorized stock to 200,000,000 shares, par value
$0.0001 per share and (3) the acquisition of Urban Television Network
Corporation, a Texas corporation, from its shareholders in a share exchange
transaction. The reverse split and change in capital was implemented on November
29, 2002. The acquisition has not been implemented.

PART II

Item 5. Market for Company's Common Equity and Related Stockholder Matters:

There was no active market for the Company's common stock. The stock was traded
on a very limited basis in limited volumes on the over-the-counter market. It
was included in the NASD's OTC Bulletin Board under the symbol, "WSCY" until the
Company changed its name in June 2002 to Urban Television Network Corporation at
which time the symbol was changed to "UNTV." The Company effectuated a 1 to 20
reverse stock split on November 28, 2002 at which time the NASD gave the Company
the new symbol "URBT". Prices for the common stock were also published in the
National Quotation Bureau, Inc.'s Pink Sheets.

A range of high and low quotations for the Company's Common Stock for fiscal
years 2001 and 2002 are listed below. The information was obtained from the
NASDAQ web site (www.nasdaq.com). The prices reported may not be indicative of
the value of the Common Stock or the existence of an active trading market. The
Company does not know whether these quotations reflect inter-dealer prices
without retail mark-up, markdown or commissions. These quotations may not
represent actual transactions.

2002 2001
Low High Low High
--- ---- --- ----

First Quarter $0.010 $0.090 $0.010 $0.010
Second Quarter $0.010 $0.510 $0.005 $0.010
Third Quarter $0.010 $0.510 $0.005 $0.005
Fourth Quarter $0.010 $0.550 $0.005 $0.010

The Company common stock commenced trading on the NASD's OTC Bulletin Board in
August of 2002.

In 1993, the Company entered into settlement agreements with several private
lenders that satisfied $339,363 in principal and interest of Company
indebtedness and terminated an option to purchase 500,000 shares of the
Company's common stock. In exchange, the Company agreed to issue or reserve for
issuance (i) a total of 374,971 shares of common stock, (ii) a ten-year option
to purchase 222,500 shares of common stock at $2.00 per share, and (iii) a
ten-year option to purchase 75,000 shares of common stock at the lesser of $3.50
per share or the per-share price of the shares included within units of the
Company's securities proposed to be offered in a public offering by the Company.
As of September 30, 2001, none of these options had been exercised. The rights
to these options were waived in December 2001.

At September 30, 2002 there were 293 holders of record. No dividends have been
paid to date and it is not anticipated that dividends will be paid in the near
future. We currently intend to retain future earnings to finance the growth of
our business. Therefore, it is unlikely that you will receive any funds from
your investment in our common stock without selling your shares. We cannot
assure you that you will receive a gain on your investment when you sell your
shares or that you will not lose the entire amount of your investment.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Background

On April 30, 2002, Waste Conversion Systems, Inc. (the "Company") acquired
assets from Urban Television Network Corporation, a Texas Corporation (Urban
Television, Texas) as set forth in Exhibit 2.0, the Asset Purchase Agreement.

The Company acquired a television broadcast signal, a television network
affiliate base and three promissory notes from Urban Television Texas under this
Asset Purchase Agreement. These assets were acquired from Urban Television Texas
by the assignment of two agreements between Urban Television Texas and Hispanic
Television Network, Inc. (HTVN) and by assignment of three promissory notes.
These assets are (a) a Satellite Transponder Space Service Agreement (Exhibit
10.2) which provides the broadcast signal and (b) an Agreement (Exhibit 10.3)
which, among other things, provides rights to a television network affiliate
base and (c) three promissory notes receivable with an unpaid principal balance
of $777,000. HTVN is the maker of these three promissory notes.

The acquisition of the television broadcast signal and network affiliate base
will enable us to provide a television market with programming and commercial
advertisements. This television network provides television programming serving
ethnic minority programming interests of the African-American population across
the United States. The network presently includes approximately 60 broadcast
television station affiliates in various parts of the country.

In April 2002, the Company has paid a purchase price comprised of our common
stock and an agreement to assume Urban Television of Texas debt owed on the
assets. We have issued Urban Television of Texas Sixteen Million (16,000,000)
common shares and agreed to assume Urban Television of Texas performance
obligations on a promissory note with a principal balance of One Million Four
Hundred Thousand ($1,400,000) Dollars. Urban Television Texas had purchased the
American Independent Network affiliate base, among other things, from HTVN for
$1,500,000 Dollars paying $100,000 down an agreeing to pay the $1,400,000
purchase price balance on a promissory note. The 16,000,000 shares are
restricted securities and may not be publicly resold without registration with
the Securities and Exchange Commission or without an exemption from the
registration requirements. The $1,400,000 Dollar promissory note is attached as
Exhibit 10.1.

In September 2002, the Company and HTVN entered into a mutual agreement whereby
it was agreed that HTVN would cancel the Satellite Transponder Service Agreement
with Urban Television, its $1,400,000 note due from the Urban Television and the
Company would cancel its $777,000 notes due from HTVN and HTVN received 100,000
restricted shares of the Company's common stock and $20,000.00.

Certain Relationships and Related Transactions

The consideration exchanged in Asset Purchase Agreement was negotiated between
the Company and Urban Television Texas in a transaction with management. The
management of the Company and Urban Television Network Corporation, a Texas
corporation, are the same individuals. The transaction does not represent an
arms-length transaction. The transaction was valued at $559,000 or $0.035 per
share. This dollar amount represents the actual approximate market price of the
Company's stock at the time of the transaction. A market value for our common
shares is difficult to ascertain because of the limited and illiquid market for
the company shares. The company shares were quoted on the National Quotation
Bureau's electronic "Pink Sheets" at the time of the transaction. The current
bid price for company shares is $1.10 for 5,000 shares.

