**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        DC 20549**
 
 **FORM
        10-Q**
 
 **QUARTERLY
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**
 **SECURITIES
        EXCHANGE ACT OF 1934**
 
 **For
        the Quarterly Period Ended June 30, 2007**
 
 **Commission
        File Number** **000-51010**
 
 **MOBILEPRO
        CORP.**
 (Exact
        name of registrant as specified in its charter)
 
 **DELAWARE**
              
              **87-0419571**(State
                  or other jurisdiction of
              
              (I.R.S.
                  Employerincorporation
                  or organization)
              
              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)
 
 Indicate
        by check mark whether the registrant (1) filed all reports required to be
        filed
        by Section 13 or 15(d) of the Securities Exchange Act of 1934 (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 large accelerated filer, an
        accelerated filer, or a non-accelerated filer. See definition of “accelerated
        filer and large accelerated filer in Rule 12b-2 of the Exchange Act.
 
 Large
                  accelerated filer o
              Accelerated
                  filer x
              Non-accelerated
                  filer 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
  Indicate
        the number of shares outstanding of each of the issuer’s classes of common
        equity, as of the latest practicable date: As of August 3, 2007, the Company
        had
        775,079,608 outstanding shares of its common stock, $0.001 par value per
        share.
  
  **TABLE
        OF CONTENTS**
 
 **PAGE****ITEM
                  NUMBER AND CAPTION****PART
                  I**
              
              **FINANCIAL
                  INFORMATION**
              
              3ITEM
                  1.
              
              FINANCIAL
                  STATEMENTS
              
              3NOTES
                  TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              
              8ITEM
                  2.
              
              MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
                  CONDITION
              
              22ITEM
                  3.
              
              QUANTITATIVE
                  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
              
              30ITEM
                  4.
              
              CONTROLS
                  AND PROCEDURES
              
              30**PART
                  II**
              
              **OTHER
                  INFORMATION**
              
              33ITEM
                  1.
              
              LEGAL
                  PROCEEDINGS
              
              33ITEM
                  1A.
              
              RISK
                  FACTORS
              
              34ITEM
                  2.
              
              UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
              
              39ITEM
                  3.
              
              DEFAULTS
                  UPON SENIOR SECURITIES
              
              40ITEM
                  4.
              
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS
              
              40ITEM
                  5.
              
              OTHER
                  INFORMATION
              
              40ITEM
                  6.
              
              EXHIBITS
              
              41**SIGNATURES**
              
              46
  2
  **PART
        I**
 **FINANCIAL
        INFORMATION**
 
 **Item
        1. Financial Statements.**
 **MOBILEPRO
          CORP. AND SUBSIDIARIES**
 **CONDENSED
          CONSOLIDATED BALANCE SHEETS**
  **June
                    30,**
                
                **March
                    31,****2007**
                
                **2007****(unaudited)****ASSETS****CURRENT
                    ASSETS**Cash
                    and cash equivalents
                
                $
                1,746,910
                
                $
                1,993,781Restricted
                    cash
                
                
                400,000
                
                
                400,000Accounts
                    receivable, net
                
                
                2,683,099
                
                
                3,222,726Prepaid
                    expenses and other current assets
                
                
                681,541
                
                
                693,717Assets
                    of companies held for sale
                
                
                51,221,301
                
                
                52,316,429**Total
                    Current Assets**
                
                
                56,732,851
                
                
                58,626,653**FIXED
                    ASSETS, NET OF ACCUMULATED DEPRECIATION**
                
                
                7,800,953
                
                
                8,414,561**OTHER
                    ASSETS**Customer
                    contracts and relationships, net of amortization
                
                
                1,214,322
                
                
                1,333,516Other
                    assets
                
                
                875,324
                
                
                934,1912,089,646
                
                
                2,267,707**TOTAL
                    ASSETS**
                
                $
                66,623,450
                
                $
                69,308,921
  The
            accompanying notes are an integral part of the condensed consolidated
            financial
            statements.
  3
 **MOBILEPRO
          CORP. AND SUBSIDIARIES**
 **CONDENSED
          CONSOLIDATED BALANCE SHEETS**
 **(CONTINUED)**
  **June
                    30,**
                
                **March
                    31,****2007**
                
                **2007****(unaudited)****LIABILITIES
                    AND STOCKHOLDERS' EQUITY****CURRENT
                    LIABILITIES**Current
                    portion of convertible debentures
                
                $
                9,790,425
                
                $
                15,101,081Note
                    payable
                
                
                1,100,000
                
                
                -Accounts
                    payable and accrued expenses
                
                
                9,003,708
                
                
                8,557,629Deferred
                    revenue
                
                
                600,000
                
                
                600,000Liabilities
                    of companies held for sale
                
                
                20,432,399
                
                
                20,199,192**Total
                    Current Liabilities**
                
                
                40,926,532
                
                
                44,457,902**LONG-TERM
                    LIABILITIES**Convertible
                    debentures, net of unamortized debt discount andcurrent
                    portion
                
