**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-QSB/A**





**QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





**For
      the Quarterly Period ended December 31, 2005**





**Commission
      File Number** **000-51010**





**DELAWARE**
            
            **87-0419571**(State
                or other jurisdiction of incorporation or organization)
            
            (I.R.S.
                Employer Identification No.)





**6701
                Democracy Boulevard, Suite 202, Bethesda, MD**
            
            **20817**(Address
                of principal executive offices)
            
            (Zip
                Code)





**(301)
                315-9040****(**Registrant’s
                telephone number, including area
                code)




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for 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 o




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


Yes o No x





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: As of February 9, 2006, the Company had
      447,161,236 outstanding shares of its common stock, $0.001 par value per
      share.









**TABLE
      OF CONTENTS**





**ITEM
                NUMBER AND CAPTION**
            **PAGE****PART
                I**ITEM
                  1.
            FINANCIAL
                STATEMENTS
            3NOTES
                TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
            8ITEM
                2.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
                CONDITION
            23ITEM
                3
            CONTROLS
                AND PROCEDURES
            42**PART
                II**ITEM
                1.
            LEGAL
                PROCEEDINGS
            43ITEM
                2.
            CHANGES
                IN SECURITIES
            44ITEM
                3.
            DEFAULTS
                UPON SENIOR SECURITIES
            44ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            44ITEM
                5.
            OTHER
                INFORMATION
            44ITEM
                6.
            EXHIBITS
            45




2




**PART
      I**


**FINANCIAL
      INFORMATION**





**Item
      1. Financial Statements.**




**MOBILEPRO
      CORP. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**MARCH
      31, 2005 AND DECEMBER 31, 2005**


**ASSETS**


**March
                31,****2005**
            
            **December
                31,****2005****(audited)**
            
            **(unaudited)****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            4,669,787
            
            $
            4,960,703Restricted
                cash
            
            
            429,954
            
            
            337,200Accounts
                receivable, net
            
            
            12,658,313
            
            
            11,376,784Prepaid
                expenses and other current assets
            
            
            2,511,697
            
            
            3,740,602**Total
                  Current Assets**
            
            
            20,269,751
            
            
            20,415,289**FIXED
                ASSETS, NET OF ACCUMULATED DEPRECIATION**
            
            
            13,193,056
            
            
            14,286,154**OTHER
                ASSETS**Goodwill,
                net of impairment
            
            
            32,579,099
            
            
            37,310,829Customer
                contracts and relationships, net of amortization
            
            
            2,965,456
            
            
            8,669,910Other
                intangible assets, net of amortization
            
            
            1,511,005
            
            
            423,259Deferred
                financing fees, net of amortization
            
            
            1,026,667
            
            
            366,667Other
                assets
            
            
            1,277,897
            
            
            1,914,77939,360,124
            
            
            48,685,444**TOTAL
                ASSETS**
            
            $
            72,822,931
            
            $
            83,386,887




The
      accompanying notes are an integral part of the condensed consolidated financial
      statements.




3




**MOBILEPRO
      CORP. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS (CONTINUED)**


**MARCH
      31, 2005 AND DECEMBER 31, 2005**


**LIABILITIES
        AND STOCKHOLDERS' EQUITY**


**March
                31,****2005**
            
            **December
                31,****2005****(audited)**
            
            **(unaudited)****CURRENT
                LIABILITIES**Current
                portion of convertible debenture
            
            $
            -
            
            $
            3,500,000Current
                portion of notes payable
            
            
            25,535,263
            
            
            6,817,581Accounts
                payable and accrued expenses
            
            
            19,863,088
            
            
            16,873,156Liability
                for common stock to be issued
            
            
            -
            
            
            53,167Deferred
                revenue
            
            
            3,470,731
            
            
            4,442,492**Total
                Current Liabilities**
            
            
            48,869,082
            
            
            31,686,396**LONG-TERM
                LIABILITIES**Convertible
                debenture, net of unamortized debt discount of $602,452 and current
                portion
            
            
            -
            
            
            10,897,548Notes
                payable and other long-term liabilities, net of current
                maturities
            
            
            999,196
            
            
            800,659**Total
                Long-Term Liabilities**
            
            
            999,196
            
            
            11,698,207**TOTAL
                LIABILITIES**
            
            
            49,868,278
            
            
            43,384,603**MINORITY
                INTERESTS**
            
            
            600,000
            
            
            3,799,605**STOCKHOLDERS'
                EQUITY**Preferred
                stock, $.001 par value, 20,035,425 shares authorized and 35,378 shares
                issued and outstanding at March 31, 2005 and December 31,
                2005
            
            
            35
            
            
            35Common
                stock, $.001 par value, 1,500,000,000 shares authorized and 355,918,011
                and 432,161,235 shares issued and outstanding at March 31, 2005 and
                December 31, 2005
            
            
            355,918
            
            
            432,161Additional
                paid-in capital
            
            
            43,195,250
            
            
            62,126,473Additional
                paid-in capital, stock warrant
            
            
            -
            
            
            853,200Accumulated
                deficit
            
            
            (21,196,550
            )
            
            (27,209,190
            )**Total
                Stockholders' Equity**
            
            
            22,354,653
            
            
            36,202,679**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY**
            
            $
            72,822,931
            
            $
            83,386,887






The
      accompanying notes are an integral part of the condensed consolidated financial
      statements.




4




**MOBILEPRO
      CORP. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(unaudited)**





**For
                the Three Months Ended**
              **December
                31,**
            
            **For
                the Nine Months Ended**
              **December
                31,****2004**
            
            **2005**
            
            **2004**
            
            **2005****REVENUES**
            
            $
            17,127,133
            
            $
            26,244,606
            
            $
            23,265,366
            
            $
            75,297,101**OPERATING
                COSTS AND EXPENSES**Cost
                of services (exclusive of depreciation and amortization)
            
            
            8,633,278
            
            
            13,790,195
            
            
            11,158,590
            
            
            36,466,453Payroll,
                professional fees and related expenses
            
            
            4,268,757
            
            
            4,206,066
            
            
            8,794,048
            
            
            13,405,613Advertising
                and marketing expenses
            
            
            686,129
            
            
            1,064,475
            
            
            852,766
            
            
            2,382,332Office
                rent and expenses
            
            
            355,686
            
            
            522,703
            
            
            508,216
            
            
            1,415,523Other
                general and administrative expenses
            
            
            4,439,560
            
            
            6,590,282
            
            
            4,889,344
            
            
            16,970,288Depreciation
                and amortization
            
            
            792,717
            
            
            1,293,993
            
            
            1,290,212
            
            
            3,163,689Goodwill
                impairment
            
            
            -
            
            
            3,764,429
            
            
            -
            
            
            3,764,429Restructuring
                costs
            
            
            -
            
            
            1,335,612
            
            
            -
            
            
            1,335,612**Total
                Operating Costs and Expenses**
            
            
            19,176,127
            
            
            32,567,755
            
            
            27,493,176
            
            
            78,903,939**OPERATING
                LOSS**
            
            
            (2,048,994
            )
            
            (6,323,149
            )
            
            (4,227,810
            )
            
            (3,606,838
            )**INTEREST
                EXPENSE, NET**
            
            
            (905,896
            )
            
            (582,785
            )
            
            (1,232,280
            )
            
            (2,213,295
            )**MINORITY
                INTERESTS IN NET INCOME OF CONSOLIDATED
                SUBSIDIARIES**
            
            
            -
            
            
            (49,798
            )
            
            -
            
            
            (192,507
            )**NET
                LOSS BEFORE PROVISION FOR INCOME TAXES**
            
            
            (2,954,890
            )
            
            (6,955,732
            )
            
            (5,460,090
            )
            
            (6,012,640
            )**Provision
                for Income Taxes**
            
            
            -
            
            
            -
            
            
            -
            
            
            -**NET
                LOSS APPLICABLE TO COMMON SHARES**
            
            $
            (2,954,890
            )
            $
            (6,955,732
            )
            $
            (5,460,090
            )
            $
            (6,012,640
            )**NET
                LOSS PER SHARE**Basic
            
            $
            (0.0093
            )
            $
            (0.0165
            )
            $
            (0.0202
            )
            $
            (0.0154
            )Diluted
            
            $
            (0.0093
            )
            $
            (0.0165
            )
            $
            (0.0202
            )
            $
            (0.0154
            )**WEIGHTED
                AVERAGE NUMBER OF COMMON SHARES OUTSTANDING**
            
            
            317,287,577
            
            
            421,105,524
            
            
            270,117,287
            
            
            390,067,725





The
      accompanying notes are an integral part of the condensed consolidated financial
      statements.




5




**MOBILEPRO
      CORP. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(unaudited)**


**For
                the Nine Months Ended**
              **December
                31,****2004**
            
            **2005****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                loss
            
            $
            (5,460,090
            )
            $
            (6,012,640
            )**Adjustments
                to reconcile net loss to net cash provided by (used in) operating
                activities:**Goodwill
                impairment
            
            
            -
            
            
            3,764,429Depreciation
                and amortization
            
            
            1,290,212
            
            
            3,163,689Restructuring
                costs
            
            
            -
            
            
            1,335,612Noncash
                interest expense
            
            
            375,150
            
            
            536,810Minority
                interests
            
            
            -
            
            
            192,507Investments
                received for services
            
            
            (450,000
            )
            
            -Other
            
            
            15,000
            
            
            38,019**Changes
                in assets and liabilities**Decrease
                in accounts receivable
            
            
            1,011,676
            
            
            1,359,448(Increase)
                decrease in other current assets
            
            
            743,283
            
            
            (1,046,675
            )(Increase)
                in other assets
            
            
            (90,377
            )
            
            (725,039
            )Increase
                (decrease) in accounts payable and accrued expenses
            
            
            4,055,926
            
            
            (5,351,928
            )Increase
                in deferred revenue
            
            
            431,247
            
            
            95,353Total
                adjustments
            
            
            7,382,119
            
            
            3,362,225**Net
                cash provided by (used in) operating activities**
            
            
            1,922,027
            
            
            (2,650,415
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES**Acquisition
                of intangible assets
            
            
            -
            
            
            (6,778,129
            )Cash
                paid for acquisitions
            
            
            (32,960,500
            )
            
            (4,973,122
            )Cash
                received in acquisition of subsidiaries
            
            
            5,827,223
            
            
            1,046,111Capital
                expenditures, net
            
            
            (1,384,688
            )
            
            (2,674,904
            )**Net
                cash (used in) investing activities**
            
            
            (28,517,965
            )
            
            (13,380,044
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES**Borrowings/(payments)
                under convertible debenture, net
            
            
            -
            
            
            15,000,000Borrowings
                under acquisition bridge loan
            
            
            15,200,000
            
            
            -Payments
                on acquisition bridge loan
            
            
            (2,200,000
            )
            
            (13,000,000
            )Borrowings/(payments)
                under notes payable, net
            
            
            4,208,449
            
            
            (4,902,372
            )Investment
                by minority interests
            
            
            -
            
            
            3,612,525Debt
                financing fees
            
            
            -
            
            
            (1,295,000
            )Proceeds
                from common stock issuances
            
            
            13,098,406
            
            
            16,906,222**Net
                cash provided by financing activities**
            
            
            30,306,855
            
            
            16,321,375




The
      accompanying notes are an integral part of the condensed consolidated financial
      statements.




6




**MOBILEPRO
      CORP. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)**


**(unaudited)**





**For
                the Nine Months Ended**
              **December
                31,****2004**
            
            **2005****NET
                INCREASE IN CASH AND CASH EQUIVALENTS**
            
            $
            3,710,917
            
            $
            290,916**CASH
                AND CASH EQUIVALENTS - BEGINNING OF YEAR**
            
            
            1,955,607
            
            
            4,669,787**CASH
                AND CASH EQUIVALENTS - END OF PERIOD**
            
            $
            5,666,524
            
            $
            4,960,703**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                paid during the period for interest
            
            $
            45,550
            
            $
            1,043,073**SUPPLEMENTAL
                DISCLOSURE OF NONCASH ACTIVITIES:**Issuance
                of common stock for:Acquisition of AFN
            
            $
            -
            
            $
            1,500,000Acquisition of InReach Internet
            
            $
            -
            
            $
            950,000Acquisition of Evergreen Broadband
            
            $
            -
            
            $
            231,073Acquisition of WazAlliance
            
            $
            -
            
            $
            135,333Investment banker retainer fee
            
            $
            -
            
            $
            58,500Conversion of payables to common stock
            
            $
            90,000
            
            $
            -Debt financing fees paid in common stock
            
            $
            1,760,000
            
            $
            -Goodwill
                recorded in acquisitions
            
            $
            31,893,329
            
            $
            5,743,263Amortization
                of SEDA deferred financing fees
            
            $
            -
            
            $
            660,000Liability
                for common stock to be issued
            
            $
            500,000
            
            $
            53,167Adjustment
                to minority interest
            
            $
            -
            
            $
            150,000Note
                payable in escrow
            
            $
            75,000
            
            $
            -




The
      accompanying notes are an integral part of the condensed consolidated financial
      statements.




7





**MOBILEPRO
      CORP. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2005**


**(unaudited)**





**NOTE
      1-** **ORGANIZATION**





**Overview**





MobilePro
      Corp., incorporated under the laws of the State of Delaware in July 2000, is
      a
      broadband wireless, telecommunications, and integrated data communication
      services company that delivers a comprehensive suite of voice and data
      communications services to its customers, including local exchange, long
      distance, enhanced data, Internet, cellular, and wireless broadband, through
      its
      operations in three industry segments - voice services, Internet services and
      wireless networks. Together with its consolidated subsidiaries, Mobilepro Corp.
      is hereinafter referred to as “Mobilepro” or the “Company”.





The
      Company’s voice services segment includes the operations of CloseCall America,
      Inc. (“CloseCall”), a Stevensville, Maryland-based competitive local exchange
      carrier (a “CLEC”), Davel Communications, Inc. (“Davel”), a Cleveland,
      Ohio-based independent payphone provider, and American Fiber Network, Inc.
      (“AFN”), a CLEC based in Kansas City, Kansas. The Company’s Internet services
      segment includes DFW Internet Services, Inc. (“DFW”, doing business as
      Nationwide Internet), an Irving, Texas-based Internet services provider, its
      acquired Internet service provider subsidiaries, and InReach Internet L.L.C.
      (“InReach”), an Internet service provider based in Stockton, California. The
      Company’s municipal wireless networks operations are conducted primarily in
      Phoenix, Arizona, by a wholly owned subsidiary, NeoReach, Inc. (“NeoReach”), and
      its subsidiary, NeoReach Wireless, Inc. The wireless networks segment also
      includes the operations of the Company’s subsidiary, Kite Broadband, LLC
      (“Kite”), a broadband wireless service provider based in Ridgeland,
      Mississippi.





**Summary
      of Acquisition Activities**





In
      April
      2004, DFW acquired August.net Services LLC, an Internet service provider located
      in Texas, for $1,730,000 in cash and promissory notes.





In
      June
      2004, DFW acquired ShreveNet, Inc. (“ShreveNet”), an Internet service provider
      located in Louisiana, for $1,250,000 in cash and common stock. The issued shares
      were valued at a fair value of $190,000 based on the average 20-day closing
      price ($0.2162 per share) prior to June 3, 2004. Mobilepro issued the common
      stock in August 2004.





In
      June
      2004, DFW acquired certain assets of Crescent Communications, Inc., an Internet
      service provider located in Houston, for $1,194,767 in cash and a promissory
      note.





In
      June
      2004, the Company acquired US1 Telecommunications, Inc. (“US1”), a long distance
      provider located in Kansas, for $135,282 in cash and conditional promissory
      notes.





In
      July
      2004, DFW acquired Clover Computer Corporation (“Clover”), a Coshocton,
      Ohio-based Internet services provider with operations in several Ohio cities,
      for $1,216,993 in cash and promissory notes.




In
      July
      2004, DFW acquired Ticon.net (“Ticon”), a Janesville, Wisconsin-based Internet
      service provider with operations in Janesville and Milwaukee, for $1,000,000
      in
      cash and promissory notes.





In
      August
      2004, the Company acquired Affinity Telecom (“Affinity”), a Michigan-based CLEC
      and long distance carrier. The Company paid $2,513,000 in cash, notes, and
      a
      convertible note.





In
      August
      2004, DFW acquired the customer base, corporate name and certain other assets
      of
      Web One, Inc. (“Web One”), a Kansas City, Missouri-based Internet service and
      web-hosting provider, for $1,960,000 in cash and common stock.





In
      September 2004, DFW acquired World Trade Network, Inc. an Internet services
      provider based in Houston, for $1,200,000 in cash and promissory
      notes.




8




In
      September 2004, DFW acquired The River Internet Access Co. (“The River”), an
      Internet services provider based in Tucson, Arizona, for $2,467,204 in cash
      and
      promissory notes.





In
      October 2004, Mobilepro acquired CloseCall, a CLEC offering local telephone
      service, long distance service, 1.800CloseCall prepaid calling cards, and
      wireless, dial-up and DSL Internet services. The purchase price included 1)
      a
      cash payment of $8,000,000, 2) 39,999,999 shares of Mobilepro’s common stock
      valued at $10,000,000, and 3) warrants to purchase 3,500,000 additional shares
      of Mobilepro’s common stock exercisable at $0.30 per share for 2,500,000 shares
      and $0.35 per share for 1,000,000 shares.





In
      November 2004, Mobilepro acquired Davel, the owner and operator of approximately
      36,000 payphones predominantly located in 42 states and the District of
      Columbia. In connection with this transaction, the Company acquired all of
      Davel’s senior secured debt in the approximate principal amount of $103.1
      million, a $1.3 million note receivable from Davel held by one of its secured
      lenders, and approximately 95.2% of the common stock of Davel. The purchase
      price included cash of $14,000,000 plus warrants to purchase up to 5,000,000
      shares of common stock at the price of $0.30 per share. In May 2005, the Company
      purchased the remaining 4.8% of Davel’s outstanding common stock for $450,000
      cash.





In
      May
      2005, NeoReach acquired WazAlliance, a network of metro-wide commercial and
      residential wireless Internet access zones for a total purchase price of
      $257,500. Consideration included the issuance of 760,000 shares of Mobilepro’s
      common stock valued at $110,200, a liability to issue an addition 540,000 shares
      of common stock valued at $78,300, and the payment of certain liabilities in
      the
      amount of $69,000 on behalf of WazAlliance.





In
      June
      2005, the Company acquired Evergreen Open Broadband (“Evergreen”), a wholesale
      wireless Internet service provider based in Boston, for a purchase price of
      approximately $231,073 representing 1,505,360 shares of Mobilepro common stock
      valued at $0.1535 per share based on the date that the parties reached agreement
      on the terms of the acquisition.





In
      June
      2005, Mobilepro acquired 100% of the outstanding common stock of AFN, a CLEC
      that is licensed to provide local telephone, long distance and/or Internet
      services throughout the United States, for a cost of $3,434,331, including
      10,000,000 shares of Mobilepro common stock, valued at $1,500,000 based on
      the
      value of the Company's common stock at the time that the substantive terms
      of
      the acquisition were accepted, a cash payment of $1,500,000 and the excess
      of
      liabilities assumed over the fair value of assets acquired. The assumed
      liabilities included $1,337,103 payable to a related party company that supplied
      administrative and support services to AFN.





In
      September 2005, AFN acquired the assets of AllCom USA and their long distance
      and T-1 customers for $300,000 cash, providing the Company with an additional
      base of customers for bundled services.





In
      November 2005, Mobilepro acquired InReach for a cost of $3,061,873, including
      a
      cash payment of $2,111,873 and 4,357,798 shares of Mobilepro common stock,
      valued at $950,000 based on the value of the Company's common stock at the
      time
      that the substantive terms of the acquisition were accepted.





**NOTE
      2-** **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





**Financial
      Statement Presentation**





The
      condensed consolidated financial statements include the accounts of the Company
      and its subsidiaries. All significant inter-company accounts and transactions
      have been eliminated in consolidation. In accordance with the requirements
      of
      Statement of Financial Accounting Standard (“SFAS”) No. 131, “Disclosures about
      Segments of an Enterprise and Related Information”, the Company has provided
      certain financial information relating to the operating results and assets
      of
      its industry segments (see Note 15) based on the manner in which management
      disaggregates the Company in making internal operating decisions.





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





9




These
      financial statements are unaudited and have been prepared by the Company
      pursuant to the rules and regulations of the Securities and Exchange Commission
      regarding interim financial reporting. Accordingly, they do not include all
      of
      the information and footnotes required by generally accepted accounting
      principles for complete financial statements, and it is suggested that these
      financial statements be read in conjunction with the financial statements,
      and
      notes thereto, included in the Company’s Annual Report on Form 10-KSB for the
      fiscal year ended March 31, 2005. In the opinion of management, the comparative
      financial statements for the periods presented herein include all adjustments
      that are normal and recurring, and that are necessary for a fair presentation
      of
      results for the interim periods. The results of operations for the three and
      nine months ended December 31, 2005 are not necessarily indicative of the
      results that will be achieved for the fiscal year ending March 31,
      2006.





**Reclassifications**





Certain
      prior-period financial statement balances have been reclassified to conform
      to
      the December 31, 2005 presentation. The reclassifications resulted in no changes
      to the accumulated deficits reported in prior periods.





**Revenue
      Recognition**





The
      Company recognizes revenue related to local telephone, long distance, wireless
      calling and Internet access services when such services are rendered and
      collection is reasonably assured; it defers revenue for services that the
      Company bills in advance. Revenue related to service contracts covering future
      periods is deferred and recognized ratably over the periods covered by the
      contracts.