The Company currently leases approximately 2,000 square feet for its principal
offices from M3X Development, Inc. Marc Pace who is a stockholder and Director
of the Company is a principal and Director of M3X Development, Inc. The office
space consist of approximately 2,000 square feet located at 18505 Highway 377
South, Fort Worth, Texas 76126. The term of the lease is three years at the rate
of $2,000 per month. The lease term ends March 31, 2005 with the total lease
expense for the term of the lease being $36,000.00

On May 7, 2002, the new majority company shareholder, Urban Television Texas,
authorized an amendment to the Articles of Incorporation changing the corporate
name from Waste Conversion Systems, Inc. to Urban Television Network
Corporation. This authorization was implemented by the written consent of the
majority shareholders in lieu of a special meeting. The new corporate name
became effective in June 2002 when the Amendment to the Company's Articles of
Incorporation were filed with the Nevada Secretary of State. This filing took
place after notice to the Company shareholders in accordance with the disclosure
provisions of the Schedule 14C Information Statement.

Urban Television, a Texas corporation, was organized in October 2001 for the
purpose of acquiring the original American Independent Network (AIN) television
broadcast signal and television network affiliate base from Hispanic Television
Network, Inc. AIN provided a general market, family-oriented programming to its
network affiliates. Urban Television Texas changed the AIN programming format
when it acquired the broadcast signal and affiliate base from HTVN to focus the
programming content on the ethnic minority programming interests of
African-American viewers across the United States. Urban Television - Texas had
over 40 broadcast television station affiliates in various parts of the country.

We are targeting the African American market primarily because we believe that
it presents vast marketing opportunities and that it is currently under-served
by our competition. With few competitors in this rapidly growing market, we feel
that there are unlimited opportunities to provide a quality broadcasting service
to the African American population that is experiencing an explosive growth
rate.

Our financial results depend on a number of factors, including the strength of
the national economy and the local economies served by our stations, total
advertising dollars dedicated to the markets served by our stations, advertising
dollars dedicated to the African American consumers in the markets served by our
stations, our stations' audience ratings, our ability to provide interesting
programming, local market competition from other television stations and other
media, and government regulations and policies.

As is common in other media companies, our performance is measured by our
ability to generate broadcast cash flow, earnings before extraordinary items,
net interest expense, income taxes, depreciation, amortization (EBITDA) and
after-tax cash flow. Broadcast cash flow consists of operating income before
depreciation, amortization and corporate expenses. After-tax cash flow consists
of income before income tax benefit (expense) and extraordinary items, minus the
current income tax provision, plus depreciation and amortization expense.
Although broadcast cash flow, EBITDA and after-tax cash flow are not measures of
performance calculated in accordance with generally acceptable accounting
principals, we feel that broadcast cash flow, EBITDA and after-tax cash flow are
useful in evaluating us because these measures are acceptable by the
broadcasting industry as generally recognized measures of performance and are
used by securities industry analysts who publish reports on the performance of
broadcasting companies. Broadcast cash flow, EBITDA and after-tax cash flow are
not intended to be substitutes for operating income as determined in accordance
with generally acceptable accounting principles, or alternatives to cash flow
from operating activities (as a measure of liquidity) or net income.

Revenues

Our primary source of revenue is the sale of advertising and programming time on
our network and local stations. Our revenues are affected primarily by the
advertising rates that we are able to charge on our networks and that our local
television stations are able to charge as well as the overall demand for African
American television advertising time. Advertising rates are determined primarily
by:

o the markets covered by our networks,

o the number of competing African American television stations
in the same market as our stations,

o the television audience share in the demographic groups
targeted by advertisers, and

o the supply and demand for African American advertising time.

Seasonal fluctuations are also common to the broadcast industry and are due
primarily to fluctuations in advertising expenditures by national and local
advertisers. The first calendar quarter typically produces the lowest broadcast
revenues for the year because of the normal post-holiday decreases in
advertising

Currently most of our network advertising has been sold to direct response and
per inquiry advertisers. Going forward, we will deploy a network advertising
team consisting of account executives that will solicit advertising directly
from national advertisers as well as soliciting advertising from national
advertising agencies. Each of our stations will also have account executives
that will solicit local and national advertising directly from advertisers and
from advertising agencies.

We market our advertising time on the Urban Television networks to:

o Advertising agencies and independent advertisers. We sell
commercial time to advertising agencies and independent
advertisers. The monetary value of this time is based upon the
estimated size of the viewing audience; the larger the
audience, the more we are able to charge for the advertising
time. To measure the size of a viewing audience networks and
stations generally subscribe to nationally recognized rating
services, such as Nielsen. Currently, a number of Urban
Television's affiliate stations are located in the smaller
market areas of the country. Our goal is to enter into
affiliate agreements with stations located in the top
demographic market areas, in order to obtain Nielsen ratings
that justify charging higher rates for our advertising time.

o Affiliate Stations. In exchange for providing programming and
advertising time to our affiliate stations, we retain
advertising time and gain access to the affiliate stations'
markets. In a traditional broadcasting contract, an affiliate
station would retain all available advertising time, which it
would then sell to outside advertisers, and the network would
receive a fee from the affiliate station. However, we believe
that by selling retained commercial time to outside
advertisers, we are able to generate higher revenues than we
would otherwise receive in fees from our affiliate stations.
Advertising time is generally a component of the programming
contract with affiliate stations. As a result, we are not
required to separately market the advertising time to our
affiliate stations.

o Program Owners: In exchange for licensing rights to select
programming, we give the program owner advertising time during
the broadcast of such programming. The program owner is then
able to sell the advertising time to outside parties. We
generally contract with program owners at the National
Association of Television Program Executives convention and
accordingly, are not required to actively market this segment
of our advertising time.

Expenses

Our most significant expenses are satellite and uplinking costs, master control
costs, employee compensation, rating services, advertising and promotional
expenses, engineering and transmission expenses and production and programming
expenses. In some cases, we are required to incur upfront programming expenses
when procuring exclusive programming usages and licenses. In most all cases
associated with upfront programming payments, the upfront payments will be
amortized over the applicable contract term. Until cash flow permits, we do not
expect to acquire exclusive programming usages and licenses. We will maintain
tight controls over our operating expenses by centralizing our master control,
network programming, finance, human resources and management information system
functions. Depreciation of fixed assets and amortization of costs associated
with the acquisition of additional stations are also significant elements in
determining our total expense level.