                
                6,389,095
                
                
                2,892,751**Total
                    Long-Term Liabilities**
                
                
                6,389,095
                
                
                2,892,751**TOTAL
                    LIABILITIES**
                
                
                47,315,627
                
                
                47,350,653**STOCKHOLDERS'
                    EQUITY**Preferred
                    stock, $.001 par value, 20,035,425 shares authorized,35,378
                    shares issued and outstanding at June 30, 2007 and March 31,
                    2007
                
                
                35
                
                
                35Common
                    stock, $.001 par value, 1,500,000,000 shares authorized,775,079,608
                    and 692,477,518 shares issued and outstandingat
                    June 30, 2007 and March 31, 2007
                
                
                775,080
                
                
                695,592Additional
                    paid-in capital
                
                
                100,792,618
                
                
                98,533,886Accumulated
                    deficit
                
                
                (82,259,910
                )
                
                (77,271,245
                )**Total
                    Stockholders' Equity**
                
                
                19,307,823
                
                
                21,958,268**TOTAL
                    LIABILITIES AND STOCKHOLDERS' EQUITY**
                
                $
                66,623,450
                
                $
                69,308,921
 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****June
                    30,****2007**
                
                **2006****REVENUES**
                
                $
                5,967,820
                
                $
                8,197,498**OPERATING
                    COSTS AND EXPENSES**Cost
                    of services (exclusive of depreciation and amortization)
                
                
                3,564,786
                
                
                4,770,713Payroll,
                    professional fees and related expenses (exclusive of stock
                    compensation)
                
                
                3,590,133
                
                
                4,152,514Office
                    rent and expenses
                
                
                152,373
                
                
                205,139Other
                    general and administrative expenses
                
                
                385,243
                
                
                254,200Depreciation
                    and amortization
                
                
                717,181
                
                
                760,737Stock
                    compensation
                
                
                200,553
                
                
                485,091Restructuring
                    charges
                
                
                -
                
                
                281,635**Total
                    Operating Costs and Expenses**
                
                
                8,610,269
                
                
                10,910,029**OPERATING
                    LOSS**
                
                
                (2,642,449
                )
                
                (2,712,531
                )**INTEREST
                    AND OTHER EXPENSE, NET**
                
                
                (630,725
                )
                
                (503,651
                )**LOSS
                    ON EXTINGUISHMENT OF DEBT**
                
                
                -
                
                
                (409,601
                )**LOSS
                    FROM CONTINUING OPERATIONS BEFORE INCOME TAXES**
                
                
                (3,273,174
                )
                
                (3,625,783
                )**Provision
                    for Income Taxes**
                
                
                -
                
                
                -**LOSS
                    FROM CONTINUING OPERATIONS**
                
                
                (3,273,174
                )
                
                (3,625,783
                )**DISCONTINUED
                    OPERATIONS**Loss
                    from operations of discontinued operations
                
                
                (1,715,491
                )
                
                (1,111,724
                )Income
                    tax benefit
                
                
                -
                
                
                -**LOSS
                    FROM DISCONTINUED OPERATIONS**
                
                
                (1,715,491
                )
                
                (1,111,724
                )**NET
                    LOSS APPLICABLE TO COMMON SHARES**
                
                $
                (4,988,665
                )
                $
                (4,737,507
                )**NET
                    LOSS PER SHARE**Basic
                
                $
                (0.0066
                )
                $
                (0.0082
                )Diluted
                
                $
                (0.0066
                )
                $
                (0.0082
                )**WEIGHTED
                      AVERAGE NUMBER OF COMMON SHARES OUTSTANDING**
                
                
                754,536,951
                
                
                580,059,290
 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 Three Months Ended****June
                    30,****2007**
                
                **2006****CASH
                    FLOWS FROM OPERATING ACTIVITIES**Net
                    loss
                
                $
                (4,988,665
                )
                $
                (4,737,507
                )Loss
                    from discontinued operations
                
                
                1,715,491
                
                
                1,111,724Loss
                    from continuing operations
                
                
                (3,273,174
                )
                
                (3,625,783
                )**Items
                    that reconcile net loss to net cash****(used
                    in) operating activities:**Depreciation
                    and amortization
                
                
                717,181
                
                
                760,737Noncash
                    interest expense and loss on debt extinguishment
                
                
                304,239
                
                
                644,535Common
                    stock issued for services
                
                
                200,553
                
                
                521,091Restructuring
                    charges
                
                
                -
                
                
                281,635Gain
                    on the sale of fixed assets
                
                
                (21,300
                )
                
                -**Changes
                    in assets and liabilities**Decrease
                    in accounts receivable
                
                
                539,627
                
                
                725,522Decrease
                    in other assets
                
                
                71,054
                
                
                238,424(Increase)
                    decrease in net assets of companies held for sale
                
                
                (143,700
                )
                
                500,033Increase
                    (decrease) in accounts payable andand
                    accrued expenses
                
                
                493,822
                
                
                (2,318,254
                )Increase
                    in deferred revenue
                
                
                -
                
                
                600,0002,161,476
                
                
                1,953,723**Net
                    cash (used in) operating activities**
                
                
                (1,111,698
                )
                