Davel
      derives its payphone revenue from two principal sources: coin calls and non-coin
      calls. Revenue related to all calls, including dial-around compensation and
      operator service revenue, is recognized in the periods that the customers place
      the calls. Any variations between recorded amounts of revenue and actual cash
      receipts are accounted for at the time of receipt.





Non-coin
      operator service calls are handled by independent operator service providers.
      These carriers assume billing and collection responsibilities for
      operator-assisted calls originating on Davel’s payphone network and pay
      commissions to Davel based upon gross revenue. Davel recognizes revenue related
      to operator service calls in amounts equal to the commissions that it is
      entitled to receive in the periods that the services are rendered.





Davel
      also recognizes revenue related to non-coin dial-around calls that are initiated
      from a Company payphone in order to gain access to a long distance company
      or to
      make a standard toll free call. Revenue related to such dial-around calls is
      recognized initially based on estimates. The inter-exchange carriers have
      historically paid for fewer dial-around calls than are actually made and the
      collection period for dial-around revenue is generally four to six months,
      but
      can be in excess of a year. Davel’s estimates of revenue are based on the
      historical analysis of calls placed versus amounts collected. These analyses
      are
      updated on a periodic basis. Recorded amounts of revenue may be adjusted based
      on actual receipts and/or the subsequent revision of prior estimates. Reported
      revenues for the three month period ended March 31, 2005 included a reduction
      to
      previously recorded revenues of $167,319. No such adjustments were recorded
      in
      the nine-month period ended December 31, 2005.





**Financing
      Fees**





The
      financing fees paid in May 2004 to Cornell Capital Partners, L.P. (“Cornell
      Capital”) and others related to the negotiation of the Standby Equity
      Distribution Agreement (the “SEDA”) were deferred and, in the current year, are
      being amortized against additional paid-in-capital on a straight-line basis
      over
      the twenty-four (24) month term of the SEDA. These fees were paid with the
      issuance of 8,000,000 shares of Mobilepro common stock valued in the amount
      of
      $1,760,000. The Company recorded amortization of approximately $220,000 in
      each
      of the three-month periods ended December 31, 2004 and 2005, respectively,
      and
      amortization of approximately $513,000 and $660,000 in the nine-month periods
      ended December 31, 2004 and 2005, respectively. The prior year amounts were
      included in depreciation and amortization expense. The fees paid to Cornell
      Capital and others at the time that funds are drawn under equity lines of credit
      (5% for the SEDA), amounting to $127,500 in the three-month period ended
      December 31, 2005, and amounting to $503,000 in the nine-month period ended
      December 31, 2005, were charged to additional paid-in-capital. Such fees, in
      the
      nine months ended December 31, 2004, amounting to $1,135,249, were charged
      to
      professional fees. No such fees were incurred in the three months ended December
      31, 2004.





The
      Company also incurred financing costs of $1,295,000 in May 2005 in connection
      with issuance of the $15.5 million convertible debenture to Cornell Capital
      and
      the early retirement of the bridge loan (see Note 8). These costs, including
      fees paid in cash to Cornell Capital, were charged to additional
      paid-in-capital.




10





**Accounting
      for Stock Options and Warrants**





The
      Company accounts for its stock-based compensation under the recognition and
      measurement principles of Accounting Principles Board (“APB”) Opinion No. 25,
“Accounting for Stock Issued to Employees,” and related interpretations. APB
      Opinion No. 25 provides that compensation expense relative to a Company’s
      employee stock options is measured based on the intrinsic value of the stock
      options at the measurement date.





If
      compensation expense had been determined based on the fair value of the options
      at the grant dates consistent with the method of accounting proscribed by SFAS
      No. 123, “Accounting for Certain Transactions Involving Stock Compensation,” as
      amended by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and
      Disclosure,” the Company’s net loss per share amounts would have been stated at
      the following pro forma amounts for the nine-month periods ended December 31,
      2004 and 2005:




**For
                the Nine Months**
              **Ended
                December 31,****2004**
            
            
            **2005**Net
                loss, as reported
            
            $
            (5,460,090
            )
            
            $
            (6,012,640
            )Add:
                Stock-based employee compensation expense included in reported net
                loss
            
            
            -
            
            
            
            -Deduct:
                Total stock-based employee compensation expense determined under
                fair
                value based method for all awards
            
            
            (6,093,029
            )
            
            
            (3,028,803
            )Pro
                forma net loss
            
            $
            (11,553,120
            )
            
            $
            (9,041,443
            )Net
                loss per share:As
                reported
            
            $
            (0.0202
            )
            
            $
            (0.0154
            )Pro
                forma
            
            $
            (0.0428
            )
            
            $
            (0.0232
            )





The
      fair
      value of each option is estimated on the date of grant using the Black-Scholes
      option-pricing model with the following assumptions used for grants during
      the
      periods ended December 31, 2004 and 2005:




**2004**
            
            **2005**Dividend
                yield
            
            None
            
            NoneExpected
                volatility
            
            
            60
            %
            
            60
            %Risk-free
                interest rate
            
            
            3.00
            %
            
            3.00
            %Expected
                term (in years)
            
            
            10.00
            
            
            10.00




For
      stock
      options granted during the nine-month periods ended December 31, 2004 and 2005,
      the weighted-average grant-date fair value was $0.13 per share and $0.21 per
      share, respectively.




**Property,
      Plant and Equipment**





Furniture
      and equipment are included in fixed assets in the accompanying balance sheets
      and are stated at cost. Depreciation expense is computed using the straight-line
      method during the estimated useful life of each asset. When an asset is retired
      or otherwise disposed of, the cost and related accumulated depreciation are
      removed from the accounts, and any resulting gain or loss is recognized in
      income for the period. The costs of maintenance and repairs are charged to
      expense as incurred; significant renewals and betterments are
      capitalized.




11




At
      March
      31, 2005 and December 31, 2005, property, plant and equipment values were as
      follows:





**Estimated**
              **Useful**
              **Lives
                (in years)**
            
            **March
                31,**
              **2005**
            
            **December
                31,**
              **2005**(audited)
            
            (unaudited)Furniture
                and fixtures
            
            
            7
            
            $
            387,861
            
            $
            471,816Machinery
                and equipment
            
            
            5
            
            
            13,584,088
            
            
            16,587,715Leasehold
                improvements
            
            
            7
            
            
            263,452
            
            
            638,584Vehicles
            
            
            5
            
            
            287,733
            
            
            226,470Subtotals
            
            
            
            
            
            14,523,134
            
            
            17,924,585Less
                accumulated depreciation
            
            
            
            
            
            (
                1,330,078
            )
            
            (
                3,638,431
            )Fixed
                assets, net
            
            
            
            
            $
            13,193,056
            
            $
            14,286,154





The
      Company recorded depreciation expense of $447,919 and $925,899 for the
      three-month periods ended December 31, 2004 and 2005, respectively, and
      depreciation expense of $614,098 and $2,254,899 for the nine-month periods
      ended
      December 31, 2004 and 2005, respectively.





**Advertising
      Contracts**





CloseCall
      uses print, signage, radio and television advertising to market services to
      customers of certain local professional sports teams. Advertising programs
      include the use of long-term contracts. Upon the negotiation of such a contract,
      the Company records the cost of the advertising program as an asset, and
      amortizes the balance to operating expenses over the life of the contract.
      At
      December 31, 2005, prepaid expenses and other assets included balances of
      $328,064 and $554,118, respectively, related to such contracts. The
      corresponding contract liability is paid typically in installments. At December
      31, 2005, accounts payable and long-term liabilities included balances of
      $345,672 and $517,430, respectively, that are payable under such contracts.





**Customer
      Contracts and Relationships**





In
      connection with the acquisition of certain customer rights under an agreement
      with Sprint Communications Company L.P. (“Sprint”), the Company made an up-front
      payment of $6,578,550, after adjustment for the difference in the closing number
      of customers subscribing to the service as compared to a target subscriber
      number. Accordingly, the amount of this payment, which is also net of the
      portion allocated to the value of the tangible assets and adjusted to include
      payments for legal and direct professional advisory fees, was capitalized and
      allocated between the value ascribed to the initial three-year term of the
      agreement with Sprint and the value ascribed to the bargain purchase option
      (see
      Note 5). These amounts ($1,966,200 and $4,612,350, respectively) were included
      in other assets in the accompanying balance sheet at December 31, 2005. The
      amount assigned to the initial term of the agreement is being amortized on
      a
      straight-line basis over the three-year term. The Company has estimated the
      total life of this arrangement to be ten years based upon an analysis of the
      operating history of the base and the average monthly disconnects. The Company
      intends to evaluate the value of these intangible assets for potential
      impairment at least annually and to adjust both the asset values and the
      prospective life in the future if determined necessary. For the three months
      ended December 31, 2005, amortization expense was $165,702. Amortization expense
      of $331,053 was included in the statement of operations for the nine months
      ended December 31, 2005, representing the amount of amortization recorded by
      Kite since it began operations on July 1, 2005.





This
      account also includes location contracts with net balances of $2,965,456 and
      $2,373,185 at March 31, 2005 and December 31, 2005, respectively, representing
      Davel acquisition costs allocated to location owner payphone contracts and
      other
      costs associated with obtaining written and signed location contracts. These
      other assets are amortized on a straight-line basis over their estimated useful
      lives based on contract terms (generally 5 years). Accumulated amortization
      related to these contracts at March 31, 2005 and December 31, 2005 was $267,586
      and $706,570, respectively. Amortization related to location contracts was
      $152,366 and $472,976, respectively, for the three-month and nine-month periods
      ended December 31, 2005.




12




**Investments**





During
      the year ended March 31, 2005, the Company provided certain management services
      to two emerging technology firms. As consideration, the Company received a
      5%
      ownership in each firm. These investments were recorded in the amounts of
      $300,000 and $150,000, respectively, approximating the value of the services
      provided. The total investment amount of $450,000 was included in other assets
      at March 31, 2005 and December 31, 2005.





**Accounts
      Payable and Accrued Liabilities**





At
      March
      31, 2005 and December 31, 2005, accounts payable and accrued liabilities
      consisted of the following:





**March
                31,**
            
            **December
                31,****2005**
            
            **2005**(audited)
            
            (unaudited)Accounts
                payable
            
            $
            14,083,842
            
            $
            12,331,292Accrued
                restructuring costs
            
            
            -
            
            
            1,335,612Accrued
                compensation
            
            
            2,147,138
            
            
            1,070,948Accrued
                interest expense
            
            
            937,509
            
            
            429,459Other
                accrued liabilities
            
            
            2,694,599
            
            
            1,705,845Totals
            
            $
            19,863,088
            
            $
            16,873,156





**Income
      Taxes**





Effective
      July 14, 2000, the Company adopted the provisions of Statement of Financial
      Accounting Standards (SFAS) No. 109, “Accounting for Income Taxes”. The
      statement requires an asset and liability approach for financial accounting
      and
      reporting for income taxes, and the recognition of deferred tax assets and
      liabilities for the temporary differences between the financial reporting bases
      and tax bases of the Company’s assets and liabilities at enacted tax rates
      expected to be in effect when such amounts are realized or settled. Because
      of
      its history of losses, the Company has not had any material federal or state
      income tax obligations. Due to the anticipated use of net operating loss
      carryforwards to offset current year income, no provision for income taxes
      was
      recorded for the three or nine months ended December 31, 2005. The Company’s net
      operating loss carryforwards totaled $15,873,774 at March 31, 2005, expiring
      through March 31, 2025. When there has been a change in an entity’s ownership,
      utilization of net operating loss carryforwards may be limited. Because of
      the
      changes in the ownership of prior acquisitions of the Company, the use of these
      acquired net operating losses will be limited and may not be available to offset
      future taxable income.





**Recent
      Accounting Pronouncements**





In
      December 2004, the Financial Accounting Standards Board revised SFAS
      No. 123. The revision was entitled “Share-Based Payment” (“SFAS
      No. 123R”), replacing SFAS 123 and superseding APB No. 25, and its
      scope encompasses a wide range of share-based compensation arrangements
      including share options, restricted share plans, performance-based awards,
      share
      appreciation rights and employee share purchase plans.





SFAS
      123R
      requires that the compensation cost relating to share-based payment transactions
      be recorded in financial statements. For each transaction, compensation cost
      is
      to be measured based on the fair value of the equity or liability instrument
      issued. The pro forma disclosures previously permitted under SFAS No. 123
      no longer will be an alternative to financial statement recognition of
      compensation expense. In accordance with a recently-issued Securities and
      Exchange Commission rule, small business registrants will be allowed to
      implement SFAS No. 123R as of the beginning of the first fiscal year that
      begins after December 15, 2005. The Company currently expects that it will
      adopt SFAS No. 123R for the fiscal quarter ending June 30,
      2006.





Under
      SFAS No. 123R, the Company must determine the appropriate fair value model
      to be used for valuing share-based payments, the amortization method for
      compensation cost and the transition method to be used at date of adoption.
      The
      permitted transition methods include either retrospective or prospective
      adoption. Under the retrospective method, prior periods may be restated either
      as of the beginning of the year of adoption or for all periods presented. The
      prospective method requires that compensation expense be recorded for all
      unvested stock options at the beginning of the first quarter of adoption of
      SFAS
      No. 123R, while the retrospective methods would record compensation expense
      for all unvested stock options beginning with the first period presented. The
      Company is evaluating the requirements of SFAS No. 123R and expects that
      its adoption will have a material impact on the company’s consolidated financial
      position and consolidated results of operations including an increase in
      compensation expense for equity instruments issued to employees. The Company
      has
      not yet determined the method of adoption or the effect of adopting SFAS
      No. 123R, and it has not determined whether the adoption will result in
      amounts that are similar to the current pro forma disclosures under SFAS
      No. 123.




13





**NOTE
      3-** **IMPAIRMENT
      OF GOODWILL**





At
      September 30, 2005, the Company’s balance sheet included intangible assets with
      a total carrying value of approximately $49,060,000, representing 56.3% of
      total
      assets and including approximately $37,492,000 in goodwill. Substantially,
      this
      goodwill was recorded in connection with the series of acquisitions completed
      by
      the Company since April 1, 2004. In connection with the acquisition of InReach,
      an additional $3,003,974 in goodwill was added to the balance sheet during
      the
      quarter ended December 31, 2005. Generally accepted accounting principles
      require that the Company assess the fair values of acquired entities at least
      annually in order to identify any impairment in the values. However, on a
      quarterly basis, management is alert for events or circumstances that would
      indicate, more likely than not, that the fair value of a reporting segment
      has
      been reduced below its carrying amount. If there is a determination that the
      fair value of an acquired entity is less than the corresponding net assets,
      including goodwill, an impairment loss would be identified and recorded at
      that
      time.





During
      the three months ended December 31, 2005, neither the Internet services segment
      nor the voice services segment performed as expected. As a result, management
      reviewed the carrying values of the assets of these segments and determined
      that
      an adjustment for goodwill impairment was appropriate at December 31, 2005.
      The
      Company recorded an impairment charge in the amount of $3,764,429, including
      $1,945,519 relating the Internet service companies and $1,818,910 related to
      Affinity. The churn of dial-up Internet access customers, the steady loss of
      Affinity customers, and bad debt losses related to Affinity customers (occurring
      at a greater rate than in the Company’s other CLEC companies), all contributed
      to the net losses incurred by these segments during the three months ended
      December 31, 2005. The impairment charge represented approximately 12.8% and
      73.0% of the goodwill related to the Internet service companies (excluding
      InReach) and Affinity, respectively.





**NOTE
      4-** **RESTRUCTURING
      OF OPERATIONS**





During
      the current year, the activities of the Internet services segment have focused
      on the integration of the operations of the acquired companies comprising this
      business segment. The efforts are focused on combining service offerings,
      consolidating network operations and customer support locations, and reducing
      operating costs. As a result of this effort, the Company recorded a
      restructuring charge of $1,335,612 in the three months ended December 31, 2005,
      including $902,306 related to the loss expected on the abandonment of leased
      facilities, $392,899 related to the loss expected upon the disposal of excess
      equipment, and $40,407 related to certain employees terminated in January
      2006.





**NOTE
      5-** **THE
      FORMATION OF KITE BROADBAND, LLC**





In
      June
      2005, Kite was funded with the Company making an investment of $3,825,000 in
      cash and receiving 51% ownership. The minority owners invested $3,675,000
      in cash. On June 30, 2005, Kite closed a Master Agreement for Services (the
      “Sprint Agreement”) with Sprint under which the Company shall provide services
      to Sprint’s broadband customers in fourteen (14) metropolitan markets for a
      period of three years utilizing the Sprint mark. The Sprint Agreement covers,
      among other things, the provisioning of certain customer-facing services, such
      as customer operations and call center management, sales, marketing, billing,
      collection, installation and repair. Sprint continues to provide network support
      and transport services. The customers remain Sprint customers during the
      three-year term of the Sprint Agreement. Upon expiration of the Sprint
      Agreement, the Company will have the option to acquire the then existing
      customers pursuant to the terms of the Sprint Agreement. All network and
      spectrum assets will remain Sprint property. In December 2005, Kite made a
      cash
      distribution of $127,500 to its investors resulting in a $62,475 reduction
      of
      the minority interest in Kite. The Company’s share of the distribution was
      $65,025. At December 31, 2005, the 49% minority ownership of Kite was reflected
      in the condensed consolidated balance sheet in the amount of $3,840,677.
      Subsequent to December 31, 2005, the Company acquired the minority interest
      in
      Kite.





**NOTE
      6-** **THE
      ACQUISITION OF AFN**





The
      acquisition of AFN, that occurred on June 30, 2005, has been accounted for
      under
      the purchase method of accounting. Accordingly, AFN is treated as a wholly
      owned
      subsidiary of the Company. The operating results of AFN are included in the
      operating results of the Company from and including July 1, 2005. The following
      unaudited pro forma information for the three and nine months ended December
      31,
      2004 and 2005 has been presented as if the acquisition occurred on April 1,
      2004, and reflects the elimination of revenues recorded on the books of both
      US1
      and AFN, and the issuance of 10,000,000 shares of the Company’s common stock.
      The unaudited pro forma information does not necessarily represent the actual
      results that would have been achieved had the companies been combined at April
      1, 2004, nor may they be indicative of future operating results.




14


**Three
                Months Ended**
              **December
                31,**
            
            **Nine
                Months Ended**
              **December
                31,****2004**
            
            **2005**
            
            **2004**
            
            **2005**Revenues
            
            $
            18,724,342
            
            $
            26,244,606
            
            $
            28,056,994
            
            $
            76,859,869Net
                loss
            
            
            (2,862,304
            )
            
            (6,955,732
            )
            
            (5,182,331
            )
            
            (5,902,469
            )Net
                loss per share:Basic
            
            
            (0.0087
            )
            
            (0.0165
            )
            
            (0.0185
            )
            
            (0.0149
            )Diluted
            
            
            (0.0087
            )
            
            (0.0165
            )
            
            (0.0185
            )
            
            (0.0149
            )




**NOTE
      7-** **THE
      ACQUISITION OF INREACH**





The
      acquisition of InReach occurred on November 1, 2005, and has been accounted
      for
      under the purchase method of accounting. Accordingly, InReach is treated as
      a
      wholly owned subsidiary of the Company. The operating results of InReach are
      included in the operating results of the Company from and including November
      1,
      2005. The following unaudited pro forma information for the three and nine
      months ended December 31, 2004 and 2005 has been presented as if the acquisition
      occurred on April 1, 2004, and reflects the issuance of 4,357,798 shares of
      the
      Company’s common stock. The unaudited pro forma information does not necessarily
      represent the actual results that would have been achieved had the companies
      been combined at April 1, 2004, nor may they be indicative of future operating
      results.





**Three
                Months Ended**
              **December
                31,**
            
            **Nine
                Months Ended**
              **December
                31,****2004**
            
            **2005**
            
            **2004**
            
            **2005**Revenues
            
            $
            18,790,255
            
            $
            26,723,477
            
            $
            28,544,302
            
            $
            78,813,687Net
                loss
            
            
            (2,982,966
            )
            
            (6,913,378
            )
            
            (5,421,255
            )
            
            (5,703,671
            )Net
                loss per share:Basic
            
            
            (0.0093
            )
            
            (0.0164
            )
            
            (0.0198
            )
            
            (0.0145
            )Diluted
            
            
            (0.0093
            )
            
            (0.0164
            )
            
            (0.0198
            )
            
            (0.0145
            )





**NOTE
      8-** **NOTES
      PAYABLE**





**Secured
      Convertible Debenture**





On
      May 13, 2005, the Company issued a secured convertible debenture (the
“Debenture”) in the aggregate amount of $15.5 million to Cornell Capital.
      The Company used most of the proceeds to pay in full the remaining $13,000,000
      balance of a note payable that bore interest at the rate of 23% and was due
      on
      November 15, 2005; the retired note was the source of bridge financing for
      the
      Company’s acquisition of Davel. Interest expense related to the retired note in
      the current year was $381,225; this amount is included in interest expense
      for
      the nine-month period ended December 31, 2005.