As a result of attracting key officers and personnel to Urban Television, we may
offer stock options as an alternate form of compensation. In the event that the
strike price of the stock option is less than the fair market value of the stock
on the date of grant, any difference will be amortized as compensation expense
over the vesting period of the stock options.

Our monthly operating expense level will vary from month to month due primarily
to the timing of significant advertising and promotion expenses. We will incur
significant advertising and promotion expenses associated with the ramp up of
Urban Television and with the establishment of our presence in new markets
associated with our new station lease or acquisition agreements. Increased
advertising revenue associated with these advertising and promotional expenses
typically lag behind the incurrence of these expenses.

Advertising and Program Time Sales

The majority of all revenues generated come from the sale of network, national
spot and local spot advertising and program time sales.

Network Advertising. All operated stations as well as affiliates have a
percentage of available commercial time dedicated for "network" sales. The
commercials sold on the network are broadcast simultaneously in all markets that
we serve.

National Spot Advertising. National advertisers have the opportunity to buy
"spot" advertising in specific markets. For example, an advertising agency in
New York would use spot advertising to purchase commercials in Miami or Oklahoma
City.

We will generate our Network and National spot advertising sales. The Company's
intent is to have the yet to be established sales personnel located in all major
markets that have a large concentration of advertising agencies targeting the
African American market. The sales of our local spot advertising will be
generated by these local sales staff personnel placed at each of our television
stations.

Local Spot Advertising. Advertising agencies and businesses located in a market
will buy commercial air-time in their respective market. This commercial time is
sold in the market by a local sales force. Local spot advertising also includes
event marketing. In conjunction with a spot buy the station incorporates events
that may be held on the premise of a business or advertiser for the purpose of
driving traffic to that place of business.

Program Time Sales. Also known as long-form programs are sold on the network and
on local stations to companies wanting to purchase the television time and air
their own programs.

Results of Operations

Urban Television Network Corporation - Historical Results of Operations Year
ended September 30, 2002 compared to the year ended September 30, 2001.

Revenues. Revenues are primarily derived from sales of advertising and
programming time.. Revenues for fiscal 2002 were $31,922 compared to $-0- for
fiscal 2001, an increase of $31,922. The increase in revenues is primarily the
result of the impact of the April 30, 2002 acquisition of assets from Urban
Television Network Corporation, a Texas corporation, which resulted in the
inclusion of five months of Urban Television revenues (May 30, 2002 - September
30, 2002).

Cost of Operations. Costs of operations were $321,449 for the 2002 fiscal year
and $57,283 for the 2001 fiscal year. The increase in 2002 is primarily due to
the impact of the April 30, 2002 asset acquisition from Urban Television Network
Corporation, a Texas corporation that resulted in the inclusion of five months
of expenses (May 1, 2002 - September 30, 2002) for the Company.

General and Administrative. General and administrative expenses for the fiscal
year ended September 30, 2002 were $86,302 compared to $57,283 for the 2001
fiscal year. The general and administrative expenses for fiscal year 2001
represented costs associated with settlement of liabilities. The 2002 general
and administrative expenses are comprised primarily of consulting ($20,500),
Telephone ($12,255), Travel ($12,228), Legal ($11.658), Rent ($12,000) and
Postage/shipping ($9,475), and office related expenses.

Interest expense for the fiscal year 2002 was $3,415. The interest expense for
fiscal year 2001 was $34,731. The 2002 interest expense is a result of accrued
interest on note payable to Urban Television Network Corporation, a Texas
corporation, it major stockholder. Interest expense in 2001 was related to notes
payable outstanding during the 2001 fiscal year.

Operating Results. We had a net operating loss of $289,527 for fiscal year ended
September 30, 2002 compared to a net operating loss of $57,283 for the fiscal
year ended September 30, 2001. The increased loss for 2002 was primarily
attributed to general and administrative expenses, satellite and building rent,
depreciation and amortization resulting from the growth in operations and the
impact of the April 30, 2002 asset acquisition from Urban Television Network
Corporation, a Texas corporation.

Earnings Per Share of Common Stock. The net income or loss per common share is
based upon the weighted average of outstanding common stock. In 2002, the net
income per share of common stock was $0.01. The income is reflective of the
$415,785 increase in gain on extinquishment of debts which exceeded the loss
before extraordinary gain by $131,723 . For fiscal 2001, net loss per share of
common stock was $0.01.

Liquidity and Capital Resources

We have financed our operations through a combination of loans from
stockholders, and revenues generated from operations. The Company has incurred
cumulative losses of $5,312,875 from the inception of the Company through
September 30, 2002.

Current liabilities at September 30, 2002 were $251,301, which exceeds current
assets of $5,766 by $245,535.

Our continued growth, will require additional funds that may come from a variety
of sources, including shareholder loans, equity or debt issuances, bank
borrowings and capital lease financings. We currently intend to use any funds
raised through these sources to fund various aspects of our continued growth,
including funding our working capital needs, acquisition of new stations,
performing digital upgrades of acquired stations, funding key programming
acquisitions, performing station capital upgrades, securing cable connections,
funding master control/ network equipment upgrades, making strategic
investments.

We had net losses before gain on extinguishment of debt of $292,942 in 2002 and
$91,654 in 2001. We expect these losses to continue as we incur operating
expenses in the growth of the Company's television network and its affiliate
base and convert them to an African American format. We currently anticipate
that our revenues as well as cash from financings will be sufficient to satisfy
operating expenses by the end of fiscal 2003. We may need to raise additional
funds, however. If adequate funds are not available on acceptable terms, our
business, results of operations and financial condition could be materially
adversely affected.

Impact of inflation

Management does not believe that general inflation has had or will have a
material effect on operations.

Transactions in 2002

On May 7, 2002, the Company issued 16,000,000 common shares to Urban Television
Network Corporation, a Texas corporation, in exchange for assets with a net
transaction value of $559,000.