                (1,672,060
                )**CASH
                    FLOWS FROM INVESTING ACTIVITIES**Capital
                    expenditures, net
                
                
                84,162
                
                
                (328,735
                )Purchase
                    of certificate of deposit
                
                
                -
                
                
                (50,000
                )Investing
                    activities of discontinued operations
                
                
                (87,013
                )
                
                (1,931,651
                )**Net
                    cash (used in) investing activities**
                
                
                (2,851
                )
                
                (2,310,386
                )**CASH
                    FLOWS FROM FINANCING ACTIVITIES**Net
                    proceeds from common stock issuances
                
                
                -
                
                
                6,661,669Borrowings/(payments)
                    of debt, net
                
                
                1,070,164
                
                
                (3,600,000
                )Financing
                    activities of discontinued operations
                
                
                (543,595
                )
                
                (78,125
                )**Net
                    cash provided by financing activities**
                
                
                526,569
                
                
                2,983,544
 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 Three Months Ended****June
                    30,****2007**
                
                **2006****NET
                    INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
                
                $
                (587,980
                )
                $
                (998,902
                )**CASH
                    AND CASH EQUIVALENTS - BEGINNING OF PERIOD**
                
                
                3,430,844
                
                
                5,397,881**CASH
                    AND CASH EQUIVALENTS - END OF PERIOD**
                
                
                2,842,864
                
                
                4,398,979**LESS
                    CASH AND CASH EQUIVALENTS OF DISCONTINUED
                    OPERATIONS**
                
                
                (1,095,954
                )
                
                (2,241,883
                )**CASH
                    AND CASH EQUIVALENTS OF CONTINUING OPERATIONS**
                
                $
                1,746,910
                
                $
                2,157,096**SUPPLEMENTAL
                    DISCLOSURE OF CASH FLOW **INFORMATION:****Cash
                    paid during the period for interest
                
                $
                6,614
                
                $
                1,006,018**SUPPLEMENTAL
                    DISCLOSURE OF NONCASH **ACTIVITIES:****Amendment
                    to convertible debenture maturity schedules
                
                $
                5,288,656
                
                $
                -Retirement
                    of convertible debentures and accrued interest with common
                    stock
                
                $
                1,967,908
                
                $
                -Amortization
                    of SEDA deferred financing fees
                
                $
                -
                
                $
                147,000
 The
          accompanying notes are an integral part of the condensed consolidated financial
          statements.
 7
 **MOBILEPRO
          CORP. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
          30, 2007**
 **(unaudited)**
  **NOTE
          1-** **ORGANIZATION**
 
 **Overview**
 
 MobilePro
          Corp., incorporated under the laws of the State of Delaware in July 2000,
          is an
          integrated telecommunication services company that has delivered 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 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 has included 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 Overland Park, Kansas. The Company’s Internet services
          segment has included 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 were conducted primarily by a
          wholly owned subsidiary, NeoReach, Inc. (“NeoReach”), and its subsidiary, Kite
          Networks, Inc. (“Kite Networks”, formerly known as NeoReach Wireless, Inc.). The
          wireless networks segment also included the operations of the Company’s
          subsidiary, Kite Broadband, LLC (“Kite Broadband”), a broadband wireless service
          provider. Both Kite Networks and Kite Broadband are based in Ridgeland,
          Mississippi. . The corporate segment has included our Internet gaming
          subsidiary, ProGames Network, Inc. (“ProGames”), that we founded in December
          2005.
 
 On
          June
          30, 2007, the Company entered into a Purchase Agreement (the “USA Agreement”)
          with United Systems Access, Inc. (“USA”), pursuant to which USA agreed to
          acquire all of the outstanding shares of CloseCall and AFN (the Company’s “CLEC
          Business”, which was previously included in the voice services business segment)
          and all of the outstanding shares of DFW and InReach (together these companies
          have comprised the Company’s Internet services provider business segment, or
“ISP Business” - see Note 3).
 
 On
          July
          8, 2007, the Company entered into a Purchase Agreement (the “Gobility
          Agreement”) with Gobility, Inc. (“Gobility”), pursuant to which Gobility
          acquired all of the outstanding shares of NeoReach and Kite Networks, and
          all of
          the outstanding membership interests in Kite Broadband (together these
          companies
          have comprised the Company’s wireless networks business segment, or “Wireless
          Networks” - see Note 3).
 