The
      Debenture bears interest at an annual rate of 7.75% and is due and payable
      in
      the following installments over a three-year period: $500,000 due on November
      15, 2005; $1,500,000 due on May 15, 2006; $1,000,000 due on each of August
      15,
      2006, November 15, 2006 and February 15, 2007; $2,000,000 due on each of May
      15,
      2007, August 15, 2007, November 15, 2007 and February 15, 2008; and the
      remaining $2,500,000 due on May 15, 2008. The interest payable under the
      Debenture is due at the time of conversion or maturity; the holder of the
      Debenture may elect to receive the interest in cash or in the form of common
      stock of Mobilepro. The Company satisfied its obligations to make the $500,000
      payment due in November 2005 and to pay accrued interest in the amount of
      $600,625. Until the Debenture is repaid in full, Cornell Capital may elect
      to
      convert any portion of the outstanding principal amount of the Debenture, plus
      accrued interest, into shares of common stock of Mobilepro at a conversion
      price
      of $0.30 per share. The conversion price of the Debenture may be adjusted if
      the
      Company issues additional equity or instruments convertible into equity in
      connection with a transaction such as a stock dividend or a stock split pursuant
      to a formula included in the Debenture. For the three-month and nine-month
      periods ended December 31, 2005, the amount of interest expense related to
      the
      Debenture, based on the stated interest rate, was $297,897 and $758,651,
      respectively. Unpaid interest included in accrued liabilities at December 31,
      2005 was $158,026.




15





The
      Debenture is secured by the assets of the Company. The terms of the Debenture
      obligate the Company to comply with certain covenants including an agreement
      that, on March 1, 2006, if the Company’s aggregate indebtedness to Cornell
      Capital exceeds $4,000,000, the parties will enter into a new SEDA in an amount
      not less than the amount of the indebtedness.





In
      connection with the issuance of the Debenture, the Company also issued to
      Cornell Capital a five-year warrant to purchase 6,000,000 shares of its common
      stock at an exercise price of $0.50 per share (the “Warrant”). If the Company
      issues additional equity or instruments convertible into equity as described
      in
      the Warrant, or is deemed to have done so, at a lower per share price than
      the
      then-effective Warrant exercise price, the exercise price may be adjusted
      downward to such lower per share price. In that case, the number of shares
      issuable upon exercise of the Warrant would be increased so that the total
      exercise price would remain $3,000,000.





The
      face
      amount of the Debenture is reflected in the balance sheet at December 31, 2005,
      net of unamortized debt discount of $602,452. The net amount of the Debenture
      reflects the fair market value on the date of issuance after allocating $853,200
      of the proceeds to the Warrant. The discount on the Debenture is being amortized
      as a charge to interest expense over the three-year period until the Debenture
      becomes due in May 2008. Interest expense for the three-month and
      nine-month periods ended December 31, 2005 included debt discount amortization
      in the amounts of $99,323 and $250,748, respectively. The value of the Warrant
      will be eliminated upon its exercise or expiration.





**Notes
      Payable to Cornell Capital**





In
      August
      2004, the Company borrowed $8,500,000 from Cornell Capital. The amount was
      due
      in one-year with interest applied at an annual rate of 12%.





In
      September 2004, the Company borrowed $3,700,000 from Cornell Capital. The amount
      was due in one year with interest applied at an annual rate of 12%.





On
      June
      24, 2005, the Company borrowed $6,300,000 from Cornell Capital. The amount
      was
      due in one year with interest applied at an annual rate of 8%. Proceeds from
      this borrowing were used to fund the $1,500,000 cash consideration portion
      of
      the AFN purchase price and the $3,825,000 cash investment in Kite.





On
      October 21, 2005, the Company borrowed $2,500,000 from Cornell Capital under
      a
      note payable in 150 days, with interest applied at an annual rate of 8%.





During
      the nine month periods ended December 31, 2004 and 2005, the Company made total
      note reduction payments of $13,000,000 and $13,700,000,
      respectively.





Interest
      expense, based on the stated rates of interest, on the notes payable to Cornell
      Capital was $470,639 and $149,266, respectively, for the three months ended
      December 31, 2004 and 2005, and $470,639 and $581,627, respectively, for the
      nine months ended December 31, 2004 and 2005. Accrued and unpaid interest at
      December 31, 2005 related to these notes was $269,183.




**Notes
      Payable Related to Acquisitions**





As
      a
      portion of the consideration paid to owners of acquired companies, the Company
      may issue promissory notes. These notes typically are payable over terms ranging
      from 4 months to two years and bear interest at annual rates ranging from 3%
      to
      7%. At March 31, 2005 and December 31, 2005, the aggregate balances due under
      the acquisition notes payable were $1,723,201 and $42,909,
      respectively.




16





In
      June
      2005, the Company retired notes payable to the former owners of Clover with
      remaining principal balances that totaled $570,372, by converting $535,188
      into
      2,200,000 shares of common stock of Mobilepro. The difference of $35,184 between
      the common stock payment and notes payable balances was credited to
      goodwill.





In
      September 2005, the Company settled a dispute with the former owners of Ticon
      with the cash payment of $195,000. The $55,000 difference between the payment
      and the $250,000 note payable balance was credited to goodwill.





In
      September 2005, the Company retired notes payable to the former owners of
      Internet Express, Inc., an Internet service provider acquired in March 2004,
      with remaining principal balances that totaled $209,533, by making a cash
      payment in the amount of $80,000. The difference of $129,533 between the payment
      and notes payable balances was credited to goodwill.





In
      September 2005, a majority of the former owners of The River, holding notes
      convertible into common stock of Mobilepro at a price of $0.20 per share with
      a
      total principal balance of $369,346, notified the Company of their intent to
      convert the notes. In October 2005, the Company completed the conversion with
      the issuance of 1,846,733 shares of common stock of Mobilepro to the note
      holders.





**Other
      Notes Payable and Long-Term Liabilities**





The
      Company has other notes and long-term liabilities payable to banks and various
      other creditors with aggregate balances due at March 31, 2005 and December
      31,
      2005 of $209,357 and $975,331, respectively.





**Debt
      Maturities**





A
      summary
      of the balances of notes payable and other debts at December 31, 2005 was as
      follows (unaudited):





Convertible
                debenture payable to Cornell Capital
            
            $
            15,000,000Notes
                payable to Cornell Capital
            
            
            6,600,000Notes
                payable related to acquisitions
            
            
            42,909Other
                notes payable and long-term obligations
            
            
            975,33122,618,240Less:
                Unamortized debt discount on convertible debenture
            
            
            (602,452
            )Less:
                Amounts due within one year
            
            
            (10,317,581
            )Long-term
                portion of debt
            
            $
            11,698,207





At
      December 31, 2005, a summary of the future scheduled payments of the long-term
      portion of debt was as follows (unaudited):





The
                twelve-month period ending --December
                31, 2007
            
            $
            7,510,888December
                31, 2008
            
            
            4,789,77112,300,659Less
                - Unamortized debt discount on convertible debenture
            
            
            (602,452
            )Long-term
                portion of debt
            
            $
            11,698,207





**NOTE
      9-** **STOCKHOLDERS’
      EQUITY**





**Standby
      Equity Distribution Agreement (the “SEDA”)**





On
      May
      13, 2004, the Company entered into the SEDA with Cornell Capital that provides,
      generally, that Cornell Capital will purchase up to $100 million of the common
      stock of Mobilepro over a two-year period, with the time and amount of such
      purchases, if any, at the Company’s discretion. Cornell Capital will purchase
      the shares at a 2% discount to the prevailing market price of the common stock.
      There are certain conditions applicable to the Company’s ability to draw down on
      the SEDA including the continuing effectiveness of a registration statement
      covering the resale of all shares of common stock that may be issued to Cornell
      Capital under the SEDA, the Company’s payment of a fee to Cornell Capital and
      other advisors at the time of each draw (5% of the amount of each draw), and
      the
      Company’s adherence with certain other covenants.




17





In
      the
      event that Cornell Capital would hold more than 9.9% of the then outstanding
      common stock of the Company, the Company would be unable to draw down on the
      SEDA. At December 31, 2005, Cornell held 4,995,000 unregistered shares of the
      Company’s common stock representing an ownership percentage of approximately
      1.12%.





In
      the
      nine-month periods ended December 31, 2004 and 2005, draws under the SEDA
      totaled $9,213,907 and $17,409,222, respectively. The Company has advanced
      120,000,000 shares of its common stock to the escrow agent in accordance with
      the terms of the SEDA since the inception of the SEDA. In the nine-month periods
      ended December 31, 2004 and 2005, 52,253,547 and 77,803,600 shares of common
      stock, respectively, were issued to Cornell Capital by the escrow
      agent.





The
      SEDA
      replaced a similar equity line of credit arrangement with Cornell Capital that
      was negotiated in May 2002 and that was intended to provide up to $10 million
      in
      equity financing to the Company. In the nine months ended December 31, 2004,
      the
      Company drew $3,800,000 from Cornell Capital in accordance with this arrangement
      and advanced 10,000,000 shares of its common stock to the escrow agent. During
      the nine months ended December 31, 2004, 18,298,438 shares of common stock
      were
      issued to Cornell Capital under this arrangement.





The
      discounts provided to Cornell Capital upon the sale of  shares of
      common stock, amounting to $90,021 and $84,889 in the three-month periods ended
      December 31, 2004 and 2005, respectively, and $375,150 and $291,956 in the
      nine-month periods ended December 31, 2004 and 2005, respectively, were included
      in interest expense.





**Common
      Stock Transactions in the Fiscal Year Ended March 31, 2005**





In
      June
      2004, the Company issued 8,000,000 shares of common stock in payment of the
      financing fees associated with the SEDA that were valued at $1,760,000. This
      cost was reflected as a deferred financing fee in the consolidated balance
      sheet.





In
      August
      2004, the Company issued 878,816 shares of common stock to the former owners
      of
      ShreveNet as partial consideration for the acquisition of their company. The
      issued shares were valued at $190,000 based on the average 20-day closing price
      ($0.2162 per share) prior to June 3, 2004.





In
      September 2004, the Company issued 5,000,000 shares of common stock to the
      former owners of Affinity as partial consideration for the acquisition of their
      company. The issued shares were valued at $1,000,000 based upon the date of
      agreement and the terms of the acquisition. The distribution of such value
      amount included an allocation of $995,000 to the terminated put
      agreement.





In
      November 2004, the Company issued 39,999,999 shares of common stock in
      connection with the acquisition of CloseCall that was completed in October
      2004.
      The 39,999,999 shares were recorded at a fair value of $10,000,000.





In
      March
      2005, the Company issued 1,500,000 shares of common stock in connection with
      the
      acquisition of Web One that was completed in August 2004. The 1,500,000 shares
      were recorded at a fair value of $300,000.





During
      the year ended March 31, 2005, the Company issued 10,000,000 shares of common
      stock to the escrow agent for use under the $10 million equity line of credit.





During
      the year ended March 31, 2005, the Company issued 65,000,000 shares of common
      stock to the escrow agent for use under the SEDA.




During
      the fiscal year ended March 31, 2005, the Company issued 1) 2,946,037 shares
      of
      its common stock in connection with the exercise of stock options and warrants
      for aggregate cash proceeds of approximately $100,000, 2) 2,000,000 shares
      of
      its common stock under a settlement agreement with a former executive valued
      at
      $90,000, and 3) 100,000 shares of common stock to an agency as compensation
      for
      personnel recruiting services.





**Common
      Stock Transactions in the Nine-Month Period Ended December 31,
      2005**





The
      Company issued 933,334 shares of common stock in connection with the acquisition
      of WazAlliance that was completed in May 2005; the shares were recorded at
      a
      fair value of $135,333. The Company also issued 100,000 shares of common stock
      to an agency as compensation for broker fees relating to this acquisition that
      were valued at $15,000.




18





In
      June
      2005, the Company issued 2,200,000 shares of common stock in full satisfaction
      of the promissory notes, and related accrued interest, totaling $535,188 that
      were issued in connection with the July 2004 acquisition of Clover.





In
      July
      and August 2005, the Company issued a total of 10,000,000 shares of its common
      stock owed to the former owner of AFN, completing the acquisition. These shares
      were valued at $0.15 per share, based on the market value of the Company’s
      common stock at the time the basic terms of the acquisition were
      negotiated.





In
      September 2005, the Company issued 1,505,360 shares of its common stock owed
      to
      the former owners of Evergreen, completing the acquisition. These shares were
      valued at $0.1535 per share, based on the market value of the Company’s common
      stock at the time the basic terms of the acquisition were
      negotiated.





In
      October 2005, the Company completed the conversion of debentures and other
      amounts owed to the former owners of The River with the issuance of 1,846,733
      shares of common stock to the note holders.





In
      November 2005, the Company issued 4,357,798 shares of its common stock in
      connection with its acquisition of InReach.





In
      December 2005, the Company issued 300,000 shares of its common stock, valued
      at
      $58,500, in connection with receipt of investment banking services.





During
      the nine months ended December 31, 2005, the Company issued 55,000,000 shares
      of
      common stock to the escrow agent for use under the SEDA.





**Stock
      Options and Warrants**





The
      stockholders of the Company have approved the issuance of 30,000,000 shares
      of
      common stock in connection with stock options granted pursuant to the 2001
      Equity Performance Plan (the “2001 Plan”). In addition, the Company has issued
      options and warrants to purchase common stock to key personnel pursuant to
      specific authorization of the board of directors outside the scope of the 2001
      Plan. The following tables summarize the stock option activity and the warrant
      activity for the nine months ended December 31, 2005 (unaudited):





**Number
                of**
            
            **Weighted-Average****Stock
                Options --**
            
            **Options**
            
            **Exercise
                Price**Outstanding
                - March 31, 2005
            
            
            1,725,000
            
            $
            0.192Granted
            
            
            8,696,000
            
            $
            0.231Exercised
            
            
            -
            
            $
            -Cancelled
            
            
            -
            
            $
            -Outstanding
                - December 31, 2005
            
            
            10,421,000
            
            $
            0.225Exercisable
                - December 31, 2005
            
            
            1,085,416
            
            $
            0.176










**Number
                of**
            
            **Weighted-Average****Stock
                Warrants --**
            
            **Warrants**
            
            **Exercise
                Price**Outstanding
                - March 31, 2005
            
            
            61,232,500
            
            $
            0.117Granted
            
            
            19,600,000
            
            $
            0.290Exercised
            
            
            -
            
            $
            -Cancelled
            
            
            1,000,000
            
            $
            0.018Outstanding
                - December 31, 2005
            
            
            79,832,500
            
            $
            0.1609Exercisable
                - December 31, 2005
            
            
            68,284,353
            
            $
            0.1584





19




**NOTE
      10-** **LIABILITY
      FOR COMMON STOCK TO BE ISSUED**





As
      the
      purchase prices of certain acquisitions are subject to post-closing adjustments,
      some of the common stock of Mobilepro due to the former owners of such acquired
      companies may not yet be issued. The $53,167 liability for common stock to
      be
      issued at December 31, 2005, reflecting an obligation to issue 366,666 shares,
      relates to the acquisition of WazAlliance.





**NOTE
      11-** **BASIC
      AND DILUTED INCOME (LOSS) PER SHARE**





Basic
      income (loss) per share includes no dilution and is computed by dividing net
      income (loss) available to common stockholders by the weighted-average number
      of
      common shares outstanding for the period. Diluted income (loss) per share
      includes the potential dilution that could occur if securities or other
      contracts to issue common stock were exercised or converted into common stock.
      The effects of the assumed exercise of outstanding stock options and warrants
      and the assumed conversion of the Debenture and other convertible notes payable
      for the three and nine months ended December 31, 2005 and 2004 were antidilutive
      as the Company incurred net losses in these periods.





**NOTE
      12-** **EXCHANGE
      OF PAYPHONES**





In
      September 2005, Davel sold the majority of the payphones and certain related
      assets and liabilities of its Bronx, New York field service office (2,204
      payphones) for a net selling price of $962,246. Davel recognized a $91,373
      gain
      on the sale of the net assets and incurred $144,073 of exit and disposal
      activity costs associated with the closing of its Bronx field service office.
      The net loss before income taxes of $52,700 is included in other general and
      administrative expenses in the accompanying condensed consolidated statement
      of
      operations for the nine months ended December 31, 2005. Davel also entered
      into
      agreements with the purchaser of its payphones to acquire certain of their
      payphones in Florida and to maintain, to service and to collect Davel’s
      remaining payphones in the New York City area. On September 30, 2005, Davel
      acquired 2,240 payphones located in Florida from the purchaser for a net
      purchase price of $784,000.





**NOTE
      13-** **COMMITMENTS**




In
      June
      2005, Mr. Jay O. Wright, the Company’s President and Chief Executive Officer,
      extended his employment agreement with the Company through 2007, with the
      extension stipulating annual salary amounts during the term, restructuring
      the
      basis for bonus awards, and providing severance payment terms. The Company
      also
      has an employment contract with each senior executive, including the chief
      financial officer, the general counsel, and the general managers of the wirelss
      network segment, the Internet service segment, CloseCall and Davel.




In
      August
      2004, the Company announced its intention to issue a property dividend of
      3,073,113 shares of common stock of Solution Technology International, Inc.
      (“STI”). The Company has a 5% ownership interest in STI. The Company
      stockholders are expected to receive one share of registered (i.e.
“free-trading”) STI stock for approximately every 93 shares of the Company stock
      that they own, based on the existing shares outstanding and certain warrants.
      The Company’s board of directors set September 15, 2004 as the record date for
      the stock dividend. In March 2005, STI withdrew its registration statement
      from
      the United States Securities and Exchange Commission. STI is contemplating
      other
      options to become a publicly traded company. The Company intends to pursue
      issuance of the property dividend upon STI obtaining its public listing. At
      this
      time, no date has been established for such listing, and there is no assurance
      that the STI dividend will ever occur.




**NOTE
      14-** **LITIGATION**





At
      the
      time that the Company acquired 95.2 % of the stock of Davel, Davel was a
      defendant in a civil patent infringement lawsuit captioned Gammino
      v. Cellco Partnership d/b/a Verizon Wireless, et al. ,
      filed
      in the United States District Court for the Eastern District of Pennsylvania.
      The case is in the discovery phase of the litigation. The plaintiff claims
      that
      Davel and other defendants allegedly infringed its patent involving the
      prevention of fraudulent long-distance telephone calls and is seeking damages
      in
      connection with the alleged infringement. Davel continues to review and
      investigate the allegations set forth in the complaint, continues to assess
      the
      validity of the Gammino Patents and is in the process of determining whether
      the
      technology purchased by Davel from third parties infringes upon the Gammino
      Patents. According to the terms of the Davel acquisition agreement, the former
      secured lenders, subject to certain limitations, have agreed to reimburse the
      Company for the litigation costs and any losses resulting from the Gammino
      lawsuit from future regulatory receipts that were assigned previously to them
      by
      Davel. Any such regulatory receipts are deposited into a third-party escrow
      account and are used to reimburse the Company for costs incurred. The secured
      lenders are not required to fund the escrow account or otherwise reimburse
      the
      Company for amounts, if any, in excess of actual regulatory receipts collected.
      Any amount remaining in the escrow account at the conclusion of the litigation
      is to be returned to the former secured lenders. The Company has received
      significant regulatory receipts that are being held in escrow. The funds can
      be
      used to reimburse the Company for costs, including legal fees, incurred in
      the
      defense or settlement of this litigation. The Company believes that there are
      sufficient funds in the escrow account to pay both its legal defense costs
      and
      any potential judgment that the Company believes could reasonably be expected.
      This $7.5 million claim represents exposure to the Company in the event that
      escrowed regulatory receipts are insufficient to cover any potential judgment
      against the Company should it be found liable for the full monetary amount
      of
      the claim.