In September 2002, the Company issued 100,000 common shares to Hispanic
Television Network, Inc. as part of the mutual agreement between the two
companies to terminate agreements and obligations between the companies.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements and Financial Statement Schedule filed as a part of
this Annual Report on Form 10-KSB are listed on the Index to Consolidated
Financial Statements and Consolidated Financial Statement Schedule on page 26.

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Although there were no changes during fiscal 2001, on February 24, 2002 we
dismissed Bailey, Saetveit & Company as our independent auditor. Also on
February 24, 2002, we retained Jack F. Burke, Jr. as our new independent
auditor.

PART III

Item 9. Directors and Executive Officers of the Registrant

The directors and executive officers of the Company as of September 30,
2002 are as follows:

Name Age Position
---- --- --------

Randy Moseley.................... 55 Chairman of the Board
Randy Moseley.................... 55 Chief Executive Officer, Chief Financial
Officer and Director
Marc Pace........................ 47 Director
Stanley Woods ................... 47 Director, Secretary

Randy Moseley, age 55, President, Chief Executive Officer and Chief Financial
Officer, was the Chief Financial Officer of Tensor Information Systems, Inc. a
software company based in Fort Worth, Texas, from November 1999 - July 2001.
Prior to joining Tensor, Moseley served as CFO and director for American
Independent Network, Inc. ("AIN"), a satellite network for independent
television and cable operators. Mr. Moseley co-founded the company and led its
growth to 160 affiliates. AIN merged with Hispanic Television Network in
November 1999. Previously, Moseley held positions with Jerry Lancaster &
Associates Inc. and Ernst & Young. Moseley received a bachelor's degree in
business administration from Southern Methodist University and is a certified
public accountant. Moseley has affiliations with the Texas Society of CPAs and
the American Institute of CPAs.

Stanley Woods, age 50, Corporate Secretary and Director. He presently serves as
President of Cresson Investments, Inc., a corporate planning and consulting
firm. Stanley has taught at the junior college and high schools and worked in
the trucking industry. He received a Bachelor's Degree in Business
Administration from Tarleton State University in 1978.

Marc Pace, age 47, Corporate Director. He presently owns and operates M3X Real
Estate Development and has been involved in the real estate development business
for the past ten years plus being involved in several oil and gas development
projects. He received a Bachelor's Degree in Business Management from Texas Tech
University in 1976.

Compensation of Directors

The Company does not pay any cash compensation for attendance at directors
meetings or participation in directors' functions.

Committees of the Board of Directors

Audit Committee

During the year ending September 30, 2001, we did not have a formal Audit
Committee of the Board of Directors. On September 30, 2002, our Board approved
an Audit Committee Charter. Although we have not yet appointed directors to this
committee, the audit committee will make recommendations concerning the
engagement of independent public accountants, review with the independent public
accountants the plans and results of such audit engagement, approve professional
services provided by the independent public accountants, review the independence
of the independent public accountants, consider the range of audit and non-audit
fees and review the adequacy of our internal accounting controls.

Compensation Committee

We did not have a formal Compensation Committee during 2001 or 2002. We
anticipate forming such a committee to make recommendations to the Board
concerning compensation of our executive officers.

Compensation Committee Interlocks and Insider Participation

No executive officer or director of the company serves as an executive officer,
director or member of a compensation committee of any other entity for which an
executive officer, director or member of such entity is a member of the Board or
the Compensation Committee of the Board. There are no other interlocks.

Advisory Committee

The Company has named three individuals to its advisory committee (the "Advisory
Committee") with additional individuals to follow as the Company grows. Its
members are expected to come from major demographic areas across the country and
include people from corporate and entertainment fields. The advisory committee
members named are as follows:

Ramon Palameros - Deputy Director of U.S. Department of Housing and
Urban Development since 1977. Mr. Palomares helps manage the public housing
systems of about 300 cities in Texas. A native of San Antonio, Texas, Mr.
Palomares earned his undergraduate degree from Our Lady of the Lake University.
He earned a fellowship to the Nation's capital in Washington, D.C. where he
earned a Masters Degree in Public Administration from Washington, D.C. Branch of
the University of Southern California. Mr. Palomares was elected as a State
Director for Latin United of Latin American Countries (LULAC) in 1999 and was
instrumental in establishing the LULAC Texas State Office in Austin and opening
the Texas Civil Rights Office in San Antonio. Some of the creative initiatives
led by Mr. Palomares and his Executive Board include the Legislative Gala, the
Annual Civil Rights Symposium, the Leadership Academy for Adult Officers and
joining with the NAACP for promotion of civil rights for all Americans.

Jill Darden - Publisher of the Fort Worth Black News, a newspaper
highlighting activities and accomplishments in the local African-American
community. She also produces and hosts a television show that is featured on the
local cable system. Ms. Darden graduated with a degree in Broadcast Journalism
from the University of Texas at Arlington. While in college, she was elected
Miss UTA and became the first African-American to hold the title. She was
pictured in the national publication of Ebony Magazine among black college
queens. Ms. Darden has received the Leadership Award from the U.S. Department of
Commerce Minority Business Development Agency. She has published a book of
poetry call Back Talk, poetic confessions from the soul and received the Paul R.
Ellis Media Award from the American Heart Association for her story, Search Your
Heart.

Christian Diaz - Mr. Diaz is Co-Founder and Sr. Executive President of
Interkard International. Mr. Diaz, with over 25 years experience in direct sales
and international marketing, he brings a wealth of marketing and communications
experience to the Interkard team. Prior to Interkard, Chris served as Executive
Vice President of XENO Development, Inc., a holding company comprised of
Prodika, Inc., POWERmedia, Inc. and EyeQ Corp. As part of XENO's executive team,
he also served as Marketing Director of Prodika and President of XENO de las
Americas, a corporate division of XENO based in Puerto Rico that targets Latin
America. Diaz joined XENO from AmeriPlan USA where he held the position of
Director of Creative Services and Vice President of Marketing for the Eastern
Division and National Hispanic Market.