 **Going
          Concern Uncertainty**
 
 The
          Company has historically lost money. The Company’s accumulated deficit at June
          30, 2007 was $82,259,910. In the three months ended June 30, 2007, the
          Company
          incurred a net loss of $4,988,665. In the fiscal years ended March 31,
          2007,
          2006 and 2005, the Company sustained net losses of $45,898,288, $10,176,407
          and
          $5,359,722, respectively. Over these periods, most of the acquired businesses
          of
          Mobilepro have experienced declining revenues. Although restructuring measures
          have reduced other operating expenses, the Company has been unable to reduce
          the
          corresponding costs of services. In addition, the Company has funded the
          start-up and operations of the municipal wireless networks and online gaming
          businesses without these companies achieving expected revenues. As a result,
          the
          amounts of cash used in operations during the three months ended June 30,
          2007
          and the fiscal year ended March 31, 2007 were $1,111,698 and $6,558,708,
          respectively. Future losses are likely to occur. Accordingly, the Company
          will
          continue to experience liquidity and cash flow problems if it is unable
          to
          improve its operating performance, to sell assets for cash, or to raise
          additional capital as needed and on acceptable terms.
 
 8
  In
          December 2006, the Company engaged an investment banking firm to assist
          in
          evaluating strategic alternatives for the wireless networks business conducted
          by its Kite Networks and Kite Broadband subsidiaries. Efforts to secure
          investment capital for this business or to find a willing buyer resulted
          in the
          Company selling these companies to Gobility. Despite obtaining lease financing
          and deferring payments to several large vendors, the Company was required
          to
          fund the operations of these businesses through the date of the sale. For
          the
          three months ended June 30, 2007, the net loss of this business segment
          was
          $1,983,293.
 
 In
          March
          2007, the Company announced that it had signed a definitive agreement for
          the
          merger of ProGames, its online gaming subsidiary, with and into Winning
          Edge
          International, Inc. Consummation of the transaction was subject to a number
          of
          closing conditions including the arrangement of financing that would have
          sustained the operations of the combined entity. Financing has not been
          arranged. As a result, the merger agreement was terminated and the Company
          continues to fund the operating costs of ProGames. The net loss incurred
          by
          ProGames in the three months ended June 30, 2007 was $232,289.
 
 The
          operating losses incurred by Davel continue to adversely affect the consolidated
          operating results of the Company. As a result, we have intensified efforts
          to
          sell groups of payphones to other operators and to remove remaining unprofitable
          payphones. In June 2007, the Company sold approximately 730 operating payphones
          and received in excess of $200,000 in cash proceeds. Despite these actions,
          Davel incurred a net loss of $1,505,161 for the three months ended June
          30,
          2007.
 
 To
          date,
          Cornell Capital Partners, L.P. (“Cornell Capital”) has been a significant source
          of capital for the Company, providing financing in several forms. During
          the
          fiscal year ended March 31, 2007, the Company borrowed funds under a series
          of
          convertible debentures. The total principal and accrued interest amounts
          owed to
          Cornell Capital under the debentures at June 30, 2007 were $16,199,650
          and
          $428,789, respectively. Using shares of its common stock registered on
          Form S-3
          in November 2006, the Company made principal and interest payments on the
          debentures that totaled $4,880,489 during the fiscal year ended March 31,
          2007,
          and that totaled $1,967,908 from April 2007 through May 2007. However,
          the
          supply of shares registered that related to the convertible debentures
          has been
          exhausted. Cornell Capital has agreed to delay additional installment payments
          until January 1, 2008 when the Company will be obligated to resume making
          total
          weekly principal payments of $375,000 plus accrued interest. Unless additional
          shares are registered by the Company under the Securities Act of 1933 (the
          “Securities Act”), shares acquired by Cornell Capital are tradable under Rule
          144 of the Securities Act, or shares of the Company’s common stock are otherwise
          freely tradable by Cornell Capital without restriction, the Company will
          be
          required to make these payments in cash. However, in the event that the
          Company
          or Cornell Capital receives a legal opinion that Cornell Capital is eligible
          to
          sell shares of the Company’s common stock under Rule 144, the Company will be
          required to resume making weekly payments of principal and accrued interest
          with
          shares of its common stock in September 2007.
 
 In
          April
          2007, the Company announced that its Board of Directors had decided to
          explore
          potential strategic alternatives for the entire Company, and that it had
          received inquiries from potential buyers regarding the purchase of portions
          of
          its business. This initiative was undertaken with the goals of maximizing
          the
          value of the Company’s assets, returning value to the Company’s stockholders and
          eliminating the Company’s debt, particularly amounts payable to Cornell Capital.
 
 The
          Company received letters of interest regarding the acquisition of the CloseCall,
          AFN and the Internet service provider businesses. As disclosed above, on
          June
          30, 2007, the Company entered into an agreement to sell the CLEC and ISP
          Businesses to USA. The total purchase price of $30 million includes cash
          proceeds of approximately $21.9 million and convertible preferred stock
          valued
          at $8.1 million.
 
 9
  With
          the
          cash proceeds expected to be received by the Company from the sale of the
          CLEC
          and ISP Businesses, the Company intends to retire the Cornell Capital
          debentures, plus accrued interest, at the time that cash proceeds are received.
          In May 2007, the Company borrowed $1,100,000 from Cornell Capital under
          a
          promissory note in order to help bridge the Company’s cash flow shortfall until
          the sale of the CLEC Business is completed.
 