20





**NOTE
      15-** **SEGMENT
      INFORMATION**





The
      Company’s reportable operating segments include voice services, Internet
      services and wireless networks. Results of operations and certain asset data
      relating to the Company’s business segments for the three-month periods ended
      December 31, 2004 and 2005 were as follows (unaudited):





**The
                Three Month Period**
            
            **Voice**
            
            **Internet**
            
            **Wireless****Ended
                December 31, 2004**
            
            **Services**
            
            **Services**
            
            **Networks**
            
            **Corporate**
            
            **Total**Revenues
            
            $
            12,391,227
            
            $
            4,735,906
            
            $
            -
            
            $
            -
            
            $
            17,127,133Cost
                of revenues
            
            
            (6,327,807
            )
            
            (2,305,471
            )
            
            -
            
            
            -
            
            
            (8,633,278
            )Other
                operating expenses
            
            
            (5,154,612
            )
            
            (1,942,579
            )
            
            (34,555
            )
            
            (2,618,386
            )
            
            (9,750,132
            )Depreciation
                and amortization
            
            
            (410,339
            )
            
            (158,731
            )
            
            (3,647
            )
            
            (220,000
            )
            
            (792,717
            )Interest
                and other, net
            
            
            83,312
            
            
            (41,871
            )
            
            (70,216
            )
            
            (877,121
            )
            
            (905,896
            )Net
                income (loss)
            
            $
            581,781
            
            $
            287,254
            
            $
            (108,418
            )
            $
            (3,715,507
            )
            $
            (2,954,890
            )Total
                assets
            
            $
            35,024,547
            
            $
            18,245,134
            
            $
            15,267
            
            $
            20,583,028
            
            $
            73,867,976Fixed
                assets, net of accumulated depreciation
            
            $
            11,599,256
            
            $
            1,250,436
            
            $
            10,940
            
            $
            -
            
            $
            12,860,632Goodwill,
                net of impairment
            
            $
            18,634,703
            
            $
            14,070,629
            
            $
            -
            
            $
            -
            
            $
            32,705,332








**The
                Three Month Period**
            
            **Voice**
            
            **Internet**
            
            **Wireless****Ended
                December 31, 2005**
            
            **Services**
            
            **Services**
            
            **Networks**
            
            **Corporate**
            
            **Total**Revenues
            
            $
            18,505,132
            
            $
            4,534,617
            
            $
            3,204,857
            
            $
            -
            
            $
            26,244,606Cost
                of revenues
            
            
            (9.862,109
            )
            
            (2,250,087
            )
            
            (1,678,000
            )
            
            -
            
            
            (13,790,196
            )Other
                operating expenses
            
            
            (7,621,737
            )
            
            (2,164,515
            )
            
            (1,877,055
            )
            
            (720,218
            )
            
            (12,383,525
            )Depreciation
                and amortization
            
            
            (999,883
            )
            
            (101,227
            )
            
            (192,883
            )
            
            -
            
            
            (1,293,993
            )Goodwill
                impairment
            
            
            (1,818,910
            )
            
            (1,945,519
            )
            
            -
            
            
            -
            
            
            (3,764,429
            )Restructuring
                costs
            
            
            -
            
            
            (1,335,612
            )
            
            -
            
            
            -
            
            
            (1,335,612
            )Interest,
                net
            
            
            18,809
            
            
            (2,271
            )
            
            21,093
            
            
            (620,416
            )
            
            (582,785
            )Minority
                interests
            
            
            -
            
            
            -
            
            
            (49,798
            )
            
            -
            
            
            (49,798
            )Net
                loss
            
            $
            (1,778,698
            )
            $
            (3,264,614
            )
            $
            (571,786
            )
            $
            (1,340,634
            )
            $
            (6,955,732
            )Total
                assets
            
            $
            51,450,926
            
            $
            19,681,335
            
            $
            10,923,229
            
            $
            1,331,397
            
            $
            83,386,887Fixed
                assets, net of accumulated depreciation
            
            $
            11,431,676
            
            $
            1,701,120
            
            $
            1,153,358
            
            $
            -
            
            $
            14,286,154Goodwill,
                net of impairment
            
            $
            20,568,280
            
            $
            16,248,330
            
            $
            494,219
            
            $
            -
            
            $
            37,310,829




21





Results
      of operations relating to the Company’s business segments for the nine-month
      periods ended December 31, 2004 and 2005 were as follows
      (unaudited):





**The
                Nine Month Period**
            
            **Voice**
            
            **Internet**
            
            **Wireless****Ended
                December 31, 2004**
            
            **Services**
            
            **Services**
            
            **Networks**
            
            **Corporate**
            
            **Total**Revenues
            
            $
            13,346,798
            
            $
            9,303,568
            
            $
            -
            
            $
            615,000
            
            $
            23,265,366Cost
                of revenues
            
            
            (6,794,042
            )
            
            (4,364,548
            )
            
            -
            
            
            -
            
            
            (11,158,590
            )Other
                operating expenses
            
            
            (5,520,495
            )
            
            (3,730,718
            )
            
            (813,266
            )
            
            (4,979,895
            )
            
            (15,044,374
            )Depreciation
                and amortization
            
            
            (438,259
            )
            
            (327,679
            )
            
            (10,941
            )
            
            (513,333
            )
            
            (1,290,212
            )Interest
                and other, net
            
            
            83,312
            
            
            (83,126
            )
            
            (70,216
            )
            
            (1,162,250
            )
            
            (1,232,280
            )Net
                income (loss)
            
            $
            677,314
            
            $
            797,497
            
            $
            (894,423
            )
            $
            (6,040,478
            )
            $
            (5,460,090
            )








**The
                Nine Month Period**
            
            **Voice**
            
            **Internet**
            
            **Wireless****Ended
                December 31, 2005**
            
            **Services**
            
            **Services**
            
            **Networks**
            
            **Corporate**
            
            **Total**Revenues
            
            $
            56,301,164
            
            $
            12,395,635
            
            $
            6,600,302
            
            $
            -
            
            $
            75,297,101Cost
                of revenues
            
            
            (27,113,902
            )
            
            (5,988,818
            )
            
            (3,363,733
            )
            
            -
            
            
            (36,466,453
            )Other
                operating expenses
            
            
            (22,853,007
            )
            
            (5,600,769
            )
            
            (4,031,131
            )
            
            (1,688,849
            )
            
            (34,173,756
            )Depreciation
                and amortization
            
            
            (2,511,742
            )
            
            (268,154
            )
            
            (376,500
            )
            
            (7,293
            )
            
            (3,163,689
            )Goodwill
                impairment
            
            
            (1,818,910
            )
            
            (1,945,519
            )
            
            -
            
            
            -
            
            
            (3,764,429
            )Restructuring
                costs
            
            
            -
            
            
            (1,335,612
            )
            
            -
            
            
            -
            
            
            (1,335,612
            )Interest,
                net
            
            
            10,769
            
            
            (15,886
            )
            
            30,294
            
            
            (2,238,472
            )
            
            (2,213,295
            )Minority
                interests
            
            
            35,645
            
            
            -
            
            
            (228,152
            )
            
            -
            
            
            (192,507
            )Net
                income (loss)
            
            $
            2,050,017
            
            $
            (2,759,123
            )
            $
            (1,368,920
            )
            $
            (3,934,614
            )
            $
            (6,012,640
            )




**NOTE
      13-** **SUBSEQUENT
      EVENTS**





On
      January 31, 2006, the Company acquired the 49% minority interest in Kite in
      an
      all stock transaction for 90,000,000 shares of the Company’s common stock
      (subject to certain post-closing adjustments). Effective at the closing, Mr.
      Jerry Sullivan, the Chief Executive Officer of Kite, was named President and
      Chief Operating Officer of the Company and Chief Executive Officer of the
      Company’s wireless networks business.





Subsequent
      to December 31, 2005, the Company drew $1,200,000 under the SEDA. Cornell
      Capital received 5,489,985 shares of the Company’s common stock in connection
      with the draws.





On
      January 18, 2006, the Company issued 15,000,000 shares of its common stock
      to
      the escrow agent under the SEDA.




22




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




The
      following is a discussion and analysis of our results of operations for the
      three-month and nine-month periods ended December 31, 2004 and 2005, our
      financial condition at December 31, 2005 and factors that we believe could
      affect our future financial condition and results of operations. Historical
      results may not be indicative of future performance.  This
      discussion and analysis should be read in conjunction with our consolidated
      financial statements and the notes thereto included elsewhere in this Form
      10-QSB. Our consolidated financial statements are prepared in accordance with
      Generally Accepted Accounting Principles in the United States (“GAAP”). All
      references to dollar amounts in this section are in United States
      dollars.





**Forward
      Looking Statements**





This
      Quarterly Report on Form 10-QSB contains forward-looking statements that involve
      risks and uncertainties. The statements contained in this document that are
      not
      purely historical are forward-looking statements within the meaning of Section
      27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
      Act
      of 1934, including without limitation statements regarding our expectations,
      beliefs, intentions or strategies regarding our business, and the level of
      our
      expenditures and savings for various expense items and our liquidity in future
      periods. We may identify these statements by the use of words such as
“anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,”
“may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “will,”
“would” and other similar expressions. All forward-looking statements included
      in this document are based on information available to us on the date hereof,
      and we assume no obligation to update any such forward-looking statements,
      except as may otherwise be required by law. Our actual results could differ
      materially from those anticipated in these forward-looking
      statements.





**Overview**




We
      are a
      broadband wireless, telecommunications, and integrated data communication
      services company. We deliver a comprehensive suite of voice and data
      communications services, including local exchange, long distance, enhanced
      data,
      Internet, wireless and broadband services to our end-user customers. We are
      focused on growing our current customer bases, deploying wireless networks,
      and
      acquiring and growing profitable telecommunications and broadband
      companies.





We
      market
      and sell our integrated communications services through 11 branch offices in
      eight states and we service over 155,000 billed accounts representing
      over 278,000 equivalent subscriber lines including
      approximately 145,000 local and long-distance telephone lines, 105,000
      dial-up lines, 5,000 broadband lines, and over 23,000 wireless
      customers. We own and operate approximately 36,000 payphones predominantly
      located in 42 states and the District of Columbia.  Our
      revenues are primarily generated through three of our four business
      reporting segments that are described as follows:





**Wireless
                Networks**
            Our
                broadband wireless network deployment efforts are being conducted
                by our
                wholly-owned subsidiary, NeoReach, Inc. (“NeoReach”), and its subsidiary,
                NeoReach Wireless, Inc. (“NeoReach Wireless”). This segment also includes
                the operations of Kite Broadband, LLC, a wireless broadband Internet
                service provider located in Ridgeland, Mississippi.**Voice Services**
            Our
                voice services segment is led by CloseCall America, Inc. (“CloseCall”), a
                Competitive Local Exchange Carrier (“CLEC”, which is a term applied under
                the Telecommunications Act of 1996 to new local telephone companies
                formed
                to compete with the incumbent local telephone companies), based in
                Stevensville, Maryland; American Fiber Network, Inc. (“AFN”), a CLEC based
                in Kansas City, Kansas; and Davel Communications, Inc. (“Davel”), an
                independent payphone provider based in Cleveland, Ohio. CloseCall
                offers
                our customers a full array of telecommunications products and services
                including local, long-distance, 1.800CloseCall anytime/anywhere calling,
                digital wireless, high-speed telephone (voice over IP), and dial-up
                and
                DSL Internet services. AFN is licensed to provide local telephone,
                long
                distance and/or Internet services throughout the United States. Davel
                is
                one of the largest independent payphone operators in the United States,
                providing approximately 57% of the revenues of the voice services
                segment
                in the nine months ended December 31, 2005.**Internet Services**
            Our
                internet services segment includes the operations of DFW Internet
                Services, Inc. (“DFW”, doing business as Nationwide Internet), an Internet
                services provider (“ISP”) based in Irving, Texas, its acquired ISP
                subsidiaries, and InReach Internet, L.L.C., a full service ISP located
                in
                Stockton, California, that we acquired on November 1, 2005. Our Internet
                services segment provides dial-up and broadband Internet access,
                web-hosting services and related Internet services to business and
                residential customers in over 40 states. Over 80% of our ISP customers
                subscribe to our dial-up service.**Corporate**
            Our
                corporate reporting segment serves as the holding company of the
                operating
                subsidiaries that are divided among the other three business reporting
                segments, provides senior executive and financial management, and
                performs
                corporate-level accounting, financial reporting and legal functions.
                Occasionally, its employees may provide services to customers resulting
                in
                the recognition of consulting service
                revenues.





23




Revenues
      for the reportable business segments for the three and nine months ended
      December 31, 2004 and 2005 were as follows:





**Three
                Months Ended**
              **December
                31,**
            
            **Nine
                Months Ended**
              **December
                31,****Business
                Segment**
            
            **2004**
            
            **2005**
            
            **2004**
            
            **2005****Voice**
            
            $
            12,391,227
            
            $
            18,505,132
            
            $
            13,346,798
            
            $
            56,301,164**Internet
                Services**
            
            
            4,735,906
            
            
            4,534,617
            
            
            9,303,568
            
            
            12,395,635**Wireless
                Networks**
            
            
            -
            
            
            3,204,857
            
            
            -
            
            
            6,600,302**Corporate**
            
            
            -
            
            
            -
            
            
            615,000
            
            
            -**Total
                Revenues**
            
            $
            17,127,133
            
            $
            26,244,606
            
            $
            23,265,366
            
            $
            75,297,101





The
      revenues for each business segment, expressed as a percentage of total revenues
      for the respective period, were as follows:




**Three
                Months Ended**
              **December
                31,**
            
            **Nine
                Months Ended**
              **December
                31,****Business
                Segment**
            
            **2004**
            
            **2005**
            
            **2004**
            
            **2005****Voice**
            
            
            72.3
            %
            
            70.5
            %
            
            57.4
            %
            
            74.8
            %**Internet
                Services**
            
            
            27.7
            
            
            17.3
            
            
            40.0
            
            
            16.5**Wireless
                Networks**
            
            
            -
            
            
            12.2
            
            
            -
            
            
            8.7**Corporate**
            
            
            -
            
            
            
            
            
            2.6**Total
                Revenues**
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %





The
      revenues of the voice services business segment are provided primarily by the
      operations of Davel and CloseCall. Davel’s revenues represented approximately
      57% and 43% of voice services revenues and consolidated revenues, respectively,
      for the nine months ended December 31, 2005. CloseCall’s revenues represented
      approximately 36% and 27% of voice services revenues and consolidated revenues,
      respectively, for the nine months ended December 31, 2005.





The
      costs
      of the network services that we provide to our customers are comprised primarily
      of telecommunications charges, including data transmission and database access,
      leased digital capacity charges, circuit installation charges and activation
      charges. The costs of database access, circuits, installation charges and
      activation charges are based on fixed fee and/or measured services contracts
      with local exchange carriers, inter-exchange carriers and data services
      providers. The cost of providing services to our customers also includes
      salaries, equipment maintenance and other costs related to the ongoing operation
      of our network facilities. Depreciation expense on our network equipment is
      excluded from our cost of network services and is included in depreciation
      and
      amortization of property and equipment and amortization of intangible assets
      in
      our consolidated statements of operations. Our other operating expenses include
      costs related to sales, marketing, administrative and management personnel;
      outside legal, accounting and consulting services; advertising and occupancy
      expenses; and other costs of being a publicly traded company, including legal
      and audit fees, insurance premiums and board of director fees.





Substantially,
      our business has been built through acquisitions. We expect that future revenue
      growth will occur largely through the consummation of additional acquisitions,
      the growth of our CLEC businesses, and the deployment, ownership and management
      of broadband wireless networks that we expect to provide subscription and
      advertising revenues.





The
      adoption of initiatives by cities to create areas within city limits where
      residents, visitors, students and businesses can obtain wireless access to
      the
      Internet has created an emerging and growing market. We are concentrating
      efforts on the deployment, management and ownership of such municipally
      sponsored wireless access zones. In the current fiscal year, we have been
      selected by six municipalities for such projects. The deployment of our first
      network is scheduled for completion in February 2006. To date, no material
      revenues have been provided from this business.




24





Prior
      to
      January 2004, we were a development stage company. Although we were incorporated
      only five years ago, we have undergone a number of changes in our business
      strategy and organization. In June 2001, we focused our business on the
      integration and marketing of complete mobile information solutions to meet
      the
      needs of mobile professionals. In April 2002, we acquired NeoReach, Inc. and
      shifted our focus toward solutions supporting the third generation wireless
      market that provides broadband to allow faster wireless transmission of data,
      such as the viewing of streaming video in real time. We shifted our business
      strategy again in December 2003 with a new management team, expanding
      significantly the scope of our business activity to include Internet access
      services, local and long distance telephone services and the ownership and
      operation of payphones. In 2005, we began to invest in the business of deploying
      broadband wireless networks and providing wireless network access services
      in
      wireless access zones to be primarily located in municipality-sponsored areas.
      As indicated above, we entered these businesses primarily through acquisitions.
      We have completed nineteen (19) acquisitions within the last 24 months.
      Accordingly, our experience in operating our current businesses is limited.
      The
      Company has lost money historically. For the nine month period ended December,
      31, 2005, we incurred a net loss of $6,012,640. In the years ended March 31,
      2005 and 2004, we incurred net losses of $5,359,722 and $2,157,844,
      respectively. At December 31, 2005, we had an accumulated deficit of
      $27,209,190.





Our
      strategy is largely unproven and the revenue and income potential from our
      strategy is uncertain. We may encounter risks and difficulties frequently
      encountered by companies that have grown rapidly through acquisition, including
      the risks described elsewhere in this report. Our business strategy may not
      be
      successful and we may not be able to successfully address these
      risks.





Mobilepro
      Corp (“Mobilepro”) was incorporated under the laws of Delaware in July 2000 and,
      at that time, was focused on the integration and marketing of complete mobile
      information solutions that satisfied the needs of mobile professionals. In
      June
      2001, Mobilepro merged with and into CraftClick.com, Inc. (“CraftClick”), with
      CraftClick remaining as the surviving corporation. The name of the surviving
      corporation was subsequently changed to Mobilepro Corp. on July 9, 2001.
      CraftClick had begun to cease its business operations in October 2000, and
      ultimately disposed of substantially all of its assets in February
      2001.





On
      March
      21, 2002, Mobilepro entered into an Agreement and Plan of Merger with NeoReach,
      a private Delaware company, pursuant to which a newly formed, wholly owned
      subsidiary of Mobilepro merged into NeoReach in a tax-free transaction. The
      merger was consummated on April 23, 2002. As a result of the merger, NeoReach
      is
      now a wholly owned subsidiary of Mobilepro.





DFW
      is
      the principal operating subsidiary within our Internet services division. On
      January 20, 2004, we acquired DFW.   Since then, we have acquired nine
      additional Internet service businesses that operate as subsidiaries of DFW
      and,
      on November 1, 2005, we acquired the business of InReach Internet L.L.C.
      (“InReach”).





On
      October 15, 2004, we closed our acquisition of CloseCall, which further
      established our commitment to the provision of voice services. One month later,
      we closed our acquisition of Davel. On June 30, 2005, we acquired
      AFN.





Our
      principal executive offices are located at 6701 Democracy Boulevard, Suite
      202,
      Bethesda, MD 20817 and our telephone number at that address is (301) 315-9040.
      We maintain a corporate web site at www.mobileprocorp.com. We make available
      free of charge through our web site our annual report on Form 10-KSB, quarterly
      reports on Form 10-QSB, current reports on Form 8-K, and all amendments to
      those
      reports, as soon as reasonably practicable after we electronically file or
      furnish such material with or to the SEC. The contents of our web site are
      not a
      part of this report. The SEC also maintains a web site at www.sec.gov that
      contains reports, proxy statements and other information regarding
      Mobilepro.





**Geographic
      Markets**





Through
      our various businesses, we provide service to customers located throughout
      the
      United States. However, certain portions of our consolidated business are
      concentrated in certain geographic markets. For example, the business of
      CloseCall is concentrated in the mid-Atlantic region of the country. Although
      Davel has payphones located across the United States, 41% of the payphones
      are
      located in the southeast states of Florida, Georgia, South Carolina, North
      Carolina and Virginia; 22% of the payphones are located in Midwest and eastern
      sections of the country, with usage thereby affected by climate; and 12% of
      the
      payphones are located in the southwest states of Texas, Arizona and New Mexico.
      The Internet services business provides service to customers that are primarily
      located in the states of Texas, Arizona, Louisiana, Kansas, Missouri, Wisconsin
      and Ohio.





**Recent
      Events**




Significant
      accomplishments in the nine-month period ended December 31, 2005 included,
      among
      other achievements, expanding our voice services and wireless networks
      businesses through the consummation of four acquisitions, deploying a broadband
      wireless network in Tempe, Arizona, obtaining a controlling interest in a
      company that will supply broadband wireless services to customers of Sprint
      Communications Company (“Sprint”), being selected by the city of Sacramento,
      California, for the deployment, ownership and management of its planned
      broadband wireless network, and the refinancing of a $13 million acquisition
      bridge loan.




25





***Wireless
      Networks***





In
      April
      2005, we were selected by the city of Tempe, Arizona, to deploy, own and manage
      a city-wide broadband wireless access network covering 40 square miles and
      serving a population of approximately 160,000 people. The network is expected
      to
      reach approximately 65,000 households, 1,100 businesses, 50,000 students and
      the
      annual visitors to Tempe. The completed network will enable a range of free
      and
      fee-based services and provide secure high-speed access to data, voice and
      video
      throughout the coverage area. The network will also provide municipal services
      to the city’s police, fire, emergency, and administrative personnel, and the
      staff, faculty and students of Arizona State University. Subscription services
      will be offered on a monthly, daily and hourly basis and will allow access
      to
      multiple Internet service providers. We believe that the Tempe wireless
      networking project is one of the first of its kind by providing a cost-effective
      alternative to residential dial-up service and local area hot-spot wireless
      access and serving as an alternative and/or complement to DSL and cable. The
      network is scheduled to be completed in February 2006. In August 2005, we
      executed a definitive, fifteen-year agreement with the city, including a base
      period of five years and two five-year extensions, for the deployment, ownership
      and management of the wireless network. At December 31, 2005, we had
      approximately forty (40) customers paying monthly subscription
      fees.





We
      intend
      that the Tempe network be an open platform, offering freedom of service choices
      to subscribers over a mixture of public, restricted and licensed bands. Our
      target customers are retail Internet service providers that would provide e-mail
      messaging, VoIP, web-hosting and emergency services to subscribers. Although
      we
      do not yet have any such agreements at this time, we expect to receive a
      majority of subscriptions pursuant to service agreements with major retail
      service providers that will, most likely, provide payments to us based on the
      actual amount of network usage. We plan to operate the network, and host the
      splash page, free service and hospitality. As a result, we expect low customer
      acquisition costs, rapid increases in the number of subscribers and reduced
      churn.





The
      user
      start-up splash page for the Tempe network will be sponsored by the Arizona
      Republic pursuant to an agreement with us that was announced on October 11,
      2005. In summary, we have agreed to share any revenues related to the placement
      of advertising on the splash page on a 50/50 basis. Although no material
      revenues have yet been generated, we are hopeful that this agreement and other
      similar agreements that we may negotiate in the future will provide a
      significant new source of revenues.





In
      May
      2005, the foundation of our operation in Tempe was obtained when NeoReach
      Wireless acquired Transcordia, LLC, d/b/a/ WazAlliance, a network of metro-wide
      commercial and residential wireless Internet access zones for a purchase price,
      subject to post closing adjustments, of $257,500, payable in the form of
      $188,500 in common stock and $69,000 cash. We have expanded this operation
      as it
      focuses its efforts on the design and deployment of the Tempe wireless
      network.