Since 1998, Mr. Diaz has served on Senator Orin Hatch's Senate Advisory
Board on Hispanic Affairs and also has served on the US Congressional Advisory
Board since 1984.

After formation, the Advisory Committee shall meet with the Company's
Board of Directors no less than quarterly for the purpose of discussing the
Company's operations. The Advisory Committee shall have no binding authority,
but it may advise and consult with the Chief Executive Officer and report to the
Board of Directors. The Company will reimburse the members of the Advisory
Committee for their expenses, but they shall not be paid any compensation for
serving on the Advisory Committee.

Policy Regarding Transactions with Officers and Directors

Our policy regarding any future transactions with our directors, officers,
employees or affiliates is that such transactions be approved in advance by a
majority of our Board, including a majority of the disinterested members of the
Board, and be on terms no less favorable to us than we could obtain from
non-affiliated parties.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of the
Company's Common Stock, to file with the Securities and Exchange Commission (a)
initial reports of beneficial ownership (From 3), (b) reports of changes in
beneficial ownership of Common Stock of the Company (Form 4) and (c) annual
reports of beneficial ownership (Form 5). Copies of those reports must also be
furnished to us. Our officers, directors and 10 percent shareholder filed their
respective Form 3 on December 27, 2002.

Item 10. Executive Compensation

No salary, bonus or other annual compensation was paid to any executive officer
during fiscal year 2002. Randy Moseley, President, Chief Executive Officer and
Chief Financial Officer and Stanley Woods, Secretary of the Company have
employment agreements as set forth below in this Item 10. There is no health
insurance, retirement, pension, profit sharing or similar program currently in
effect.

Stock Option Plan. In February 1993, the Company adopted, with stockholder
approval, the 1993 Stock Option Plan (the "Plan"). Options granted under the
Plan may be either (i) options intended to qualify as "incentive stock options"
under Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), or (ii) nonqualified stock options. Incentive stock
options may be granted under the Plan to employees, including officers and
directors who are employees. Nonqualified options may be granted to non-employee
directors and to such other persons, as the Board of Directors shall select.

The Plan is administered by the Board of Directors. The Board of Directors has
the authority to determine the person to whom options will be granted, the
number of shares to be covered by each option, whether the options granted are
intended to be incentive stock options, the duration and rate of exercise of
each option, the option price per share, the manner of exercise, and the time,
manner and form of payment upon exercise of an option. The Company has 76,000
shares of common stock reserved for issuance under the Plan.

The following table provides information about our Chief Executive Officer and
each of our executive officers who received salary and bonus in the year ended
September 30, 2002, that exceeded $100,000, these persons being collectively
referred to as "named executive officers."

Other Annual All Other
Name and principal position Year Salary Bonus Compensation Compensation
--------------------------- ---- ------ ----- ------------ ------------

Stan Abrams 2002 $00.00 -- -- --
Chief Executive Officer
(Sept. - Feb)

Randy Moseley 2002 $00.00 -- -- --
Chief Executive Officer
(Feb. - Sept)

Option Grants in Last Fiscal Year

We did not grant any options to our named executive officers during fiscal year
2002.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values

During fiscal year 2002, no options were exercised.

Employment Agreements with Executive Officers

Mr. Randy Moseley is employed pursuant to a five-year employment agreement that
commenced on October 2, 2002. The agreement provides for a base annual salary
equal to $200,000 and a possible annual cash bonus as determined by the Board of
Directors and/or the Compensation Committee.

Mr. Stanley Woods is employed pursuant to a three-year employment agreement that
commenced on October 2, 2002. The agreement provides for a base annual salary
equal to $50,000 and a possible annual cash bonus as determined by the Board of
Directors and/or the Compensation Committee.

Item 11. Security Ownership of Certain Beneficial Owners and Management

As of September 30, 2002, we had 22,331,667 shares of common stock outstanding.
The following table sets forth information concerning beneficial ownership of
shares of our common stock as of September 30, 2002:

o each person (or group within the meaning of Section 13(d)(3)
of the Exchange Act) known to us to own more than 5% of our
outstanding common stock;

o each director;

o each executive officer; and

o all directors and executive officers as a group.

Except as otherwise noted, the named beneficial holder has sole voting and
investment power. The address for all officers and directors is 18505 Highway
377 South, Fort Worth, Texas, 76126.

Shares of Common Stock
Beneficially Owned (*)
------------------------
Number Percent
---------- -------
Urban Television Network Corporation.(2).(4)....... 16,000,000 71.6%
Randy Moseley.(1).(2).(3).(4)...................... 16,000,000 71.6%
All officers and directors as a group
(3 persons) (2).(4)................................ 16,000,000 71.6%

(1) Directors and Officers
(2) 5% Beneficial shareholder
(3) Randy Moseley is a director and President of the Company. He is also
President of of Urban Television Network Corporation, a Texas

Corporation, the company that is the majority shareholder of Urban
Television Network Corporation, a Nevada corporation. He has the
Authority to vote the 16,000,000 Company shares owned by Urban
Television Network Corporation, a Texas corporation. Therefore, he is
deemed a Beneficial owner of the shares.
(4) On November 29, 2002, the Company effecutated a 1 to 20 reverse split
of its common stock which reduced the 16,000,000 shares to 800,000
shares with the percentage ownership remaining at 71.6%.
________________
(*) As used in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of, a security, or the sole or
shared investment power with respect to a security (i.e., the power to
dispose of, or to direct the disposition of, a security) and includes
the ownership of a security through corporate, partnership, or trust
entities. In addition, for purposes of this table, a person is deemed,
as of any date, to have "beneficial ownership" of any security that
such person has the right to acquire within 60 days after such date.