 If
          the
          Company fails to permanently eliminate the cash requirements represented
          by the
          Wireless Networks Business, Davel and ProGames, and if a sale of the Wireline
          Business is not consummated on its negotiated terms by December 31, 2007,
          the
          Company will not have the ability to continue as a going concern beyond
          the
          third quarter of the current fiscal year without additional capital and
          a
          significant restructuring of the Cornell Capital debt. Although the consolidated
          financial statements have been prepared on a going-concern basis, the Company
          recorded substantial impairment charges at March 31, 2007 related to the
          goodwill of the Wireless Networks and ISP Businesses and certain fixed
          and
          intangible assets of Davel and Kite Networks.
 
 **Companies
          Held for Sale**
 
 The
          assets and liabilities of the businesses covered by the purchase agreements
          described above, including the Wireless Networks, CLEC and ISP Businesses,
          are
          summarized and classified as “held for sale” in the accompanying balance sheets
          at June 30, 2007 and March 31, 2007. In addition, the operating results
          of these
          businesses are included in discontinued operations in the accompanying
          statements of operations for the three months ended June 30, 2007 and
          2006.
 
 **NOTE
          2-** **SUMMARY
          OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Financial
          Statement Presentation**
 
 The
          consolidated financial statements include the accounts of the Company and
          its
          subsidiaries. All significant inter-company accounts and transactions have
          been
          eliminated in consolidation. Certain prior-period financial statement balances
          have been reclassified to conform to the June 30, 2007
          presentation.
 
 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.
 
 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-K for the
          fiscal year ended March 31, 2007. 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
          months
          ended June 30, 2007 are not necessarily indicative of the results that
          will be
          achieved for the fiscal year ending March 31, 2008.
 
 **Restricted
          Cash**
 
 The
          Company is required to maintain letters of credit collateralized by cash
          as
          additional security for the performance of obligations under certain service
          agreements. The cash collateral is restricted and is not available for
          the
          Company’s general working capital needs. The letters of credit expire at various
          dates through September 2008.
 
 10
  **Revenue
          Recognition**
 
 The
          Company derives a material portion of its revenues through the provision
          of
          local telephone, long distance, wireless calling and Internet access services
          to
          subscribers. The Company recognizes revenue related to these telecommunications
          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.
 
 A
          material amount of the Company’s revenues is also generated from the use of
          Davel’s payphones. 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 specific 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 one year. Most dial-around receivable amounts
          are received early in each calendar quarter from an industry clearinghouse
          organization, one quarter in arrears. For example, Davel received its
          dial-around receipts related to the quarter ended March 31, 2007 in July
          2007,
          allowing it to adjust the first calendar quarter dial-around receivable
          amount
          included in the balance sheet at June 30, 2007 based on the actual collection
          experience. Davel’s estimate of revenue for the most recent calendar quarter is
          based on the historical analysis of calls placed and 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. Total dial-around revenue amounts for the three months ended
          June 30,
          2007 and 2006 were approximately $1,245,717 and $1,620,274, respectively.
 
 In
          connection with the right to provide cellular-based services to users of
          personal data assistants (“PDAs”), the Company has the right to resell PDA
          equipment, software and related maintenance agreements to such customers.
          As the
          Company has no continuing obligations to the purchasers of such products,
          the
          Company generally records revenue related to the delivery of such products
          upon
          shipment.
 
 **Accounts
          Receivable**
 
 Dial-around
          receivable amounts included in the balance sheets at June 30, 2007 and
          March 31,
          2007 were $2,471,043 and $2,856,629, respectively. During all periods presented,
          credit losses, to the extent identifiable, were generally within management’s
          overall expectations.
 
 **Financing
          Fees**
 
 The
          financing fees paid in May 2004 to Cornell Capital and others related to
          the
          negotiation of the Standby Equity Distribution Agreement (the “SEDA”) were
          deferred and, in the prior year, were 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 $147,000 in the three months ended June 30,
          2006,
          completing the amortization of the cost of the deferred asset.
 
 11
  **Accounting
          for Stock Options and Warrants**
 
 The
          Company adopted SFAS 123R, effective April 1, 2006. The amounts of related
          compensation expense recorded and presented in the accompanying statements
          of
          operations for the three-month periods ended June 30, 2007 and 2006 were
          $200,553 and $485,091, respectively.
 
 **Property,
          Plant and Equipment**
 
 Depreciation
          expense is computed using the straight-line method during the estimated
          useful
          life of each asset. The amounts of depreciation related to continuing operations
          and included in the condensed consolidated statements of operations for
          the
          three months ended June 30, 2007 and 2006 were approximately $586,274 and
          $603,532, respectively.
 
 **Customer
          Location Contracts**
 
 Intangible
          assets include amounts paid to property location owners in connection with
          payphone installation contracts with net balances of $1,007,769 and $1,174,205
          at June 30, 2007 and March 31, 2007, respectively. 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 June 30, 2007 and March 31, 2007 was $1,352,367 and $1,261,428,
          respectively. Amortization expense related to location contracts was $130,908
          and $157,206, respectively, for the three months ended June 30, 2007 and
          2006.
 