Because
      of the increased pace in the emergence of municipal wireless networking
      opportunities, we have accelerated our business development efforts in this
      market. Including the operating costs being incurred to support the Tempe
      network, total operating expenses for NeoReach Wireless in the three months
      and
      nine months ended December 31, 2005 were $513,773 and $1,391,701, respectively.
      In order to complete the Tempe network, we estimate that capital expenditures
      will approximate $2,500,000 including the development of the deployment plan,
      networking equipment (i.e., antennas, transmitters and network routers) and
      equipment installation. To date, we have acquired networking equipment at a
      total cost of approximately $839,000 for the Tempe wireless
      network.





In
      June
      2005, we acquired Evergreen Open Broadband (“Evergreen”), a wholesale wireless
      Internet service provider based in Boston, with the issuance of 1,505,360 shares
      of our common stock, valued in the amount of approximately $231,000, and the
      assumption of approximately $30,000 in certain liabilities. Evergreen provides
      to us a developed scoring model that we now utilize to evaluate municipal
      wireless network opportunities. The model considers a variety of factors in
      the
      areas of demographics, climate and topography in rating a city as a desirable
      opportunity for our business development activities. Evergreen will operate
      as
      part of NeoReach Wireless. Evergreen actively participated in our bidding for
      Tempe and is involved with business development opportunities represented by
      numerous other city-wide wireless network projects that are pending or under
      consideration.





The
      city
      of Sacramento, California (population of approximately 465,000 people) and
      the
      cities of Chandler, Arizona; Farmers’ Branch, Texas; Akron, Ohio; and Cuyohoga
      Falls, Ohio, have also selected us for the proposed deployment, ownership and
      management of their planned wireless networks. Currently, we are negotiating
      definitive contracts and/or developing pilot deployments with these
      municipalities. We are aware of five other publicly-announced municipal wireless
      network projects that we have lost including Philadelphia, Pennsylvania, that
      was awarded to Earthlink, and Minneapolis, Minnesota, and Portland, Oregon,
      where we were not included as a finalist for the pending awards.




26





In
      June
      2005, we invested $3,825,000 cash in connection with the formation
      of Kite Broadband, LLC (“Kite”) resulting in a 51% ownership
      percentage. On June 30, 2005, Kite executed a Master Agreement for Services
      with
      Sprint under which Kite shall provide services to Sprint’s broadband customers
      in fourteen (14) metropolitan markets for a period of three years utilizing
      the
      Sprint mark. The agreement covers, among other things, the provisioning of
      certain customer-facing services, such as customer operations and call center
      management, sales, marketing, billing, collection, installation and repair.
      Sprint continues to provide network support and transport services. The
      customers remain Sprint customers during the three-year term of the agreement.
      Upon expiration of the agreement, Kite will have the option to acquire the
      then
      existing customers pursuant to the terms of the agreement. All network and
      spectrum assets will remain the property of Sprint. Since June 30, 2005, Kite
      has generated revenues of approximately $6,584,680 and our 51% share of Kite’s
      net income for this period was $237,464. On January 31, 2006, we acquired
      the 49% minority interests in Kite for approximately 90,000,000 shares of our
      common stock.




***Voice
      Services***




During
      the current year, activities at CloseCall America have been focused on the
      expansion of its telecommunications service offerings, and the securing of
      long-term agreements with local exchange carriers. CloseCall has also expanded
      its advertising programs in the current year. It uses print, signage, radio
      and
      television advertising to market services to customers of certain local
      professional sports teams including the Baltimore Ravens, Ripken Baseball,
      Aberdeen Ironbirds, Frederick Keys, Bowie Baysox, and the Delmarva
      Shorebirds.





We
      offer
      our integrated communications services in a high-quality bundle to residential
      customers, and small to medium-sized businesses at attractive prices. When
      economically advantageous for us to do so, we seek to bundle our integrated
      communications services. Our targeted customers often will have multiple vendors
      for voice and data communications services, each of which may be billed
      separately. Unlike many of these vendors, we are able to provide a comprehensive
      package of local telephone, long distance, Internet access and other integrated
      communications services. Our future business strategy will focus on the
      establishment of effective cross-selling programs in order to leverage the
      combined customer base of the voice and Internet service provider business
      segments, the effective delivery of such services and the provision of excellent
      customer service. CloseCall's combined local and long distance churn measured
      by
      terminations of customer subscriber lines is approximately 2% per month compared
      to an industry average of approximately 5% per month.





In
      the
      nine-month period ended December 31, 2005, we completed five-year commercial
      agreements with Verizon and SBC covering six and thirteen states, respectively.
      In addition, we executed a similar agreement with BellSouth covering nine states
      that runs through December 31, 2007. Completion of these agreements 1) allows
      the expansion of CloseCall’s overall geographic market, and the expansion and
      bundling of service offerings in these states including Florida, and 2) provides
      predictability of the pricing of wholesale services provided to us by these
      carriers during the terms of the agreements.





During
      the nine-month period ended December 31, 2005, we completed two acquisitions
      intended to add revenues, profits and licensed coverage areas. On June 30,
      2005,
      we acquired AFN, a company licensed to provide local, long distance and/or
      Internet service throughout the United States that added approximately 15,000
      customer lines to our customer base. AFN is focused on four major customer
      segments - hotels and resorts, corporate housing, resort-area property
      management and other business services. The purchase consideration was
      $3,000,000, including 10,000,000 shares of our common stock and a cash payment
      of $1,500,000. Since its acquisition on June 30, 2005, AFN has provided revenue
      of approximately $3,458,286 and contributed net income of $810,176. This
      operating profit was favorably affected by the timing of costs and expenses
      incurred by AFN’s affiliated service company during 2005. The service agreement
      terminated on October 31, 2005. In September 2005, AFN acquired the assets
      of
      AllCom USA and their long distance and T-1 customers for $300,000 cash,
      providing an additional customer base for bundled services. This acquisition
      is
      expected to increase our annual revenues by approximately
      $1,200,000.





On
      September 30, 2005, Davel sold the majority of the payphones and certain related
      assets and liabilities of its Bronx, New York, field service office,
      representing 2,204 payphones, for a net selling price of $962,246. We recognized
      a $91,373 gain on the sale of the net assets, but we incurred $144,073 of exit
      and disposal activity costs associated with the closing of the field service
      office resulting in a net loss of $52,700. Davel also entered into agreements
      with the purchaser of its payphones to acquire certain of their payphones in
      Florida and to maintain, to service and to collect Davel’s remaining payphones
      in the New York City area. On September 30, 2005, Davel acquired 2,240 payphones
      located in Florida from the purchaser for a net purchase price of $784,000.
      We
      expect that the purchase of the payphones in Florida will allow us to maintain
      the level of revenues at a reduced level of operating expenses.





***Internet
      Services***





During
      the current year, the activities of this operation have focused on the
      integration of the operations of the acquired companies comprising this business
      segment. The efforts are focused on combining service offerings, consolidating
      network operations and customer support locations, and reducing operating costs.
      As a result of this effort, we recorded a restructuring charge of $1,335,612
      in
      the three months ended December 31, 2005, including $902,306 related to the
      loss
      expected on the abandonment of leased facilities, $392,899 related to the loss
      expected upon the disposal of excess equipment, and $40,407 related to certain
      employees terminated in January 2006. The success of our overall growth
      strategy depends, in part, on our ability to transition customers to new
      Internet access services, especially broadband wireless. However, at present,
      dial-up subscribers represent the largest group of customers of the Internet
      services group. The erosion of this customer base is likely to
      continue.




27





During
      the nine months ended December 31, 2005, through cash payments and the
      conversion of note amounts into shares of our common stock, we retired notes
      payable related to ISP acquisitions in the amount of approximately $1,608,000,
      including negotiated note reductions of approximately $220,000 relating to
      post
      closing purchase price adjustments.





On
      November 1, 2005, we completed the acquisition of InReach. Besides adding annual
      revenues expected to approximate $5,700,000, InReach provides a base of
      operations for the Sacramento municipal wireless network. The purchase price
      for
      InReach, before any post closing adjustments, included $2,111,873 cash and
      4,357,798 shares of common stock valued at $950,000.




***Goodwill
      Impairment***





At
      September 30, 2005, our balance sheet included intangible assets with a total
      carrying value of approximately $49,060,000, representing 56.3% of total assets
      and including approximately $37,492,000 in goodwill. Substantially, this
      goodwill has been recorded in connection with the series of acquisitions
      completed by us since April 1, 2004. In connection with acquisition of InReach,
      an additional $3,003,974 in goodwill was added to the balance sheet during
      the
      quarter ended December 31, 2005. Generally accepted accounting principles
      require that we assess the fair values of acquired entities at least annually
      in
      order to identify any impairment in the values. However, on a quarterly basis,
      we are alert for events or circumstances that would indicate, more likely than
      not, that the fair value of a reporting segment has been reduced below its
      carrying amount. If we determine that the fair value of an acquired entity
      is
      less than the net assets of the entity, including goodwill, an impairment loss
      would be identified and recorded at that time.





During
      the three months ended December 31, 2005, both the Internet service provider
      segment and the voice services segments incurred operating losses that were
      not
      expected. As a result, we reviewed the carrying values of the assets of these
      segments and determined that an adjustment for goodwill impairment was
      appropriate at December 31, 2005. We recorded an impairment charge in the amount
      of $3,764,429, including $1,945,519 relating the Internet service provider
      companies and $1,818,910 related to Affinity Telecom (“Affinity”), a CLEC
      business located in the state of Michigan that was acquired in August 2004.
      The
      negative customer churn of dial-up ISP customers has exceeded our expectations,
      contributing to the net loss incurred by this segment during the most recent
      quarter. We have experienced a significant and steady loss of Affinity
      customers, and incurred bad debt losses at a greater rate than in our other
      CLEC
      companies. The impairment charges represented approximately 12.8% and 73.0%
      of
      the goodwill related to the ISP companies (excluding InReach) and Affinity,
      respectively.




Future
      assessments of the fair values of acquired companies could identify material
      impairment losses resulting in additional write-offs of goodwill. Such
      adjustments could have material adverse effects on our results of operations
      and
      our financial position, and could impede our ability to raise capital and/or
      to
      make acquisitions.





***Corporate
      Activities***




Since
      the
      beginning of the current fiscal year, we have attempted to strengthen our
      balance sheet in order to provide capital for acquisitions, to fund our NeoReach
      Wireless operating needs (including the capital expenditures related to the
      build-out of municipal broadband wireless networks), and to improve our
      liquidity. We have increased stockholders’ equity to over $36 million with a
      cash balance of approximately $5 million at December 31, 2005. Total debt has
      been reduced from a balance of approximately $26,534,000 at March 31, 2005
      to a
      balance of $22,016,000 at December 31, 2005. We are looking for opportunities
      to
      further improve those positions.





We
      extended debt maturities and reduced our interest cost in May 2005 when we
      issued a convertible debenture in the aggregate amount of $15,500,000 to
      Cornell Capital Partners, L.P. (“Cornell Capital”). We used a significant
      portion of the proceeds to pay in full the remaining $13,000,000 balance of
      a
      note payable that bore interest at the rate of 23% and was due on November
      15,
      2005. The retired note was the source of bridge financing for our acquisition
      of
      Davel. The debenture is payable in installments over a three-year period, with
      $3,500,000 classified as a current liability at December 31, 2005, and bears
      interest at an annual rate of 7.75%.





In
      September 2005, the stockholders approved 1) an amendment to our certificate
      of
      incorporation that increased the authorized number of shares of common stock
      from 600 million to 1.5 billion shares and the authorized number of preferred
      shares from 5,035,425 to 20,035,425, and 2) an increase in the number of shares
      of our common stock available for award under our employee stock option plan
      from 1 million to 30 million.




28




**Management
      Challenges**





During
      the current fiscal year, management is concentrating its efforts on the business
      development and network deployment activities of NeoReach Wireless, the
      consolidation and integration of the Internet services and voice services
      businesses, and the identification and securing of additional sources of growth
      capital.





We
      see
      opportunity for growth in the emerging market presented by municipally sponsored
      broadband wireless networks. Our acquisition strategy of the last two years
      has
      been executed, in part, with the objective of establishing a viable
      telecommunications company with sufficient credibility to be considered for
      selection by cities for the deployment, ownership and management of broadband
      wireless networks. The initial indication of the effectiveness of our business
      plan execution was the selection by Tempe, Arizona, of NeoReach Wireless for
      its
      network. Subsequently, we were selected by five other cities for the deployment,
      ownership and management of such networks. However, the ramp-up time from
      selection to the completion of deployment can exceed six months. As a result,
      we
      have incurred significant costs related to this business before the Tempe
      deployment is completed, and therefore before any significant revenues are
      expected. The capital equipment costs for the Tempe network are expected to
      approximate $2,500,000. Operating costs for NeoReach Wireless, currently running
      at a monthly rate of approximately $200,000, were approximately $1,392,000
      for
      the nine months ended December 31, 2005.





Many
      of
      the companies that we have acquired are experiencing declining revenues as
      we
      expected. Over 80% of the customers of our Internet services business are
      subscribers to dial-up service. The revenues of this business segment have
      declined from approximately $4,580,000 for the three months ended March 31,
      2005
      to approximately $3,591,000 (before the addition of InReach revenues) for the
      three months ended December 31, 2005, a decline of approximately 22%. Likewise,
      the pay telephone business is declining due primarily to the public’s increasing
      usage of competitive technologies. Revenues for Davel for the nine months ended
      December 31, 2005 were $32,283,029 compared with revenues of approximately
      $44,007,674 for the corresponding period of the prior year. The declining
      revenues of these businesses and the operating costs of NeoReach Wireless
      discussed above are adversely affecting our operating profitability.





As
      a
      result, we are currently focused on the implementation of a company-wide plan
      of
      consolidation and integration of our operations. Primarily, the completion
      of
      this plan will result in the combination of the Internet service provider and
      CloseCall CLEC businesses and the combination of the Davel payphone business
      with AFN. The customer-facing activities of this combined business will be
      conducted by a retail operation organization that will conduct all marketing,
      provisioning, billing and customer support activities. Likewise, the network
      operations will be managed by a single organization. Simultaneously, we will
      consolidate all of our financial operations into a single organization. As
      a
      result, we expect to achieve improvements in the quality and consistency of
      our
      delivered services and customer support, while reducing our operating expenses.
      The execution of this plan will include the elimination of employment positions
      in a series of reductions and the closing of certain facilities. We have begun
      to record the anticipated costs associated with these restructuring activities
      in the current quarter. The consolidation of these businesses will significantly
      enhance our ability to cross-sell and bundle services in efforts to retain
      the
      subscriber base of the Internet service business and grow the revenues of our
      CLEC businesses at CloseCall and AFN.





As
      discussed in detail below, we have relied on funds provided by Cornell Capital
      in order to finance the cost of our acquisitions and enable us to grow the
      Company. In the current fiscal year, we have also used these funds to invest
      in
      the business of Kite and to fund the operation of our municipal broadband
      wireless network business and the deployment of the network in Tempe. In order
      to reduce the cost of capital, to strengthen the balance sheet, to improve
      liquidity and to provide the financial flexibility to react quickly to future
      acquisition opportunities, we are focused on the establishment of alternative
      sources of growth capital. In this regard, during the current quarter, we
      announced a new association with an investment banking firm, Ryan Beck &
Co., to advise us on numerous items, including financing.





**Critical
      Accounting Policies**





We
      believe there have been no significant changes in our critical accounting
      policies during the nine-month period ended December 31, 2005 as compared to
      what was previously disclosed in our Annual Report on Form 10-KSB for the year
      ended March 31, 2005. During this period, because the $100 million Standby
      Equity Distribution Agreement with Cornell Capital (the “SEDA”) is providing
      equity financing to us, we began to amortize deferred financing costs related
      to
      the SEDA to additional paid-in-capital and we began to charge this account
      for
      the additional fees paid to Cornell Capital and other financial advisors in
      connection with making draws under the SEDA.




We
      consider the accounting policies related to revenue and related cost
      recognition, the valuation of goodwill and other intangible assets and the
      accounting for transactions related to our debt and equity financing activity
      to
      be critical to the understanding of our results of operations. Critical
      accounting policies include the areas where we have made what we consider to
      be
      particularly subjective or complex judgments in making estimates and where
      these
      estimates can significantly impact our financial results under different
      assumptions and conditions. We prepare our financial statements in conformity
      with U.S. generally accepted accounting principles. As such, we are required
      to
      make certain estimates, judgments and assumptions that we believe are reasonable
      based upon the information available. These estimates, judgments and assumptions
      affect the reported amounts of assets and liabilities at the date of the
      financial statement and the reported amounts of revenue and expenses during
      the
      periods presented. Actual results could be different from these
      estimates.




29





**New
      Accounting Pronouncements**





In
      December 2004, the Financial Accounting Standards Board revised SFAS
      No. 123. The revision, referred to as SFAS 123R, was entitled “Share-Based
      Payment”. This revised pronouncement replaces SFAS 123 and supersedes APB
      No. 25, and its scope encompasses a wide range of share-based compensation
      arrangements including share options, restricted share plans, performance-based
      awards, share appreciation rights and employee share purchase plans.





SFAS
      123R
      requires that the compensation cost relating to share-based payment transactions
      be recorded in financial statements. For each transaction, compensation cost
      is
      to be measured based on the fair value of the equity or liability instrument
      issued. The pro forma disclosures previously permitted under SFAS No. 123
      no longer will be an alternative to financial statement recognition of
      compensation expense. In accordance with a recently-issued Securities and
      Exchange Commission rule, small business registrants will be allowed to
      implement SFAS No. 123R as of the beginning of the first annual period that
      begins after December 15, 2005. We currently expect that we will adopt SFAS
      No. 123R for the fiscal quarter ending June 30, 2006.





Under
      SFAS No. 123R, we must determine the appropriate fair value model to be
      used for valuing share-based payments, the amortization method for compensation
      cost and the transition method to be used at date of adoption. The permitted
      transition methods include either retrospective or prospective adoption. Under
      the retrospective method, prior periods may be restated either as of the
      beginning of the year of adoption or for all periods presented. The prospective
      method requires that compensation expense be recorded for all unvested stock
      options at the beginning of the first quarter of adoption of SFAS No. 123R,
      while the retrospective methods would record compensation expense for all
      unvested stock options beginning with the first period presented. We are
      evaluating the requirements of SFAS No. 123R and expect that its adoption
      will have a material adverse impact on our consolidated financial position
      and
      consolidated results of operations including an increase in compensation expense
      for equity instruments issued to employees. We have not yet determined the
      method of adoption or the effect of adopting SFAS No. 123R, and we have not
      determined whether the adoption will result in amounts that are similar to
      the
      current pro forma disclosures that have been provided in accordance with SFAS
      No. 123.





**Results
      of Operations and Financial Condition**





We
      realize that effective analysis of our operations with an approach of comparing
      results for a current period with the results of a corresponding prior period
      may be difficult due to the significant number of acquisitions and stock issues
      that we have completed. In order to analyze ourselves, we focus not only on
      achieving increasing amounts of net income and EBITDA, but emphasize the
      increase of net income per share.




**The
      Three Months Ended December 31, 2005 and 2004**





***Total
      Revenues***





We
      achieved consolidated revenues of $26,244,606 in the three-month period ended
      December 31, 2005 compared with revenues of $17,127,133 in the corresponding
      period of the prior fiscal year. Since April 1, 2004, we have completed the
      acquisition of seventeen companies that have provided significant revenues
      to
      us, particularly to our voice and Internet services operating segments. The
      most
      significant portions of our revenues are provided by our CloseCall and Davel
      subsidiaries that were acquired in October 2004 and November 2004, respectively.
      Revenues for these companies were included in our consolidated results of
      operations from the acquisition dates. In addition, major acquisitions in the
      current year include AFN, acquired on June 30, 2005, and InReach, acquired
      on
      November 1, 2005, and we obtained a 51% ownership of Kite on June 30, 2005.
      The
      revenues of these entities are included in our consolidated results of
      operations from those dates. Accordingly, the amounts of revenues included
      in
      our consolidated revenues for the three month periods ended December 31, 2004
      and 2005 were as follows for Davel and CloseCall, Kite, AFN and
      InReach.




30




**Acquired
                Company**
            
            **2004**
            
            **2005**
            
            **Increase****Davel**
            
            $
            6,377,744
            
            $
            10,084,268
            
            $
            3,706,524**CloseCall
                (includes Affinity and US1)**
            
            
            6,013,483
            
            
            6,509,269
            
            
            495,786**Kite**
            
            
            -
            
            
            3,199,366
            
            
            3,199,366**AFN**
            
            
            -
            
            
            1,906,635
            
            
            1,906,635**InReach**
            
            
            -
            
            
            943,138
            
            
            943,138**Total
                Revenues**
            
            $
            12,391,227
            
            $
            22,642,676
            
            $
            10,251,449




***Revenues
      by Segment***





**Voice
      Services.** We
      deliver voice communications services to end users on a retail basis principally
      though this business segment. Revenues from our voice services for the current
      quarter ended December 31, 2005 were $18,505,132, representing approximately
      71%
      of consolidated revenues. The revenues of this segment were $12,391,227 in
      the
      third quarter last year. The current year revenues were attributable primarily
      to CloseCall, Davel and AFN, all of which were acquired subsequent to last
      year’s second quarter. This group derives most of its operating revenues from
      recurring monthly charges, coin revenue and “dial-around” revenues (intercarrier
      compensation paid to us by the providers of 800 numbers at the rate of 49.4
      cents per call) that are generated by our communications services. Our local
      and
      long distance service revenues are being negatively affected in the current
      year
      by a continued decline in rates and competitive pressures to bundle long
      distance minutes of use within local service product offerings. Our existing
      base of business of long distance minutes is also subject to increasing
      competition from both VoIP and competing wireless service offerings.