Item 12. Certain Relationships and Related Transactions with Urban Television
Network Corporation, a Texas Corporation

On May 7, 2002, the Company issued 16,000,000 common shares to Urban Television
Network Corporation, a Texas corporation, in exchange for assets with a net
transaction value of $546,000. The consideration exchanged in Asset Purchase
Agreement was negotiated between the Company and Urban Television in a
transaction with management. The management of the Company and UTNV are the same
individuals. The transaction does not represent an arms-length transaction. The
transaction was valued at $546,000 or $0.035 per share. This dollar amount
represents the approximate market value of the shares issued by the Company.

In September 2002, the Company and HTVN entered into a mutual agreement whereby
HTVN agreed to cancel the Satellite Transponder Service Agreement with Urban
Television, its $1,400,000 note due from the Urban Television and the Company
cancelled its $777,000 notes due from HTVN and HTVN received 100,000 restricted
shares of the Company's common stock and $20,000.00. See Exhibit 10.4.

Item 13. Exhibits, LISTS and Reports on Form 8-K

(a) EXHIBITS

Exhibit No. Description and Method of Filing
----------- --------------------------------

2.0 Asset Purchase Agreement w/o Exhibits

10.1 Promissory Note

10.2 Satellite Transponder Space Service Agreement between Hispanic
Television Network, Inc. and Urban Television Network Corporation dated
on, or about October 28, 2001

10.3 Agreement between Hispanic Television Network, Inc. and Urban
Television Network Corporation dated November 13, 2001

10.4* Satellite Space Agreement with Loral Skynet dated on, or about November
22, 2002

10.5* Employment Agreement by and between Randy Moseley and Urban Television
Network Corporation, dated October 2, 2002.

10.6* Employment Agreement by and between Stanley Woods and Urban Television
Network Corporation, dated October 2, 2002.

21* Subsidiaries of the Registrant.

99.1 Certification by Chief Executive Officer, pursuant to 18 USC Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

99.2 Certification by Chief Financial Officer, pursuant to 18 USC Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

________________
*Filed herewith.

(b) Reports on Form 8-K.

During the last quarter of the period covered by this report we filed
one Current Report on Form 8-K on September 2, 2002, disclosing information
under Item 5, Other Events and Regulation FD Disclosure.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Urban Television NETWORK CORPORATION

By: /s/ Randy Moseley
--------------------------------
Randy Moseley
Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this
amended report has been signed by the following persons on behalf of the
Registrant and in the capacities indicated on September, 2002.

By:/s/ Randy Moseley Title: Chairman of the Date: December 31, 2002
--------------------- Board
Randy Moseley

By:/s/ Randy Moseley Title: Chief Executive Date: December 31, 2002
--------------------- Officer and Director
Randy Moseley

By:/s/ Marc Pace Title: Director Date: December 31, 2002
---------------------
Marc Pace

By:/s/ Stanley Woods Title: Director Date: December 31, 2002
---------------------
Stanley Woods

URBAN TELEVISION NETWORK CORPORATION

Financial Statements
and
Independent Auditor;s Report

September 30, 2002 and 2001

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

Board of Directors
Urban Television Network Corporation
Fort Worth, Texas

I have audited the accompanying balance sheet of Urban Television Network
Corporation as of September 30, 2002 and 2001, and the related consolidated
statements of operations, capital deficit and cash flows for the years there
ended. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on our audit.

I conducted my audit in accordance with auditing standards generally accepted in
the United States of America. Those standards require that I plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis for
my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Urban Television Network
Corporation as of September 30, 2002 and 2001, and the results of its operations
and changes in its cash flows for the years there ended in conformity with
generally accepted accounting principles generally accepted in the United States
of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 10 to the
financial statements, the Company has suffered recurring losses from operations.
These conditions raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 10. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

/s/ Jack Burke, Jr., CPA

December 17, 2002

URBAN TELEVISION NETWORK CORPORATION
And subsidiaries

Consolidated Balance Sheet

September 30, 2002 and 2001

ASSETS
------ 2002 2001
----------- -----------

Current assets:
Cash and cash equivalents $ -- $ --
Accounts receivable 5,766 --
----------- -----------
Total current assets 5,766 --
----------- -----------

Furniture, fixtures and equipment, net 6,122 --
----------- -----------

Other assets
Network assets, net 512,416 --
----------- -----------

Total Assets $ 524,304 $ --
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Accounts payable $ 58,957 $ 72,428
Notes payable 188,929 210,348
Accrued interest payable 3,415 218,261
Accrued payroll taxes -- 2,355
----------- -----------
Total current liabilities 251,301 503,392
----------- -----------

Stockholders' equity (deficit):
Preferred stock, $1 par value, 500,000 shares authorized, none issued -- --
Common stock, $0.01 par value, 50,000,000 shares authorized,
22,331,667 shares outstanding at September 30, 2002 and
6,207,236 outstanding at September 30, 2001 223,316 62,072
Additional paid-in capital 5,362,562 4,879,134
Accumulated deficit (5,312,875) (5,444,598)
----------- -----------

Total stockholders' equity (deficit) 273,003 (503,392)
----------- -----------

$ 524,304 $ --
=========== ===========

See notes to financial statements.

F-1

URBAN TELEVISION NETWORK CORPORATION
and Subsidiaries

Consolidated Statements of Operations
For the years ended September 30, 2002 and 2001

2002 2001
------------ ------------

Revenues $ 31,922 $ --
------------ ------------

Expenses:
Satellite and uplink services 91,980 --
Production expenses 37,050 --
Technology expenses 58,750 --
Administration 86,302 57,283
Depreciation and amortization 47,367 --
------------ ------------
Total expenses $ 321,449 $ 57,283
------------ ------------
Income loss from operations (289,527) (57,283)

Other income (expense)
Interest expense (net) (3,415)
(34,371)
Gain extinguishment of debt 424,665 8,880

------------ ------------

Net income (loss) $ 131,723 $ (82,774)
============ ============

Earnings per share:

Net income (loss) $ 0.010 $ (0.01)

Weighted average number of common
shares outstanding 12,902,000 6,207,236

See notes to financial statements.