 **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
          non-affiliate equity interest 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 shares of common stock held by the Company are
          considered to be available-for-sale securities. If a decline in the fair
          value
          of these securities is judged by management to be other than temporary,
          the cost
          basis of the securities would be written down to fair value at that time.
          The
          cost basis of the common stock included in other assets at June 30, 2007
          and
          March 31, 2007 was $443,281 and $450,000, respectively.
 
 **Accounts
          Payable and Accrued Liabilities**
 
 The
          accounts payable and accrued liabilities of continuing operations consisted
          of
          the following at the indicated dates:
 
 **June
                    30, 2007**
                
                **March
                    31, 2007**Accounts
                    payable
                
                $
                3,868,470
                
                $
                4,169,687Accrued
                    location usage fees
                
                
                2,185,891
                
                
                1,800,991Accrued
                    restructuring costs
                
                
                100,218
                
                
                100,218Accrued
                    compensation
                
                
                501,874
                
                
                449,021Accrued
                    interest expense
                
                
                446,871
                
                
                161,950Other
                    accrued liabilities
                
                
                1,900,384
                
                
                1,875,762Totals
                
                $
                9,003,708
                
                $
                8,557,629
 
 12
  **NOTE
          3-** **DISPOSITION
          OF BUSINESSES**
 
 **Sale
          of the ISP and CLEC Businesses**
 
 On
          June
          30, 2007, the Company entered into a Purchase Agreement with USA, pursuant
          to which USA agreed to acquire all of the outstanding shares of CloseCall,
          AFN,
          DFW and InReach. The USA Agreement was subsequently amended to extend the
          closing date for the sale of the ISP Business until July 17, 2007. The
          closing
          for the CLEC Business will take place following receipt of the necessary
          regulatory approvals. Until the closing, USA will manage the CLEC Business
          pursuant to a management agreement entered into with USA (the “USA Management
          Agreement”).
 
 The
          total
          purchase price for the ISP and CLEC Businesses is $30.0 million, consisting
          of
          $21.9 million in cash and $8.1 million in convertible preferred stock of
          USA
          (the “USA Preferred”). The 8,100 shares of USA Preferred is convertible into
          7.5% of the outstanding common stock of USA and can be redeemed for $8.1
          million
          in cash, at the option of the Company, anytime following the third anniversary
          of the closing of the CLEC Business. Prior to that time, USA has the option
          to
          redeem all of the unconverted USA Preferred for $12,960,000.
 
 Upon
          the
          closing of the sale of the ISP Business on July 18, 2007, the Company received
          $2.5 million in cash, a $2 million note, which is payable upon the earlier
          of
          the closing of the CLEC Business or January 1, 2008, and the $8.1 million
          of USA
          Preferred. The loss incurred in connection with this sale, if any, is not
          expected to be significant.
 
 **Sale
          of the Wireless Networks Business**
 
 On
          July
          8, 2007, the Company entered into a Purchase Agreement with Gobility, pursuant
          to which Gobility acquired all of the outstanding shares of Neoreach and
          Kite
          Networks, and all of the outstanding membership interests in Kite Broadband.
          The
          purchase price was $2.0 million, paid in the form of a debenture that is
          convertible into shares of Gobility common stock (the “Gobility Debenture”) at a
          rate of $5.00 per share, or such lower price, if Gobility issues common
          stock or
          securities convertible into common stock at a price that is less than $5.00
          per
          share. Unless converted, the Gobility debenture is due July 8, 2009 with
          annual
          interest at 8%. The Company expects to recognize a gain on the sale of
          Wireless
          Networks of approximately $1.1 million, net of income tax, in the second
          fiscal
          quarter ending September 30, 2007.
 
 Under
          the
          terms of the Gobility Debenture, Gobility is required to raise at least
          $3.0
          million in cash no later than August 15, 2007. If Gobility defaults on
          the
          financing obligation under the Gobility Debenture, the Company will have
          the
          right but not the obligation to repurchase the Wireless Networks business
          with
          the surrender of the Gobility Debenture and the payment of nominal additional
          consideration. In this case, the gain described above would be
          reversed.
 
 **Discontinued
          Operations**
 
 Revenues,
          operating costs and expenses, and other income and expense attributable
          to the
          Wireless Networks, ISP and CLEC Businesses have been aggregated to a single
          line, loss from discontinued operations, in the condensed consolidated
          statements of operations for all periods presented. The Company has no
          income
          taxes due to operating losses incurred for tax purposes. No interest expense,
          other than amounts relating to the capital leases or other debt recorded
          by the
          discontinued businesses, has been allocated to discontinued operations.
  13
  The
          revenues and the net losses of discontinued operations were as
          follows:
 **Three
                      Months Ended June 30,****2007**
                  
                  **2006**Revenues
                  
                  $
                  15,010,201
                  
                  $
                  15,145,288Loss
                      from discontinued operations before disposal
                  
                  $
                  (1,715,491
                  )
                  $
                  (1,111,724
                  )Estimated
                      loss on disposal
                  