**Internet
      Services.** We
      deliver data communications services to end users on a retail basis principally
      though this business segment. Revenues from Internet services for the current
      quarter ended December 31, 2005 were $4,534,617, representing approximately
      17%
      of consolidated revenues and including $943,138 in revenues attributable to
      InReach. We reported Internet service revenues of $4,735,906 for the prior
      year
      quarter ended December 31, 2004. The current year and prior year results
      included a full quarter of operating results for each of the eight data services
      companies acquired during the fiscal year ended March 31, 2005. As a result,
      revenues determined on a “same company” basis declined by $1,144,427 between
      years, or approximately 24%. As stated above, the loss of customers by this
      business, that includes mostly dial-up Internet access subscribers, has exceeded
      our expectations, contributing to the goodwill impairment loss recorded in
      the
      current quarter. In order to attempt to reverse the loss of revenues, we have
      consolidated the retail operations of the voice and Internet service provider
      businesses in order to promote the cross selling of CLEC services to our
      Internet access subscribers.





**Wireless
      Networks.** The
      revenues of this operating segment principally relate to Kite. As indicated
      above, Kite’s revenues for the current quarter were $3,199,366, representing
      12.2% of consolidated revenues. To date, the revenues earned by NeoReach
      Wireless are insignificant. This segment did not generate any revenues for
      the
      fiscal quarter ended December 31, 2004.





**Corporate.** From
      time
      to time, the corporate segment generates miscellaneous revenues. No such
      revenues were generated by this segment in the current year or prior year
      quarters.





***Operating
      Costs and Expenses***





Total
      operating costs and expenses for the three months ended December 31, 2005,
      including depreciation and amortization, were $32,567,755, including charges
      for
      goodwill impairment and restructuring costs of $3,764,429 and $1,335,612,
      respectively. Excluding these charges, total operating costs and expenses
      represented approximately 105% of consolidated revenues for the three months
      ended December 31, 2005. Operating costs and expenses for the three months
      ended
      December 31, 2004 were $19,176,127, or 112% of consolidated revenues. Operating
      costs and expenses have increased, but decreased as a percentage of consolidated
      revenues, as we acquire companies and increase the size of our businesses.
      The
      cost of services (excluding depreciation and amortization) was $13,790,195
      in
      the three months ended December 31, 2005, or 52.5% of revenues, compared with
      $8,633,278, or 50.4% of revenues, in the prior year quarter. Compensation
      expenses, professional fees paid to attorneys, accountants and other advisors,
      and other general and administrative expenses comprises a major portion of
      operating costs and expenses. Such expenses represented 90.4% and 89.5% of
      total
      operating costs and expenses (before impairment and restructuring charges)
      in
      the three-month periods ended December 31, 2004 and 2005,
      respectively.




31





Our
      current year operating expenses include the operating costs being incurred
      to
      start-up the municipal wireless network business and to support the deployment
      of the Tempe network. Total operating costs for the current quarter included
      $513,773 in operating expenses of NeoReach Wireless. There were no such costs
      in
      the corresponding prior year period. Spending by NeoReach Wireless has
      accelerated in the current year as we see increased interest in municipal
      wireless projects, as measured by the number of municipalities issuing requests
      for proposals. This activity and our own success in being selected for such
      projects convinced us to increase the pace of our investment in this business.
      In order to respond to the growing number of opportunities, we have increased
      staff in this group and expanded our business development activities resulting
      in increased compensation costs, tradeshow attendance costs and other travel
      expenses.





***Interest
      Expense***





Interest
      expense, net, was $582,785 for the three-month period ended December 31, 2005
      compared with $905,896 in the comparable period of the prior year. During the
      prior year period, we closed two significant acquisitions resulting in a
      significant increase in borrowings from Cornell Capital and Airlie. Most
      significantly, the purchase consideration for the acquisition of Davel in
      November 2004 included $14 million cash. These funds were provided by the
      proceeds of the acquisition bridge loan from Airlie. We used funds borrowed
      from
      Cornell Capital to provide the $8 million cash portion of the CloseCall purchase
      consideration. Since the end of last year’s quarter, significant amounts of the
      Cornell Capital borrowings have been retired and the proceeds provided by the
      Debenture allowed us to retire the Airlie bridge loan in May 2005. The effect
      of
      this financing activity on interest expense for the quarter ended December
      31,
      2004 was interest related to notes payable to Cornell Capital and the bridge
      loan in the amounts of $470,639 and $389,211, respectively. Interest expense
      for
      the current quarter included interest expense related to notes payable to
      Cornell Capital of only $149,266. Interest expense for the current quarter
      related to the Debenture, including the debt discount amortization, was
      approximately $397,000.





***Net
      Income (Loss)***




We
      reported a net loss of $6,955,732 for the three-month period ended December
      31,
      2005, or $0.0165 per share, compared with a net loss of $2,954,890, or $0.0093
      per share, for the corresponding quarter of the prior year. The charges for
      goodwill impairment and restructuring costs that were recorded in the current
      quarter totaled $5,100,041, or $0.0121 per share. As a result, all segments
      incurred net losses for the current quarter. In the comparable quarter of the
      prior year, the voice and Internet services segments provided net income amounts
      of $581,781 and $287,254, respectively, which were not sufficient to offset
      the
      combined operating loss of the wireless networks and corporate segments of
      approximately $3,823,925. The prior year net loss for the quarter included
      amortization expense of approximately $220,000 related to SEDA deferred
      financing fees. Consistent with our practice of converting funds drawn under
      the
      SEDA to common stock, we have charged current year amortization to additional
      paid-in capital.




***Consecutive
      Quarter Results***





On
      a
      consecutive quarter basis, consolidated revenues decreased by 1.1% from
      $26,546,650 reported for the three-month period ended September 30, 2005,
      despite the acquisition of InReach during the current quarter that added
      revenues of $943,138. For the prior quarter, we reported net income of $523,900.
      As described above, the current quarter net loss included goodwill impairment
      and restructuring costs of $5,100,041. However, the current quarter results
      were
      also adversely affected by the seasonal decline of Davel’s revenues, the
      continuing negative churn of dial-up ISP customers, and increased bad debt
      expenses recorded by the ISP group and CloseCall. Cost of services, expressed
      as
      a percentage of corresponding revenues, increased from 43.9% in the prior
      quarter to 52.5% in the current quarter. Benefiting prior quarter results were
      favorable adjustments resulting from the settlement of disputes with vendors
      recorded by Davel and CloseCall that reduced cost of services by $563,000.
      The
      total amount of other operating expenses, depreciation, amortization and
      interest expense increased by $34,657 from the prior quarter total amount of
      $14,225,645.





***Adjusted
      EBITDA Presentation***





EBITDA
      represents net income (loss) before interest, taxes, depreciation and
      amortization, and in the case of Adjusted EBITDA, before goodwill impairment
      and
      restructuring charges. EBITDA is not a measurement of financial performance
      under GAAP. However, we have included data with respect to EBITDA because we
      evaluate and project the performance of our business using several measures,
      including EBITDA. The computations of Adjusted EBITDA for the preceding quarter
      ended September 30, 2005, and for the three-month periods ended December 31,
      2005 and 2004 were as follows.




32




**For
                the Three Months Ended September 30,**
            
            **For
                the Three Months Ended**
              **December
                31**,
            
            **For
                the Nine Months Ended December 31,****2005**
            
            **2005**
            
            **2004**
            
            **2005****Net
                Income (Loss)**
            
            $
            523,900
            
            $
            (6,955,732
            )
            $
            (2,954,890
            )
            $
            (6,012,640
            )**Add
                non-EBITDA items included in net results:****Depreciation
                and amortization**
            
            
            1,047,319
            
            
            1,293,993
            
            
            792,717
            
            
            3,163,689**Interest
                expense, net**
            
            
            698,335
            
            
            582,785
            
            
            905,896
            
            
            2,213,295**Goodwill
                impairment and restructuring costs**
            
            
            -
            
            
            5,100,041
            
            
            -
            
            
            5,100,041**Adjusted
                EBITDA**
            
            $
            2,269,554
            
            $
            21,087
            
            $
            (1,256,277
            )
            $
            4,464,385





The
      significant decline in Adjusted EBITDA from September 30 to December 31, 2005
      was due to the loss incurred from operations in the current quarter before
      the
      nonrecurring charges. Our negative EBITDA in the third quarter of the prior
      fiscal year was primarily attributable to acquisition costs and the smaller
      scale of operations in the prior year.




We
      consider EBITDA to be an important supplemental indicator of our operating
      performance, particularly as compared to the operating performance of our
      competitors, because this measure eliminates many differences among companies
      in
      financial, capitalization and tax structures, capital investment cycles and
      ages
      of related assets, as well as certain recurring non-cash and non-operating
      items. We believe that consideration of EBITDA should be supplemental, because
      EBITDA has limitations as an analytical financial measure. These limitations
      include the following: EBITDA does not reflect our cash expenditures, or future
      requirements for capital expenditures or contractual commitments; EBITDA does
      not reflect the interest expense, or the cash requirements necessary to service
      interest or principal payments, on our indebtedness; although depreciation
      and
      amortization are non-cash charges, the assets being depreciated and amortized
      will often have to be replaced in the future, and EBITDA does not reflect any
      cash requirements for such replacements; EBITDA does not reflect the effect
      of
      earnings or charges resulting from matters we consider not to be indicative
      of
      our ongoing operations; and not all of the companies in our industry may
      calculate EBITDA in the same manner in which we calculate EBITDA, which limits
      its usefulness as a comparative measure.




Management
      compensates for these limitations by relying primarily on its GAAP results
      to
      evaluate its operating performance and by considering independently the economic
      effects of the foregoing items that are not reflected in EBITDA. As a result
      of
      these limitations, EBITDA should not be considered as an alternative to net
      income (loss), as calculated in accordance with generally accepted accounting
      principles, as a measure of operating performance, nor should it be considered
      as an alternative to cash flows as a measure of liquidity.





Further,
      we realize that effective analysis of our operations with an approach of
      comparing results for a current period with the results of a corresponding
      prior
      period may be difficult due to the significant number of acquisitions and stock
      issues that we have completed. In order to analyze ourselves, we focus not
      only
      on achieving increasing amounts of net income and EBITDA, but strive to increase
      net income per share.





**The
      Nine Months Ended December 31, 2005 and 2004**





***Revenues***




Consolidated
      revenues were $75,297,101 in the nine-month period ended December 31, 2005
      compared with revenues of $23,265,366 in the corresponding period of the prior
      fiscal year. The most significant portion of the increase in revenues is the
      combined revenues of CloseCall and Davel, subsidiaries that were acquired in
      October and November 2004, respectively. As a result, the voice business segment
      reported revenues of $56,301,164 for the current year compared with revenues
      of
      only $13,346,798 in the prior year. Full period revenues for all of the ISPs
      that were acquired in the prior year plus the addition of InReach resulted
      in
      the increase in Internet services revenues to $12,395,635 for the current year
      from revenues of $9,303,568 reported for the prior year. The current year
      revenues also benefited from the acquisitions of AFN and Kite. The schedule
      below presents a comparison of revenues included in our consolidated revenues
      for the quarters ended December 31, 2004 and 2005 for the most significant
      companies added since October 1, 2004 (the beginning of last year’s
      quarter).




33








**Acquired
                Company**
            
            **2004**
            
            **2005**
            
            **Increase****Davel**
            
            $
            6,377,744
            
            $
            32,283,029
            
            $
            25,905,285**CloseCall
                (includes Affinity and US1)**
            
            
            6,969,054
            
            
            20,479,012
            
            
            13,509,958**Kite**
            
            
            -
            
            
            6,584,680
            
            
            6,584,680**AFN**
            
            
            -
            
            
            3,539,123
            
            
            3,539,123**InReach**
            
            
            -
            
            
            943,138
            
            
            943,138**Total
                Revenues**
            
            $
            13,346,798
            
            $
            63,828,982
            
            $
            50,482,184




In
      June
      2004, we entered into a Business Development Agreement with Solution Technology
      International, Inc. (“STI”), a Frederick, Maryland-based software company,
      whereby we provided advice in connection with going public
      and financing to STI in exchange for a 5% ownership in
      STI.  We believed that a strategic relationship with STI
      would be valuable to us since STI had contacts with insurance companies that
      could be potential purchasers of our various services.  We valued
      this ownership at $150,000 and recorded revenues of this amount in the quarterly
      period ended June 30, 2004.





In
      August
      2004, we signed a Business Development Agreement with Texas Prototypes, Inc.
      (“Texas Prototypes”), an electronic prototype manufacturing company, to jointly
      pursue a working relationship covering a number of potential technology projects
      and business development initiatives. We saw a potential fit between their
      chip
      prototype business and our Zigbee chip development project. We received a
      5% ownership in Texas Prototypes as consideration for services under the
      agreement. We valued this ownership at $300,000 and recorded revenues of this
      amount in the quarterly period ended September 30, 2004.





The
      investments in STI and Texas Prototypes were classified as other assets and
      were
      included in our consolidated balance sheets at March 31, 2005 and December
      31,
      2005 in the amounts of $150,000 and $300,000, respectively.





In
      August
      2004, we provided cash to STI and Texas Prototypes under bridge debenture
      agreements in the amounts of $300,000 and $700,000, respectively, in
      anticipation of their initial public offerings. We borrowed the cash from
      Cornell Capital under separate notes payable in the same amounts that were
      due
      and payable in 180 days from the dates of issuance, bore interest at the annual
      rate of 14%, and were secured by our assets.





In
      March
      2005, we assigned both bridge debentures to Cornell Capital in exchange for
      the
      elimination of the full amounts of our corresponding notes payable to Cornell
      Capital since the United States Securities and Exchange Commission had
      raised issues regarding the combination of convertible debentures and
      registration of shares upon exercise of convertible debentures under a Form
      SB-2
      as both STI and TXP agreed to do under the convertible bridge notes. We were
      concerned that if we converted our convertible debentures there could be a
      significant delay in having our STI and TXP shares registered for sale
      under Form SB-2.





In
      August
      2004, we announced our intention to issue the shares of STI common stock owned
      by us to our stockholders as a property dividend. In March 2005, STI withdrew
      its registration statement previously filed with the United States Securities
      and Exchange Commission. On May 19, 2005, STI executed an agreement and plan
      of
      merger with Networth Technologies, Inc., an OTC Bulletin Board listed company.
      The completion of this transaction is subject to closing conditions. We intend
      to pursue the issuance of a property dividend upon STI obtaining its public
      listing. At this time, no date has been established for such
      listing.




We
      have
      no plans to enter into other business development arrangements and/or
      advance funds as we did with STI and Texas Prototypes.  The regulatory
      concerns raised by the United States Securities and Exchange Commission and
      its
      scrutiny of these transactions have increased the costs and uncertainty of
      these
      arrangements. Accordingly, we prefer to concentrate on growing our core
      business at this time.





***Operating
      Costs and Expenses***





Total
      operating costs and expenses for the nine months ended December 31, 2005
      (including depreciation and amortization,) were $78,903,939, including charges
      for goodwill impairment and restructuring costs of $3,764,429 and $1,335,612,
      respectively. Excluding these charges, total operating costs and expenses
      represented approximately 98% of consolidated revenues for the nine months
      ended
      December 31, 2005. Operating costs and expenses for the nine months ended
      December 31, 2004 were $27,493,176, or 118% of consolidated revenues. Operating
      costs and expenses have increased significantly, but decreased as a percentage
      of consolidated revenues, as we acquire companies, increasing the size of our
      business and leveraging the corporate-level functions, and begin to combine
      operations. The cost of services (excluding depreciation and amortization)
      was
      $36,466,453 in the nine months ended December 31, 2005, or 48.4% of revenues,
      compared with $11,158,590, or 48.0% of revenues, in the prior year period.
      Compensation expenses, professional fees paid to attorneys, accountants and
      other advisors, and other general and administrative expenses in total
      represented 90.4% and 90.6% of total operating costs and expenses (before
      impairment and restructuring charges) in the nine-month periods ended December
      31, 2004 and 2005, respectively.




34





Operating
      expenses for the current year are running at a higher rate than we had planned
      at the beginning of the fiscal year, with the excess occurring substantially
      in
      the voice services segment. Operating expenses for the year for corporate,
      the
      Internet services segment and NeoReach Wireless are at or below plan. As we
      continue with our organizational integration project, combining many functions
      of the Internet services and voice services segments, the current level of
      operating expenses should decline. For example, the employee terminations that
      occurred in January 2006 as part of our restructuring are expected to save
      approximately $150,000 in compensation costs in the fourth quarter. Additional
      reductions are expected to occur in the fourth quarter. By the time we complete
      the consolidation of facilities contemplated by our current quarter
      restructuring charge, operating expenses next year will benefit from a reduction
      of occupancy costs in excess of $100,000 per quarter. The cost of services
      for
      the year, expressed as a percentage of consolidated revenues, are within
      expectations.





***Interest
      Expense***





Interest
      expense, net, was $2,213,295 for the nine-month period ended December 31, 2005
      compared with $1,232,280 in the comparable period of the prior year. Since
      the
      end of last year’s quarter, we have continued to use funds provided by Cornell
      Capital, enabling us to acquire AFN and InReach, to invest in Kite and to the
      fund the operations of NeoReach Wireless. In addition, as described above,
      we
      issued a Debenture to Cornell Capital in the amount of $15,500,000 in May 2005,
      retiring the Airlie bridge loan. As a result of the financing activity, the
      major components of interest expense for the current year included approximately
      $874,000 related to notes payable to Cornell Capital (including $291,956 in
      draw
      discounts), $381,225 related to the retired bridge loan, and approximately
      $1,009,000 related to the Debenture (including $250,748 in debt discount
      accretion). In the comparable quarter of the prior year, the major components
      of
      interest expense included approximately $845,000 related to notes payable to
      Cornell Capital (including $375,150 in draw discounts) and $389,211 related
      to
      the bridge loan.





***Net
      Income (Loss)***




We
      reported a net loss of $6,012,640 for the nine-month period ended December
      31,
      2005, or $0.0154 per share. Excluding the effects of the goodwill impairment
      and
      restructuring charges recorded in the current quarter, the net loss was
      $912,599, or $0.0023 per share, compared with a net loss of $5,460,090, or
      $0.0202 per share, for the corresponding period of the prior year. As in the
      prior year, both the voice and Internet service business segments contributed
      net income (before the effects of the goodwill impairment and restructuring
      charges) in the current year, totaling approximately $4,390,935, more than
      offsetting the net loss incurred by the wireless networks segment of $1,368,920
      and corporate expenses of $3,934,614. In the comparable period of the prior
      year, the Internet services and voice segments provided net income of
      approximately $1,474,811 that was not sufficient to offset the combined
      operating loss of the wireless networks and corporate segments of approximately
      $6,934,901. The prior year corporate expenses included SEDA deferred financing
      fee amortization expense of approximately $513,000 and SEDA draw fees of
      approximately $1,135,000.





Despite
      the current year net loss, we have generated Adjusted EBITDA, as calculated
      above, in the amount of $4,464,385 for the nine months ended December 31,
      2005.





**Liquidity
      and Capital Resources**




During
      the nine-month period ended December 31, 2005, our balance of unrestricted
      cash
      and cash equivalents increased by $290,916 to $4,960,703.





Net
      cash
      used in operations during the nine months ended December 31, 2005 was
      $2,650,415. We have used net cash of $13,380,044 in connection with investing
      activities. We paid $6,778,129 in cash for the acquisition of intangible assets,
      including $6,578,550 for the acquisition of certain customer rights under the
      Sprint Agreement, and we paid $3,927,011 in net cash in connection with
      acquisitions during the current year, including the acquisitions of AFN and
      InReach. We made capital expenditures during the current year totaling
      $2,674,904.





Our
      financing activities during the current year provided net cash of $16,321,375.
      The net proceeds of the Debenture with Cornell Capital, in the amount of
      $14,205,000, enabled us to retire the Airlie bridge loan in May 2005 with the
      payment of the principal amount of $13,000,000. Proceeds received from the
      sale of shares of common stock, primarily pursuant to the provisions of the
      SEDA, totaled $16,906,222. In addition, $3,612,525 in cash was contributed
      by
      the minority interests in June 2005 in connection with the formation of Kite.
      During the period, we used cash to retire $4,902,372 in note payable balances,
      and to make the scheduled Debenture maturity payment of
      $500,000.




35





In
      the
      corresponding period of the prior year, the balance of cash and cash equivalents
      increased by $3,710,917. Cash was provided by operations in the amount of
      $1,922,027, primarily due to an increase in accounts payable and accrued
      liabilities of $4,055,926. In the current year, the balance of accounts payable
      and accrued liabilities has been reduced by $5,351,928.