F-2

URBAN TELEVISION EETWORK CORPORATION
and Subsidiaries

Consolidated Statements of Capital Deficit
For the years ended September 30, 2002 and 2001

Additional Total
Common Stock Paid-In Capital
Shares Amount Capital Deficit Deficit
----------- ----------- ----------- ----------- -----------

Balance, September 30, 2000 6,207,236 $ 62,072 $ 4,879,134 $(5,361,824) $ (420,618)

Net loss for year ended
September 30, 2001 (82,774) (82,774)
----------- ----------- ----------- ----------- -----------
Balance, September 30, 2001 6,207,236 62,072 4,879,134 (5,444,598) (503,392)

Contributed capital 85,428 85,428

Stock issued for asset
Acquisition 16,000,000 160,000 389,000 549,000

Stock issued to Hispanic
Television Network 100,000 1,000 9,000 10,000

Stock issued for prior
year agreements 24,431 244 244

Net income for year ended
September 30, 2002 131,723 131,723
----------- ----------- ----------- ----------- -----------
Balance, September 30, 2002 22,331,667 $ 223,316 $ 5,362,562 $(5,312,875) $ 273,003
----------- ----------- ----------- ----------- -----------

See notes to financial statements.

F-3

URBAN TELEVISION EETWORK CORPORATION
and Subsidiaries

Consolidated Statements of Cash Flows
For the years ended September 30, 2002 and 2001

2002 2001
--------- ---------

Operating activities:
Net income (loss) $ 131,723 $ (82,774)
Adjustments to reconcile net income (loss) to
cash provided (used) by operating activities:
Depreciation and amortization 47,367 --
Net change in assets and liabilities:
Accounts receivable (5,766) --
Accounts payable (13,471) 49,885
Accrued interest payable (214,846) --
Accrued expenses -- 32,781
Accrued payroll taxes (2,355) --
Advances from shareholder 188,929 --
Notes payable (210,348) 108
--------- ---------

Net cash provided (used) by operating activities (78,767) --
--------- ---------

Investing Activities:
Purchase of equipment (6,905) --
--------- ---------

Financing activities:
Contributed capital 85,672 --
--------- ---------

Net increase in cash -- --
Cash, beginning of period -- --
--------- ---------

Cash, end of period $ -- $ --
========= =========

Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ -- $ --
Income taxes $ -- $ --
Non-cash transactions:
Acquisition of network affiliate base $ 559,000 $ --
Extraordinary item - extinguishment of debt $ 424,665 $ 8,800
Cancellation of shares 2,700 $ --

See notes to financial statements.

F-4

URBAN TELEVISION NETWORK CORPORATION
and Subsidiaries

Notes to Financial Statements
September 30, 2002

1. Significant Accounting Policies

Organization and Business

Waste Conversion Systems, Inc. was incorporated under the laws of the state
of Nevada on October 21, 1986. On June 10, 2002 the company changed its
name to Urban Television Network Corporation. The name change coincided the
company's acquisition of assets from the Urban Television Network
Corporation, a Texas corporation. Urban Television Network Corporation
("UTVN") and its subsidiaries, together, the "Company") are engaged in the
business of supplying programming to broadcast television stations and
cable systems. Formerly the company's business had been the marketing of
thermal burner systems that utilize industrial and agricultural waste
products as fuel to produce steam, which generates electricity,
air-conditioning or heat.

Principles of Consolidation

The consolidated financial statements include the account of Urban
Television Network Corporation and its subsidiary. All material
intercompany accounts and Transactions are eliminated. The Company owns
100% of Waste Conversion Systems Of Virginia, Inc. which had no assets or
liabilities at September 30, 2002 and 2001 and no revenues or expenses for
the years ended September 30, 2002 and 2001.

Non Goodwill Intangible Assets

Intangible assets other than goodwill consist of network assets acquired by
purchase. They are being amortized over their expected lives of 5 years and
are reviewed for potential impairment whenever events or circumstances
indicate that carrying amounts may not be recoverable. No impairment loss
was recognized During the reporting period. On January 1, 2002, the Company
adopted Statement of Financial Accounting Standards No. 142, Goodwill and
Intangible Assets. This provides that a recognized intangible shall be
Amortized over its useful life to the reporting entity unless that life is
determined to be indefinite. The amount of an intangible asset to be
amortized shall be the amount initially assigned to that asset less any
residual value.

Income (Loss) Per Share

Income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding. Stock options and
warrants are anti-dilutive, and accordingly, are not included in the
calculation of income (loss) per share.

Cash

For purposes of the statement of cash flows, the Company considers
unrestricted cash and all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash. The Company has no
cash or cash equivalents.

F-5

URBAN TELEVISION NETWORK CORPORATION
And Subsidiaries

Notes to Financial Statements, Continued
September 30, 2002

Advertising Costs

The Company expenses non-direct advertising costs as incurred. The Company
did not incur any direct response advertising costs for the fiscal years
ended September 30, 2002 and 2001.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

Recent Accounting Standards

The FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." The Statement
provides guidance for determining whether a transfer of financial assets
should be accounted for as a sale or a secured borrowing, and whether a
liability has been extinguished. The Statement is effective for recognition
and reclassification of collateral and for disclosures ending after
December 15, 2001. The Statement is effective for transfers and servicing
of financial assets and extinguishments of liabilities occurring after
March 31, 2001. The initial application of SFAS No. 140 will have no impact
to the Company's results of operations and financial position.

In June, 2001 the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations" and No. 142
"Goodwill and Other Intangible Assets." These statements prohibit
pooling-of- interest accounting for Transactions initiated after June 30,
2001, require the use of the purchase method of accounting for all
combinations after June 30, 2001, and establish new standards for
accounting for goodwill and other intangibles acquired in business
combinations. The Company does not expect these pronouncements to have a
material affect on its financial statements.

Stock Options

The Company accounts for non-employee stock options under SFAS 123, whereby
option costs are recorded at the fair value of the consideration received
or the fair value of the equity instrument issued, whichever is more
reliable measurement, in accordance with EITF 96-18 "Accounting for Equity"
instruments that are issued to other than employees for acquiring or in
conjunction with selling Goods or Services.