                  
                  —
                  
                  
                  —Loss
                      from discontinued operations
                  
                  $
                  (1,715,491
                  )
                  $
                  (1,111,724
                  )
 
 Assets
          and liabilities associated with the Wireless Networks, ISP and CLEC Businesses
          have been segregated from continuing operations and presented separately
          as
          assets of companies held for sale and liabilities of companies held for
          sale in
          the condensed consolidated balance sheets at June 30, 2007 and March 31,
          2007.
          The major classifications of such assets and liabilities were as follows:
 
 **June
                    30**
                  **2007**
                
                **March
                    31**
                  **2007**Cash
                    and cash equivalents
                
                $
                1,095,954
                
                $
                1,437,063Restricted
                    cash
                
                
                1,904,864
                
                
                1,798,200Accounts
                    receivable, net
                
                
                5,191,255
                
                
                5,387,772Prepaid
                    expenses and other current assets
                
                
                2,423,693
                
                
                2,401,464Fixed
                    assets, net
                
                
                9,804,550
                
                
                10,368,844Goodwill,
                    net of impairment
                
                
                29,547,074
                
                
                29,547,074Customer
                    contracts and relationships, net
                
                
                495,179
                
                
                593,734Other
                    assets
                
                
                758,732
                
                
                782,278Assets
                    of companies held for sale
                
                $
                51,221,301
                
                $
                52,316,429Accounts
                    payable and accrued expenses
                
                $
                11,806,070
                
                $
                11,222,807Deferred
                    revenue
                
                
                3,666,480
                
                
                3,864,518Notes
                    payable and other long-term liabilities
                
                
                4,959,849
                
                
                5,111,867Liabilities
                    of companies held for sale
                
                $
                20,432,399
                
                $
                20,199,192
 
 **NOTE
          4-** **IMPAIRMENT
          OF GOODWILL AND LONG-LIVED ASSETS**
 
 The
          goodwill included in assets of companies held for sale at June 30, 2007
          and
          March 31, 2007 was recorded in connection with the series of acquisitions
          completed by the Company since January 1, 2004. Generally accepted accounting
          principles require that the Company assess the fair value of goodwill amounts
          relating to 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 that, more likely than not,
          the fair
          value amounts of goodwill for reporting segments have been reduced below
          the
          corresponding carrying amounts. If there is a determination that the fair
          value
          of an acquired entity is less than the corresponding net assets amount,
          including goodwill, an impairment loss would be identified and recorded
          at that
          time.
 
 During
          the fiscal year ended March 31, 2007, the Wireless Networks business, the
          ISP
          Business and Davel did not perform as expected. In addition, as discussed
          above,
          the Company was engaged in negotiations for the sale of all of these businesses.
          As a result, management reviewed the carrying values of the assets of these
          businesses at March 31, 2007 and determined that adjustments for goodwill
          and
          other asset impairment were appropriate. The Company recorded impairment
          charges
          in the total amount of $25,185,098 at March 31, 2007, including $17,745,303
          representing the entire amount of goodwill and other intangible assets
          related
          to Wireless Networks, $4,384,000 relating to the goodwill of the ISP Business,
          $1,482,000 relating to certain deployed wireless network equipment of Kite
          Networks, and $1,573,795 relating to certain payphone equipment and location
          contracts of Davel. The Company had previously recorded goodwill impairment
          charges related to the ISP Business including $348,118 in the fiscal quarter
          ended June 30, 2006; this amount is included in the loss from discontinued
          operations for the three months ended June 30, 2006. Management does not
          believe
          that additional goodwill impairment charges are required at June 30,
          2007.
 
 14
 **NOTE
          5-** **DEBT**
 
 **Debt
          Maturities**
 
 A
          summary
          of the balances owed under the debentures, capital leases, notes payable,
          and
          other long-term liabilities of continuing operations at June 30, 2007 and
          March
          31, 2007 was as follows:
  **June
                    30,
                    2007**
                
                **March
                    31,
                    2007**Amended
                    Debenture issued to Cornell Capital
                
                $
                12,578,828
                
                $
                12,649,650Secured
                    Debentures issued to Cornell Capital
                
                
                3,620,822
                
                
                5,500,000Notes
                    payable to Cornell Capital
                
                
                1,100,000
                
                
                -Other
                    notes payable and long-term obligations
                
                
                118,500
                
                
                138,50017,418,150
                
                
                18,288,150Less:
                    Unamortized debt discounts
                
                
                (138,630
                )
                
                (294,318
                )Less:
                    Amounts due within one year
                
                
                (10,890,425
                )
                
                (15,101,081
                )Long-term
                    portion of debt
                
                $
                6,389,095
                
                $
                2,892,751
 
 Based
          on
          the current terms of the Cornell Capital debentures, as amended, the entire
          long-term portion of debt at June 30, 2007 will become due for payment
          in the
          twelve-month period ending June 30, 2009.
 