Financing
      activities during the prior year provided net cash of $30,306,855. In connection
      with our investing activities during the same prior year period, we used
      $28,517,965 in cash. Primarily from Cornell Capital, we received total
      proceeds of $13,098,406 from the sale of shares of common stock, and net
      proceeds of $4,208,449 from borrowings under notes payable. In addition, the
      Company received $15,200,000 in funds under an acquisition bridge loan from
      Airlie Opportunity Master Fund (with $2,200,000 repaid subsequent to closing)
      that were used to provide most of the $14,000,000 in cash that was paid to
      the
      former owners of Davel at closing. In addition, the Company used cash in the
      amount of $8,000,000 in order to close the acquisition of CloseCall, and a
      total
      of $10,960,500 in connection with the acquisition of Affinity, US1 and eight
      ISPs. In total, the Company obtained $5,827,223 in cash with the acquisitions
      during the period. The Company spent $1,384,688, net, in capital expenditures
      during the period.





Our
      primary liquidity and capital resource needs are to finance the costs of our
      acquisitions, to fund the operating costs and equipment requirements of our
      emerging wireless networks business, to support our other operating activities,
      to make capital expenditures and to service our debt. Over the twenty-one month
      period ended December 31, 2005, we have depended primarily on funds provided
      by
      Cornell Capital to meet our financing needs. Under a series of draw and
      borrowing transactions with Cornell Capital, we have obtained approximately
      $34,600,625 in financing since April 1, 2004, and have issued 155,333,281 shares
      of our common stock pursuant to the provisions of the Cornell Capital SEDA
      and
      the terminated equity line of credit. In addition, proceeds of $15,500,000
      were
      provided to us in the current year through the issuance of the convertible
      debenture to Cornell Capital. As discussed above, we used a substantial portion
      of these proceeds to complete the acquisition of seventeen (17) companies since
      April 1, 2004, and to retire the remaining $13,000,000 balance of the
      acquisition bridge loan. We have also used our common stock as consideration
      in
      connection with a number of acquisitions. In the last twenty-one months, we
      have
      issued common stock valued at approximately $14,556,406 in connection with
      our
      acquisitions.





As
      of
      December 31, 2005, the actual amount of funds available for future needs under
      the SEDA was determined as follows:





**SEDA
                Activity and Availability**
            
            **Amounts**Amounts
                drawn under the SEDA to date
            
            $
            26,623,129Total
                number of shares of common stock registered for the SEDA
            
            
            250,000,000Less
                -- Number of shares of common stock issued to date under the
                SEDA
            
            
            (130,057,147
            )Total
                number of shares of common stock available for future
                draws
            
            
            119,942,853Funds
                available under the SEDA based on the number of shares of common
                stock
                available and a price per share of $0.23
            
            $
            27,586,856





Although
      we have drawn $26,623,129 in funds under the $100 million SEDA, based on the
      remaining number of shares registered for the benefit of Cornell Capital, there
      were $27,586,856 in additional funds available for future draws under the SEDA
      for future needs. Draws and conversions subsequent to December 31, 2005 (through
      February 3, 2006) have reduced the funds available under the SEDA to
      $26,324,160. The term of the current SEDA expires on May 19, 2006. The Debenture
      agreement requires that, if the total amount of debt payable to Cornell Capital
      exceeds $4,000,000 at the SEDA expiration date, we must renew the SEDA. Failure
      to renew the SEDA would represent a default of the terms of the
      Debenture.





We
      expect
      that our future cash flows from operations, together with the funds that are
      available under our existing SEDA facility, will be adequate to meet our
      anticipated cash needs through the remainder of our current fiscal year,
      including the completion of the wireless network in Tempe. We currently expect
      that capital expenditures for the Tempe network will approximate $2,500,000;
      as
      of December 31, 2005, we had incurred costs of approximately $839,000 for the
      Tempe network. However, in order to complete the deployment of additional
      municipal wireless networks, to pursue one or more significant strategic
      acquisitions and to repay the balance owed to Cornell Capital under the
      Debenture, we will most likely need to incur additional debt or issue additional
      equity to finance those acquisitions. As stated above, we have selected Ryan
      Beck & Co., an investment banking firm, to advise us on financing
      alternatives and other items. Should we fail to obtain alternative capital
      financing, we may be required to curtail operations, in particular the
      deployment of additional municipal wireless networks.




36




**Inflation**





Our
      monetary assets, consisting primarily of cash and receivables, and our
      non-monetary assets, consisting primarily of intangible assets and goodwill,
      are
      not affected significantly by inflation. We believe that replacement costs
      of
      equipment, furniture and leasehold improvements will not materially affect
      our
      operations. However, the rate of inflation affects our expenses, such as those
      for employee compensation and costs of network services, which may not be
      readily recoverable in the price of services offered by us.





**Risks
      Related To Our Business**





Investing
      in our securities involves a high degree of risk. Before investing in our
      securities, you should consider the following discussion of risk factors, other
      information contained in this Quarterly Report on Form 10-QSB, and the extensive
      discussion of “Risks Related to Our Business” contained in our Annual Report on
      Form 10-KSB for the fiscal year ended March 31, 2005. Our future results may
      also be impacted by other risk factors listed from time to time in our future
      filings with the SEC, including, but not limited to, our Quarterly Reports
      on
      Form 10-QSB and our Annual Report on Form 10-KSB.





**We
      Have Lost Money Historically Which Means That We May Not Be Able to Maintain
      Profitability**





We
      have
      historically lost money. For the nine months ended December 31, 2005, we
      incurred a net loss of $6,012,640. In the years ended March 31, 2005 and 2004,
      we sustained net losses of $5,359,722 and $2,157,844, respectively. Future
      losses may occur. Accordingly, we may experience liquidity and cash flow
      problems if we are not able to improve our operating performance or raise
      additional capital as needed and on acceptable terms. Despite our reporting
      net
      income in the three consecutive quarters ended September 30, 2005, there can
      be
      no assurance that we will achieve profitable operating results again, or
      maintain them if achieved.





**Our
      Operations Are Recently Acquired Which Means That We Have a Limited
      Operating History upon Which You Can Base Your Investment Decision**





Prior
      to
      January 2004, we were a development stage company. Although we were incorporated
      only five years ago, we have undergone a number of changes in our business
      strategy and organization.





We
      have
      had several major shifts in our business strategy. In June 2001, we focused
      our
      business on the integration and marketing of complete mobile information
      solutions that satisfy the needs of mobile professionals. In April 2002, we
      acquired and shifted our focus toward solutions supporting the third generation
      wireless market. We shifted our business strategy again in December 2003 by
      beginning to expand significantly the scope of our business activity to include
      Internet access services, local and long distance telephone services and the
      ownership and operation of payphones. In 2005, we began to invest in the
      business of deploying wireless broadband networks and providing wireless network
      access services in wireless access zones to be primarily located in
      municipality-sponsored areas. We entered these businesses primarily through
      the
      acquisition of established companies. These operations have all been acquired
      subsequent to January 1, 2004.





Accordingly,
      the Company has a limited operating history upon which an evaluation of its
      prospects can be made.





Our
      strategy is unproven and the revenue and income potential from our strategy
      is
      unproven. We may encounter risks and difficulties frequently encountered by
      companies that have grown rapidly through acquisition, including the risks
      described elsewhere in this section. Our business strategy may not be successful
      and we may not be able to successfully address these risks.





If
      we are
      unsuccessful in the execution of our current strategic plan, we could be forced
      to reduce or cease our operations.





**We
      Have Limited Experience Running Our Businesses Which May Hamper Our Ability
      to
      Make Effective Management Decisions**





Virtually
      all of our operations have been acquired or started in the last 24 months.
      Therefore, our experience in operating the current business is limited. Further,
      we intend to pursue additional acquisitions to further the development of our
      Internet services business, competitive local exchange and wireless broadband
      businesses.





Mr.
      Jay
      O.   Wright became our President and Chief Executive Officer in December
      2003. In February 2004, Mr. Kurt Gordon became our Chief Financial Officer.
        Prior to Mr. Gordon joining the Company, Messrs. Wright and Gordon had no
      experience working together.  Since Mr. Wright joined our Company we have
      completed numerous acquisitions and integrated various different management
      teams into our operations.   Prior to closing those acquisitions, Messrs.
      Gordon and Wright had not previously worked with management at any of our
      subsidiaries and divisions. The other senior executives, including the general
      managers of each of the three operating business segments, have joined the
      Company in connection with acquisitions or been recently hired. None of these
      executives has significant experience working with the others. Consequently,
      internal communication and business-decision making processes are evolving.
      We
      may react too slowly or incorrectly to trends that may emerge and affect our
      business. Our future success depends on the ability of the senior executives
      to
      establish an effective organizational structure and to make effective management
      decisions despite their limited experience.




37





**The
      Success of Our Business Is Based on Unproven Revenue Generation Models Which
      Means That We May Not Achieve Anticipated Revenues**





Our
      revenue models, especially for our municipal wireless network business, are
      new
      and evolving. Our ability to generate revenue depends, among other things,
      on
      our ability to provide quality wireless technology, telecommunications,
      broadband and integrated data communication services to our customers utilizing
      new technologies, new products and innovative bundled service packages. Because
      our businesses are either newly acquired, based on emerging opportunities and
      technologies, or based on new bundled services with new price packages, we
      have
      limited experience with our revenue models.





Our
      ability to achieve organic revenue growth is dependent upon the success of
      long-term projects, such as our wireless initiatives, that require us to incur
        significant up-front costs.  We expect to confront multiple
      challenges in reaching the point where significant revenues are provided by
      this
      business. For example, the securing of a city contract is a multi-step process
      that can take over six months to complete, including a pilot demonstration,
      the
      RFP preparation, response and evaluation, contract negotiation, development
      of
      the deployment plan, and equipment installation and testing. Although we attempt
      to minimize development risks by carefully analyzing demographics, topography,
      climate and other factors, each project includes the utilization of newly
      developed transmission equipment. For example, operating costs incurred by
      NeoReach Wireless in the current year approximate $1,392,000, and we expect
      that
      the cost of the equipment required for the completion of the Tempe network
      will
      approximate $2,500,000 million. Further, in order to generate revenues from
      these projects, we will be required to successfully complete marketing efforts
      to obtain individual subscribers willing to pay us for wireless Internet service
      and negotiate contracts with large Internet service providers allowing them
      use
      of the network.





In
      addition, during the current fiscal year, the activities of the Internet
      services operation have focused on the integration of the acquired companies.
      The efforts are focused on combining service offerings, consolidating network
      operations and customer support locations, and reducing operating expenses.
      The
      success of our overall growth strategy depends, in part, on our ability to
      transition customers to new Internet access services, especially broadband
      wireless, and/or to sell additional voice services to the existing customer
      base. However, at present, dial-up subscribers represent a significant number
      of
      our Internet service customers. The erosion of this customer base is likely
      to
      continue until our new efforts to transition these customers to enhanced
      services become more effective.





There
      can
      be no assurance that the projects will be successfully completed or that the
      completed projects will provide the anticipated revenues. Accordingly, there
      can
      be no assurance that our business revenue models will be successful or that
      we
      can sustain revenue growth or maintain profitability.





**If
      We Are Not Able to Compete Effectively in Our Markets That Are Highly
      Competitive, We May Be Forced to Reduce or Cease Operations**





We
      believe that our ability to compete successfully in our markets depends on
      a
      number of factors, including market presence; the adequacy of our member and
      technical support services; the capacity, reliability and security of our
      network infrastructures; the ease of access to and navigation of the Internet
      provided by our services; our pricing policies and those of our competitors
      and
      suppliers; the timing of introductions of new services by us and our
      competitors; our ability to support existing and emerging industry standards;
      and general industry and economic trends. Other specific factors that could
      impact our ability to compete successfully include the following items, among
      others:




•
            our
                success in withstanding the continued shift from dial-up ISP service
                to
                broadband ISP service;•
            the
                performance of our products, services and technology in a manner
                that
                meets customer expectations;•
            the
                success of our efforts to develop effective channels of distribution
                for
                our products;•
            our
                ability to price our products that are of a quality and at a price
                point
                that is competitive with similar or comparable products offered by
                our
                competitors;•
            the
                success of our efforts to develop, improve and satisfactorily address
                any
                issues relating to our technology;•
            our
                ability to effectively compete with companies that have substantially
                greater market presence and financial, technical, marketing and other
                resources than us including (i) local ISPs, (ii) national and regional
                ISPs, (iii) established online services; (iv) nonprofit or educational
                ISPs; (v) national telecommunications companies; (vi) Regional Bell
                Operating Companies (“RBOCs”); (vii) competitive local exchange carriers;
                and (viii) cable operators;•
            our
                ability to adapt to the consolidation of existing ISPs with or into
                larger
                entities, or entry of new entities into the Internet services market,
                would likely result in greater competition for the
                Company;•
            our
                ability to collect dial around compensation owed to our pay telephone
                business from third party payors; and•
            the
                continued erosion of coin revenues in our pay telephone business
                resulting
                from the penetration of wireless technologies and prepaid calling
                cards.





38




There
      can
      be no assurance that the Company will have the financial resources, technical
      expertise or marketing and support capabilities to compete successfully. Failure
      to do so could harm our business and operating results in a material way and
      could cause us to reduce or cease operations.





**Recent
      Industry Trends Could Adversely Affect Our Ability to Compete in the Wireless
      Communications Industry and Significantly Reduce the Likelihood of Our Success**





The
      wireless communications industry has experienced consolidation of participants,
      and this trend may continue. If wireless carriers consolidate with companies
      that utilize technologies that are similar to or compete with our wireless
      technology, our proportionate share of the emerging market for wireless
      technologies may be reduced or eliminated. This reduction or elimination of
      our
      market share could reduce our ability to obtain profitable operations and could
      even cause us to reduce or cease operations.





In
      addition, the increasing number of municipally sponsored wireless network
      opportunities is attracting the interest of very large competitors. For example,
      competitors for the Philadelphia network included Verizon, Comcast and
      Earthlink. According to a published report, the city of San Francisco received
      plans from 26 companies in response to a request for proposals, including
      Cingular Wireless, Earthlink and Google.





The
      activity of these competitors, with resources far greater than ours, could
      adversely affect our ability to obtain additional awards for the deployment
      and
      management of wireless networks and significantly reduce the likelihood of
      success for our emerging wireless network and other businesses.





**Our
      Payphone Division is Subject to Intense Competition That May Result in Future
      Revenue Declines**





Through
      our Davel subsidiary, we compete with other independent pay telephone providers
      and large local exchange carriers for the locations where we install and operate
      pay telephones. Many of these competitors have substantially greater financial,
      marketing and other resources than us.





Additionally,
      Davel indirectly competes with other telecommunications providers,
      including providers of wireless services and prepaid calling card companies,
      for
      end users to utilize our pay telephones to make local and long distance calls.
      The proliferation of wireless communication devices has continued to reduce
      the
      use of pay telephones. For example, the cellular telephone business of CloseCall
      represents indirect competition for Davel.   Furthermore, certain providers
      of wireless communication devices have continued to introduce rate plans,
      including pre-paid rate plans, that are competitively priced with certain of
      the
      products offered by us and have negatively impacted the usage of pay telephones
      throughout the nation. The effect on our business is that revenues of Davel
      are
      steadily declining. Davel’s revenues were $32,283,029 for the nine months ended
      December 31, 2005 compared with $44,007,674 (including the pre-acquisition
      portion) for the corresponding period of the prior year.





If
      we are
      unsuccessful in increasing revenues from other sources, the declining payphone
      business may contribute to declines in consolidated revenues and the incurring
      of operating losses.





**Davel’s
      Reliance on Third Party Providers Could Delay the Timely Receipt of Accounts
      Receivable**





Davel
      relies on third party providers to provide local access, long distance and
      operator services to its pay telephones. The uncertainty with the greatest
      potential negative financial impact relates to revenue from and collectibility
      of access code calls and toll-free dialed calls, or dial around compensation
      (i.e., intercarrier compensation paid to us by the providers of 800 numbers
      at
      the rate of 49.4 cents per call). In current quarters, Davel initially
      recognizes revenue related to non-coin dial-around calls that are initiated
      from
      a Company payphone in order to gain access to a long distance company or to
      make
      a standard toll free cal l based on estimates.   The inter-exchange
      carriers have historically paid for fewer dial-around calls than are actually
      made and the collection period for dial-around revenue is generally four to
      six
      months, but can be in excess of a year.   The estimates of revenue are
      based on the historical analysis of calls placed and amounts collected. These
      analyses are updated on a   quarterly basis.   Recorded amounts of
      revenue relating to prior periods may be adjusted based on the amounts of actual
      receipts and/or an unexpected change in the historical trends of calls and/or
      collections.





Dial
      around compensation represents a material percentage of our consolidated
      revenues. Dial around revenue was approximately $ 8,082,691 in the nine months
      ended December 31, 2005, representing approximately 10.7% of consolidated
      revenues for the period. The amount of dial-around revenue estimated to be
      collectible and included in the balance of accounts receivable at December
      31,
      2005 was $5,453,041.   We depend on the third-party service providers to
      quickly and accurately report and pay amounts owed to us as dial around
      compensation.   Our inability to obtain such reports and/or our inability
      to collect amounts owed to us could result in material reductions in accounts
      receivable with   material adverse effects to future consolidated revenues
      and net income.




39





**If
      We Are Unable to Raise Additional Capital, We May Be Unable to Make Acquisitions
      or to Fund Our Future Operations**





We
      have
      relied almost entirely on external financing to fund our operations and
      acquisitions to date. We have been particularly reliant on funds provided by
      Cornell Capital. Such financing has historically come from a combination of
      borrowings and sale of common stock. As of February 3, 2006, we have drawn
      a
      total of $27,823,129 in funds under the SEDA resulting in the issuance of
      approximately 135,547,132 shares of our common stock to Cornell Capital. We
      registered 250,000,000 shares of our common stock for resale by Cornell Capital
      in May 2004. Based on the closing price of our common stock on February 3,
      2006
      ($0.230 per share), approximately 114,452,868 shares would be available for
      the
      conversion of future draws, representing approximately $26,324,160 in remaining
      funds available under the SEDA. At December 31, 2005, we believe that Cornell
      Capital owned approximately 1.2% of our outstanding common stock.   Future
      funding from Cornell Capital under the SEDA may be unavailable if Cornell
      Capital holds more than 9.9% of our outstanding common stock at the time
      financing is needed. In addition, the term of the current SEDA expires in May
      2006.





Over
      the
      next two years we anticipate that, in addition to the funds available to us
      under the SEDA with Cornell Capital, we may need to raise additional or
      alternative capital to fund major acquisitions and to grow our emerging
      businesses.   We anticipate that these additional funds will be in the
      range of $10 million to $50 million, depending on the pace of growth and /or
      the
      size of future acquisitions.





If
      our
      ability to draw funds under the SEDA in the future is limited, our efforts
      to
      negotiate an extension to the SEDA on acceptable terms are unsuccessful, or
      we
      are unable to obtain capital from alternative sources when needed on favorable
      terms, we may be unable to adequately fund our future operations and continuing
      expansion; to successfully promote our brand name, products and services; to
      develop or enhance our service offerings; to take advantage of business
      opportunities; or to respond to competitive market pressures. Any resulting
      reduction in our operations may result in a lower stock price. In addition,
      the
      issuance of any additional shares will reduce the percentage ownership of a
      stockholder with a fixed number of shares of our common stock.





**We
      May Not Successfully Execute or Integrate Our Acquisitions Which Could Harm
      Our
      Business**





Our
      business model is dependent upon growth through acquisition of other
      telecommunication service providers. We have completed 17 acquisitions during
      the 21 month period ended December 31, 2005. We expect to continue making
      acquisitions that will enable us to build our Internet services, competitive
      local exchange carrier and wireless broadband businesses. Acquisitions involve
      numerous risks, including the following:





•
            Difficulties
                in integrating the operations, technologies, products and personnel
                of the
                acquired companies;•
            Diversion
                of management’s attention from normal daily operations of the business;•
            Difficulties
                in entering markets in which we have no or limited direct prior experience
                and where competitors in such markets have stronger market
                positions;•
            Initial
                dependence on unfamiliar partners;•
            Insufficient
                revenues to offset increased expenses associated with acquisitions;
                and•
            The
                potential loss of key employees of the acquired companies.





Acquisitions
      may also cause us to:





•
            Issue
                common stock that would dilute our current stockholders’ percentage
                ownership;•
            Assume
                liabilities;•
            Record
                goodwill and non-amortizable intangible assets that will be subject
                to
                impairment testing on a regular basis and potential periodic impairment
                charges;•
            Incur
                amortization expenses related to certain intangible assets;•
            Incur
                large and immediate write-offs, and restructuring and other related
                expenses; or•
            Become
                subject to litigation.





Mergers
      and acquisitions are inherently risky, and no assurance can be given that our
      previous or future acquisitions will be successful and will not materially
      adversely affect our business, operating results or financial condition. **** In
      order
      to achieve the critical mass of business activity necessary to successfully
      execute our business plan, we plan to continue making strategic acquisitions
      and
      significantly increase the number of strategic partners and customers that
      use
      our technology and services. This growth has placed, and will continue to place,
      significant strain on our personnel, systems and resources. We expect that
      we
      will continue to hire employees, including technical, management-level
      employees, and sales staff, in the foreseeable future. This growth will require
      us to improve management, technical, information and accounting systems,
      controls and procedures. We may not be able to maintain the quality of our
      operations, control our costs, continue complying with all applicable
      regulations and expand our internal management, technical information and
      accounting systems in order to support our desired growth. We cannot be sure
      that we will manage our growth effectively, and our failure to do so could
      cause
      us to reduce or cease operations.