The Company adopted in February 1993 an employee stock option plan. There
are no options outstanding under this plan. This plan will be accounted for
under FAS 123 as described above.

F-6

URBAN TELEVISION NETWORK CORPORATION
And Subsidiaries

Notes to Financial Statements, Continued
September 30, 2002

2. Network Assets - Amortization

On May 1, 2002, the Company entered into an agreement with Urban Television
Network Corporation, a Texas corporation, (UTVN-Texas) to acquire the
rights to the UATV Network signal space which included the assignment of
the UATV affiliates for 16,000,0000 shares of common stock with an
estimated fair market value of $559,000. These assets purchased are
referred to as network asset.

Network assets consist of intangibles other than Goodwill. These assets
automatically renew every year unless either party terminates the agreement
by such notification to the other party. A useful life of five (5) years is
estimated for the assets. These agreements are not expected to be
terminated by either party prior to its useful life period. Total
amortization of these assets has been $46,584 and the amortization for the
period ended September 30, 2002 was $46,584.

Future amortization of the Network assets at September 30, 2002 will be
$512,416 and on an annual basis be as follows:

Year ended September 30, 2003 $111,804
Year ended September 30, 2004 $111,804
Year ended September 30, 2005 $111,804
Year ended September 30, 2006 $111,804
Year ended September 30, 2007 $ 65,200

3. Property, Plant and Equipment

The Company acquired equipment totaling $6,905. This was recorded at cost
and depreciation on a straight-line basis over five (5) years. Depreciation
for the year and accumulated to date is $783.00.

4. Other Income

Extinguishment of Debt

Since Waste Conversion Systems, Inc. ceased operations in 1996, it did not
pay any of its obligations, related to previous operations. For those trade
creditors and note holders that did not extend the statute of limitations
on collection of their accounts through legal actions, the Company has been
taking the write off of the payables into income as the statutory period
for collection expires. The income was $424,665 ($0.014 per share) and
$8,880 (less than $0.01 per share) for fiscal 2002 and 2001, respectively.

5. Related Party Transactions

In May 2002, the Company issued 16,000,000 shares to Urban Television
Network Corporation for asset purchase of network assets. (See Note 3,
Network Assets)

The Company leases office space from one its shareholders and director for
$2,000 per month. The total rental expense for year ended September 30,
2002 was $12,000.

F-7

URBAN TELEVISION NETWORK CORPORATION
And Subsidiaries

Notes to Financial Statements, Continued
September 30, 2002

6. Notes Payable - Legal Matters

Notes payable consist of:

September 30, September 30,
2002 2001
------------- -------------
Notes payable to stockholders at 10%
interest payable at On September 30, 2004 $ 188,929

Notes payable to stockholders at 8.5%
December 31, 2001 * $ 152,108

10% unsecured loan for past due rent** 58,240
------------- -------------
$ 188,929 $ 210,348
------------- -------------

* A judgment filed against this note was settled in December of 2001 for
213,712 shares of common stock.

** The Company paid this note in December 2001 for $1,000 plus 10,718
shares of its common stock.

7. Income Tax

The Company has, for income tax purposes, approximately $4,950,000 in net
operating loss carryforwards at September 30, 2002, available to offset
future years' taxable income and expiring in varying amounts through the
year 2015. A deferred tax asset of approximately $2,032,000 has been offset
by a 100% valuation allowance. The annual utilization of the loss
carryforward will be limited under Internal Revenue Code Section 382
provisions due to the recent stock issuances. The Company accounts for
income taxes pursuant to the Statement of Financial Accounting Standards
No.109. The Company has no current or deferred income tax component.

8. Capital Stock

In May 2002, the Company issued 16,000,000 shares to Urban Television
Network Corporation for asset purchase of network assets. (See Note 3
Network Assets)

In September 2002, the Company issued 100,000 shares to Hispanic Television
Network, Inc. as part of the mutual settlement agreement between the two
companies to cancel the Satellite Transponder Service Agreement and notes
payable/receivable.

9. Preferred Stock

The Articles of Incorporation of the Company authorize issuance of a
maximum of 500,000 shares of nonvoting preferred stock with a par value of
$1.00 per share. The Articles of Incorporation grant the Board of Directors
of the Company authority to determine the designations, preferences, and
relative participating, optional or other special rights of any preferred
stock issued.

No preferred shares had been issued as of September 30, 2002.

F-8

URBAN TELEVISION NETWORK CORPORATION
and Subsidiaries

Notes to Financial Statements, Continued
September 30, 2002

10. Going Concern

The Company has suffered recurring losses from operations. In order for the
Company to sustain operations and execute its television broadcast and
programming business plan , capital will need to be raised to support
operations as the company executes its business plan. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.

The Company may raise additional capital through the sale of its equity
securities, or debt securities.

11. Subsequent Events

Satellite Transponder Lease

The Company entered into a Satellite space segment service agreement with
Loral Skynet on November 20, 2002 for 6 MHz of satellite bandwidth on
Telstar 5 for a period of three year ending on November 21, 2005.

Future lease payments due during the term of the lease ending on November
21, 2005 will equal $649,548 and be due as follows:

Year ended September 30, 2003 $198,473
Year ended September 30, 2004 $216,516
Year ended September 30, 2005 $216,516
Year ended September 30, 2006 $ 18,043

The Company entered into a Full Time Broadcast Agreement with Verestar,
Inc. on November 21, 2002 for a full time redundant 6 MHz digital C-band
uplink service for a period of three years ending on November 21, 2005.

Future lease payments due during the term of the lease ending on November
21, 2005 will equal $288,000 and be due as follows:

Year ended September 30, 2003 $88,000
Year ended September 30, 2004 $96,000
Year ended September 30, 2005 $96,000
Year ended September 30, 2006 $ 8,000

On November 21, 2002 the Company completed a 1:20 reverse stock split and
amended its Articles of Incorporation to increase its authorized common
shares to 200,000,000 and adjust its par value to $0.0001 per share.

F-9