40





Many
      of
      the companies that we have acquired have been very small and/or privately held.
      Consequently, we have made acquisition decisions based on historical information
      that has not been audited. Generally, we structure our merger agreements to
      give
      us the right to make subsequent adjustments to the purchase consideration based
      on the subsequent discovery of inaccuracies. However, the process requires
      that
      senior management spend significant amounts of time resolving disputes with
      former owners of the acquired companies. In addition, we have been confronted
      with the challenges of managing many remotely located operations and combining
      different systems. Although we have been successful in retaining key managers
      and other employees of our major acquired companies, the lack of employee
      retention at certain smaller acquired companies has adversely affected the
      integration of operations and the retention of customers.





Failure
      to manage and successfully integrate acquisitions we make could harm our
      business and operating results in a material way.





**We
      May Not Be Successful in Obtaining and Retaining Key Employee s Which Could
      Adversely Affect Our Ability to Operate, Grow and Manage Our Businesses**





We
      have
      been successful in making important additions to our management, including
      not
      only members of the management teams of certain acquired companies but new
      hires
      as well. For example, our executive management team has been expanded to include
      senior executive officers for each of our three operating business segments,
      an
      executive vice president focused on the integration of our acquired operations,
      and a general counsel. In addition, employment contract extensions were
      negotiated with our chief executive and other key officers. Our future success
      depends in a large part upon the continued service of key members of our senior
      management team. In particular, our chief executive officer, Mr. Jay O. Wright,
      is critical to the overall management of our Company as well as the development
      and implementation of our business strategy. Although we have designed
      employment agreements with Mr. Wright and other key executives that we believe
      provide incentives to perform at high levels and to fulfill the terms of their
      agreements with us, each executive, or any other employee, may terminate their
      employment with us at an y time. Our future success also depends on our ability
      to identify, attract, hire, retain and motivate other well-qualified managerial,
      technical, sales and marketing personnel. There can be no assurance that these
      professionals will be available in the market or retained, or that we will
      be
      able to meet or to continue to meet their compensation requirements. Failure
      to
      establish and maintain an effective management team and work force could
      adversely affect our ability to operate, to grow and to manage our businesses.





**Impairment
      of Goodwill Could Result in Significant Future Charges That Could Impede Our
      Ability to Raise Capital**





At
      December 31, 2005, our balance sheet included intangible assets with a total
      carrying value of approximately $46,403,998, representing 56% of total assets
      and including approximately $37,310,829 in goodwill. Substantially, this
      goodwill has been recorded in connection with the series of acquisitions
      completed by us since January 1, 2004. GAAP requires that we assess the fair
      values of acquired entities at least annually in order to identify any
      impairment in the values. We perform our annual impairment tests for goodwill
      at
      fiscal year-end. However, on a quarterly basis, we are alert for events or
      circumstances that would more likely than not reduce the fair value of a
      reporting segment below its carrying amount. If we determine that the fair
      value
      of an acquired entity is less than the net assets of the entity, including
      goodwill, an impairment loss would be identified and recorded at that time.





During
      the three months ended December 31, 2005, both the Internet and voice services
      segments incurred operating losses that were not expected. As a result,
      management reviewed the carrying values of the assets of these segments and
      determined that an adjustment for goodwill impairment was appropriate at
      December 31, 2005. The Company recorded an impairment charge in the amount
      of
      $3,764,429, including $1,945,519 relating the Internet service companies and
      $1,818,910 related to Affinity. The negative customer churn of dial-up Internet
      access customers has exceeded management’s expectations, contributing to the net
      loss incurred by this segment during the most recent quarter. The Company has
      experienced a significant and steady loss of Affinity customers, and incurred
      bad debt losses at a greater rate than in our other CLEC companies. The
      impairment charge represented approximately 12.8% and 73.0% of the goodwill
      related to the Internet service companies (excluding InReach) and Affinity,
      respectively.





Future
      assessments of the acquisition fair values could identify material impairment
      losses resulting in substantial write-offs of goodwill. Such adjustments could
      have material adverse effects on our results of operations and our financial
      position, and could impede our ability to raise capital and/or to make
      acquisitions.





**If
      We Are Unable to Successfully Acquire the Necessary Equipment, the Deployment
      and Management of Our Wireless Networks Could Be Delayed**




41





The
      successful deployment and management of a broadband wireless network, like
      the
      Tempe network, depends on our ability to obtain the necessary technical
      equipment and to acquire such equipment when needed at prices and on terms
      acceptable to us. Required equipment includes antennas, transmitters and network
      routers. For the Tempe network, we have been able to successfully obtain such
      equipment. We currently expect that capital expenditures for the Tempe network
      will approximate $2,500,000; as of December 31, 2005, we had incurred such
      costs
      of approximately $839,000. However, there can be no assurance that our
      purchasing efforts will continue to be successful. If we are unable to acquire
      the remainder of the equipment necessary for the successful completion of the
      Tempe wireless network when needed, or are unable to purchase equipment for
      future networks, all at prices and on terms acceptable to us, the deployment,
      ownership and management of broadband wireless networks could be delayed.





**The
      Unavailability of Telecommunication Lines Could Threaten Our Business**





Our
      ability to deliver good quality services at competitive prices depends on our
      ability to obtain access to T-l and dial-up lines pursuant to pricing and other
      terms that are acceptable to us. Access to these lines necessary for providing
      services to a significant portion of our subscribers is obtained from incumbent
      local exchange carriers like Verizon, SBC and Bell South. In 2005, we have
      been
      successful in reaching certain important agreements with each of these carriers
      providing us with opportunities to expand services and the geographic coverage
      of such services and predictable prices, avoiding any interruption in service
      to
      our customers. In the event that any of the carriers would b e unable or
      unwilling to provide service to us, even if legally required to do so, our
      ability to service existing customers or add new customers could be adversely
      impaired in a material manner.





**Our
      Payphone Division’s Revenue Is Subject to Seasonal Variations**





Davel's
      revenue from pay telephone operations is affected by seasonal variations. Since
      many of its pay telephones are installed outdoors, weather patterns have
      differing effects on our revenue depending upon the region of the country where
      the pay telephones are located. For example, the pay telephones installed and
      operated throughout the Midwestern and eastern United States produce their
      highest call volumes during the second and third calendar quarters, when the
      climate tends to be more favorable. Currently, approximately 22% of our 36,000
      payphones are located in these regions of the country. Unusually severe weather
      in these regions could exacerbate the seasonal variations in revenues resulting
      in adverse effects on our business. In addition, changes in the geographic
      distribution of Davel's pay telephones in the future may result in differing
      seasonal variations in our operating results.





**Item
      3. Controls and Procedures.**





Under
      the
      supervision and with the participation of our management, including our Chief
      Executive Officer (CEO) and Chief Financial Officer (CFO), we conducted an
      evaluation of our disclosure controls and procedures (as defined in Rules
      13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the
      end
      of the period covered by this Quarterly Report on Form 10-QSB. Based upon that
      evaluation, our CEO and our CFO have concluded that the design and operation
      of
      our disclosure controls and procedures were effective to ensure that information
      required to be disclosed by us in reports that we file or submit under the
      Exchange Act is recorded, processed, summarized and reported within the time
      periods specified in the rules and forms of the Securities and Exchange
      Commission and that information required to be disclosed in the reports that
      we
      file or submit under the Exchange Act is accumulated and communicated to
      management, including our principal executive and financial officers, to allow
      timely decisions regarding required disclosure.





There
      have been no changes in our internal controls over financial reporting that
      occurred during the period covered by this Quarterly Report on Form 10-QSB
      that
      have materially affected, or are reasonably likely to materially affect, our
      internal controls over financial reporting.




42


**PART
      II**


**OTHER
      INFORMATION**





**Item
      1. Legal Proceedings.**





As
      of
      December 31, 2005, the Company was party to the following material legal
      proceedings.





1)
      At the
      time that we acquired Davel, there was existing litigation brought against
      Davel
      and other defendants regarding a claim associated with certain alleged patent
      infringement. Davel has been named as a defendant in a civil action captioned
      Gammino v. Cellco Partnership d/b/a Verizon Wireless, et al., C.A. No. 04-4303
      filed in the United States District Court for the Eastern District of
      Pennsylvania. The plaintiff claims that Davel and other defendants allegedly
      infringed its patent involving the prevention of fraudulent long-distance
      telephone calls. Davel continues to review and investigate the allegations
      set
      forth in the complaint, continues to assess the validity of the Gammino Patents
      and is in the process of determining whether the technology purchased by Davel
      from third parties infringes upon the Gammino Patents. The plaintiff is seeking
      monetary relief of at least $7,500,000. The case is in the discovery phase
      of
      the litigation.





According
      to the terms of the Davel acquisition, the former secured lenders of Davel,
      subject to certain limitations addressed below, have agreed to reimburse the
      Company for the litigation cost and any losses resulting from the Gammino
      lawsuit. The former secured lenders have agreed to fund such costs from future
      Regulatory Receipts that were assigned to them by Davel. The Regulatory Receipts
      are being deposited into a third-party escrow account and used to reimburse
      the
      Company for costs incurred in connection with the litigation. The secured
      lenders are not required to fund the escrow account or otherwise reimburse
      the
      Company for amounts, if any, in excess of actual Regulatory Receipts collected.
      Any amount remaining in the escrow account at the conclusion of the litigation
      is to be distributed to the former secured lenders. Subsequent to March 31,
      2005, the Company has received significant Regulatory Receipts, which are being
      held in escrow. These funds can be used to reimburse the Company for costs
      incurred in defending or settling the litigation matter. We believe that there
      are sufficient funds in the escrow account to pay both our legal costs incurred
      in the defense against the plaintiff’s infringement claims and any potential
      judgment that we believe could reasonably be expected. There is a potential
      exposure of the Company to the $7,500,000 claim in the event that the Regulatory
      Receipts that are being held in escrow are insufficient to cover any potential
      judgment against the Company should it be found liable for the full monetary
      amount the plaintiff is seeking.





2)
      On
      September 10, 2004, CloseCall was served a complaint in an action captioned
      Verizon Maryland Inc., Verizon New Jersey Inc., and Verizon Delaware Inc. in
      the
      Circuit Court for Montgomery County, Maryland. Verizon has sued for “in excess
      of $1,000,000” based on alleged unpaid invoices for services provided to
      CloseCall. Verizon asserts that CloseCall has underpaid the Federal Subscriber
      Line Charges billed by Verizon, by applying an uncollectible factor to the
      amounts charged by Verizon. In addition, Verizon contends that CloseCall has
      underpaid the amounts owed to Verizon by misapplying the terms of the “merger
      discount” offered to CLECs, including CloseCall, as a result of the merger
      between Bell Atlantic and GTE. CloseCall filed an Answer and Counterclaims
      against Verizon on November 1, 2004. In response to the Complaint filed by
      Verizon, CloseCall has asserted two primary defenses. First, CloseCall contends
      that its resale agreements with Verizon allow CloseCall to either (a) pay
      Verizon the Subscriber Line Charges billed or (b) collect the Subscriber Line
      Charges from CloseCall’s customers and remit those collections to Verizon.
      CloseCall has opted to collect the Subscriber Line Charges from its customers
      and remit those sums to Verizon. As with payments made to taxing authorities,
      CloseCall applies its uncollectible factor to the amounts billed by Verizon
      for
      the Subscriber Line Charges to account for the portion of CloseCall’s subscriber
      base that does not pay for the services billed. Second, with regard to the
      merger discount, CloseCall has calculated the amounts owed to Verizon for resold
      telecommunications services by applying the terms of the promotional discount
      set forth on Verizon’s website at the time CloseCall opted into the discount in
      January 2001. At that time, CloseCall’s account manager at Verizon represented
      that the website included the applicable merger discount provisions.
      Subsequently, and without notice to CloseCall, Verizon added new and different
      conditions that attempted to limit the application of the merger discount to
      CloseCall.





CloseCall
      has also filed counterclaims against Verizon. The first claim stems from
      Verizon’s refusal to resell certain bundled telecommunications services to
      CloseCall, despite repeated requests by CloseCall and the requirements of the
      Communications Act of 1934, as amended. In addition, CloseCall has asserted
      damages as a result of Verizon’s entry into secret resale agreements with two
      CLECs, offering those companies deep discounts on telecommunications services
      not offered to other CLECs, including CloseCall. The basis for this counterclaim
      is SEC regulations that prohibit an incumbent carrier from offering different
      rates or different levels of discounts to similarly situated CLECS. The damages
      associated with this claim will be determined by data and information that
      has
      not yet been produced by Verizon. CloseCall has asserted damages as a result
      of
      Verizon’s failure to provide dialing parity to CloseCall’s customers. The
      damages claimed will depend on data that has not yet been produced by Verizon.
      CloseCall has asserted a claim for tortious interference with business relations
      as a result of Verizon’s policy of blocking local service change orders for any
      customer that also receives DSL service from or through Verizon. CloseCall
      has
      also made a declaratory judgment claim for inaccurate and improper billings
      by
      Verizon, including carrier access billing service charges. Currently, the
      parties are in discovery. While CloseCall believes that its counterclaims
      against Verizon are valid and that it has meritorious defenses to the
      allegations contained in the complaint and intends to vigorously prosecute
      the
      claims as well as defend itself, CloseCall cannot at this time predict its
      likelihood of success on the merits.




43





**Item
      2. Changes in Securities.**




In
      October 2005, the Company completed the conversion of debentures and other
      amounts owed to the former owners of The River with the issuance of 1,846,733
      shares of common stock to the note holders.





In
      November 2005, the Company issued 4,357,798 shares of its common stock in
      connection with its acquisition of InReach.





In
      December 2005, the Company issued 300,000 shares of its common stock, valued
      at
      $58,500, in connection with the receipt of investment banking
      services.





During
      the nine months ended December 31, 2005, the Company issued 55,000,000 shares
      of
      common stock to the escrow agent for use in the conversion of borrowings made
      under the SEDA.





In
      November 2005 and pursuant to our 2001 Equity Performance Plan, we awarded
      options to purchase 6,696,000 shares of our common stock to our employees.
      The
      stock options are exercisable at a purchase price of $0.22 per share. 50% of
      the
      stock options will vest in equal installments on March 31, 2006, 2007 and 2008;
      the remaining 50% will vest depending on our achievement of a certain EBITDA
      amount and the employees achieving certain other objectives during the fiscal
      year ending March 31, 2007.





**Item
      3. Defaults upon Senior Securities.**





There
      were no defaults upon senior securities during the three months ended December
      31, 2005.





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




There
      were no matters submitted to the stockholders for a vote during the three months
      ended December 31, 2005.





**Item
      5. Other Information.**




Not
      applicable.




44





**Item
      6. Exhibits.**




**Exhibit
                No.**
            **Description**
            
            **Location**2.1
            Agreement
                and Plan of Merger by and among Registrant, Neoreach, Inc., Transcordia
                Acquisition Corp., Transcordia, LLC and its Unit Holders, dated April
                2005
            
            Incorporated
                by reference to Exhibit 2.1 to the Registrant’s Form 10-QSB filed August
                15, 2005.2.2
            Agreement
                and Plan of Merger by and among Registrant, Neoreach, Inc., Neoreach
                Wireless, Inc., Evergreen Open Broadband Corporation, and Certain
                Shareholders
            
            Incorporated
                by reference to Exhibit 2.1 to the Registrant’s Form 10-QSB filed August
                15, 2005.2.3
            Agreement
                and Plan of Merger, dated June 30, 2005, by and among the Registrant,
                AFN
                Acquisition Corp., American Fiber Network, Inc. and the Bethell Family
                Trust
            
            Incorporated
                by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
                filed on July 6, 2005.10.1
            Amendment
                No. 1 to Employment Agreement between Davel Communications, Inc.
                and Tammy
                L. Martin, dated April 20, 2005
            
            Incorporated
                by reference to Exhibit 10.29 to the Registrant’s Form 10-KSB filed June
                28, 2005.10.2
            Amendment
                No. 2 to Employment Agreement between Davel Communications, Inc.
                and Tammy
                L. Martin, dated May 26, 2005
            
            Incorporated
                by reference to Exhibit 10.30 to the Registrant’s Form 10-KSB filed June
                28, 2005.10.3
            Amended
                and Restated Executive Employment Agreement, dated June 16, 2005
                between
                Jay O. Wright and the Company
            
            Incorporated
                by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
                8-K filed on June 20, 2005.10.4
            Amended
                and Restated Executive Employment Agreement, dated June 16, 2005
                between
                Kurt Gordon and the Company
            
            Incorporated
                by reference to Exhibit 10.32 to the Registrant’s Form 10-KSB filed June
                28, 2005.10.5
            Amended
                and Restated Executive Employment Agreement, dated June 16, 2005
                by and
                among the Company, CloseCall America, Inc. and Tom
                Mazerski
            
            Incorporated
                by reference to Exhibit 10.33 to the Registrant’s Form 10-KSB filed June
                28, 2005.10.6
            Amended
                and Restated Executive Employment Agreement, dated June 16, 2005,
                between
                Geoffrey Amend and the Company
            
            Incorporated
                by reference to Exhibit 10.34 to the Registrant’s Form 10-KSB filed June
                28, 2005.10.7
            Securities
                Purchase Agreement, dated as of May 13, 2005, by and between the
                Company
                and Cornell Capital
            
            Incorporated
                by reference to Exhibit 10.35 to the Registrant’s Form 10-KSB filed June
                28, 2005.10.8
            Secured
                Convertible Debenture, issued on May 13, 2005 by the Company to Cornell
                Capital
            
            Incorporated
                by reference to Exhibit 10.36 to the Registrant’s Form 10-KSB filed June
                28, 2005.10.9
            Amended
                and Restated Collateral Assignment of Intellectual Property Rights,
                made
                as of May 13, 2005, by and among the Company, the Company subsidiaries
                identified therein and Cornell Capital
            
            Incorporated
                by reference to Exhibit 10.37 to the Registrant’s Form 10-KSB filed June
                28, 2005.10.10
            Amended
                and Restated Security Agreement, dated as of May 13, 2005, by and
                among
                the Company, the Company subsidiaries identified therein and Cornell
                Capital
            
            Incorporated
                by reference to Exhibit 10.38 to the Registrant’s Form 10-KSB filed June
                28, 2005.10.11
            Investor
                Registration Rights Agreement, dated as of May 13, 2005 by and between
                the
                Company and Cornell Capital
            
            Incorporated
                by reference to Exhibit 10.39 to the Registrant’s Form 10-KSB filed June
                28, 2005.




45




10.12
            Amended
                and Restated Guaranty Agreement, dated as of May 13, 2005, made by
                each of
                the direct and indirect subsidiaries of the Company in favor of Cornell
                Capital
            
            Incorporated
                by reference to Exhibit 10.40 to the Registrant’s Form 10-KSB filed June
                28, 2005.10.13
            Warrant
                issued by the Company to Cornell Capital dated May 13,
                2005
            
            Incorporated
                by reference to Exhibit 10.41 to the Registrant’s Form 10-KSB filed June
                28, 2005.10.14
            Master
                Agreement for Services between Sprint Communications Company L.P.
                and Kite
                Broadband, LLC, dated May 20, 2005*
            
            Incorporated
                by reference to Exhibit 2.1 to the Registrant’s Form 10-QSB filed August
                15, 2005.10.15
            Executive
                Employment Agreement dated September 1, 2005, between James L. Magruder,
                Jr. and the Company
            
            Incorporated
                by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
                8-K filed September 9, 2005.10.16
            Executive
                Employment Agreement dated February 1, 2006, between Jerry M. Sullivan,
                Jr. and the Company
            
            Incorporated
                by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed February
                13, 2006.20.1
            Letter
                from Jay O. Wright, President and Chief Executive Officer of the
                Company
                to the Stockholders, dated April 21, 2005
            
            Incorporated
                by reference to Exhibit 99.1 to the Registrant’s Current Report on Form
                8-K filed on April 26, 200521.1
            Subsidiaries
                of Registrant
            
            Incorporated
                  by reference to the Registrant’s Quarterly Report on Form 10-QSB
                  filed on February 14, 2006.31.1
            Certification
                by Jay O. Wright, Chief Executive Officer, pursuant to Rule
                13a-14(a)
            
            Incorporated
                  by reference to the Registrant’s Quarterly Report on Form 10-QSB
                  filed on February 14, 2006.31.2
            Certification
                by Kurt Gordon, Chief Financial Officer, pursuant to Rule
                13a-14(a)
            
            Incorporated
                  by reference to the Registrant’s Quarterly Report on Form 10-QSB
                  filed on February 14, 2006.32.1
            Certification
                by Jay O. Wright and Kurt Gordon, pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002**
            
            Incorporated
                  by reference to the Registrant’s Quarterly Report on Form 10-QSB
                  filed on February 14, 2006.





*
      Confidential treatment has been requested for certain portions of this document
      pursuant to an application for confidential treatment sent to the Securities
      and
      Exchange Commission. Such portions are omitted from this filing and filed
      separately with the Securities and Exchange Commission.




*
      * These
      certifications are not deemed filed by the SEC and are not to be incorporated
      by
      reference in any filing of the Registrant under the Securities Act of 1933
      or
      the Securities Exchange Act of 1934, irrespective of any general incorporation
      language in any filings.




46




**SIGNATURES**





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





**MOBILEPRO
                CORP.**Date: May
                10, 2006
            By:
            /s/ Jay
                O. WrightJay
                O. Wright, Chief Executive OfficerDate: May
                10, 2006
            By:
            /s/ Richard
                H. DeilyRichard
                H. Deily, Chief Accounting Officer




47