 **The
          Secured Debenture Agreement**
 
 On
          August
          28, 2006, the Company entered into a financing agreement with Cornell Capital
          that provided $7.0 million in debt financing with the proceeds received
          in a
          series of four closings (the “Secured Debenture Agreement”). At each closing,
          the Company issued Cornell Capital a 7.75% secured convertible debenture
          in the
          gross amount for the closing, convertible into shares of common stock at
          $0.174
          per share. The Company received cash proceeds of $6,495,000, net of financing
          fees of $505,000. In addition, Cornell Capital was issued warrants to purchase
          10,000,000 additional shares of common stock at an exercise price of $0.174
          per
          share, as amended.
 
 The
          debentures issued pursuant to the Secured Debenture Agreement were recorded
          in
          the balance sheet net of unamortized debt discounts reflecting the fair
          market
          values of the debentures on the dates of issuance after allocating a like
          amount
          of proceeds to the related warrants. The discount amounts are being amortized
          as
          charges to interest expense over the terms of the related debentures. The
          total
          unamortized amount of debt discounts at June 30, 2007 was $16,914.
 
 Under
          conditions similar to those included in the Amended Debenture (see discussion
          below), the Company had the right to make any and all such principal and
          interest payments by issuing shares of its common stock to Cornell Capital
          with
          the amount of such shares based upon the lower of $0.174 per share or 93%
          of the
          average of the two lowest daily volume weighted average per share prices
          of its
          common stock during the five days immediately following the scheduled payment
          date. Through March 31, 2007, the Company issued 42,598,498 shares of its
          common
          stock in satisfaction of $1,500,000 in principal and $198,654 in accrued
          interest. From April 1, 2007 through May 10, 2007, the Company issued an
          additional 78,091,157 shares of its common stock in satisfaction of $1,849,343
          in principal and $47,743 in accrued interest. The Company used cash to
          pay
          $29,836 in principal and $6,614 in interest on May 10, 2007.
 
 15
 Under
          the
          terms of the Secured Debenture Agreement, as amended, the Company has agreed
          to
          make weekly principal payments of at least $125,000 in satisfaction of
          the
          remaining principal commencing January 1, 2008, with interest on the outstanding
          principal balance payable at the same time. However, in the event that
          the
          Company or Cornell Capital receives a legal opinion that Cornell Capital
          is
          eligible to sell shares of the Company’s common stock under Rule 144 of the
          Securities Act of 1933, the Company will be required to resume making weekly
          payments of principal and accrued interest with shares of its common stock
          in
          September 2007.
 
 **The
          Amended Debenture**
 
 On
          May 13, 2005, the Company issued a 7.75% secured convertible debenture (the
          “Debenture”) to Cornell Capital in the aggregate amount of $15,500,000. 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.
 
 The
          outstanding balance of the Debenture at March 31, 2006 of $15,000,000 was
          due
          and payable in a series of installment payments through May 15, 2008, including
          $1,500,000 due on May 15, 2006 and $1,000,000 due on August 15, 2006.
 
 On
          June
          30, 2006, the Company entered into an amended secured convertible debenture
          in
          the amount of $15,149,650 with Cornell Capital (the “Amended Debenture”),
          replacing the Debenture. The Company has the right to make any and all
          principal
          and interest payments by issuing shares of its common stock to Cornell
          Capital provided that all
          such shares may only be issued by the Company if such shares are tradable
          under
          Rule 144 of the Securities Act of 1933 (the “Securities Act”), are registered
          for sale under the Securities Act, or are freely tradable by Cornell Capital
          without restriction. The amount of such shares shall be based upon the
          lower of
          $0.275 per share or 93% of the average of the two lowest daily volume weighted
          average per share prices of the Company’s common stock during the five days
          immediately following the scheduled payment date. Cornell Capital may convert
          all or any part of the unpaid principal and accrued interest owed under
          the
          Amended Debenture into shares of our common stock at a conversion price
          of
          $0.275 per share. The Amended Debenture is secured by a blanket lien on
          our
          assets. Like the Debenture, the Amended Debenture bears interest at an
          annual
          rate of 7.75%. The conversion price of the Amended 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 Amended Debenture.
 
 In
          connection with the issuance of the Debenture, the Company issued to Cornell
          Capital a five-year warrant, as modified, to purchase 15,000,000 shares
          of its
          common stock at an exercise price of $0.20 per share (the “Warrant”). In
          connection with the issuance of the Amended Debenture, Cornell Capital
          was
          issued a warrant, as modified, to purchase 13,750,000 shares of the Company’s
          common stock at a purchase price of $0.20 per share (the “Additional Warrant”).
          This Additional Warrant will expire in November 2007.
 
 The
          face
          amount of the Amended Debenture was recorded initially in the balance sheet
          net
          of unamortized debt discount of $319,000. During the quarter ended September
          30,
          2006, the fair value of the Additional Warrant was recalculated based on
          its
          reset terms resulting in an increase to such value of $192,500. The net
          amount
          of the Amended Debenture at March 31, 2007 reflected the fair market value
          after
          allocating additional proceeds in the amount of $192,500 to the Additional
          Warrant. The increased discount on the Amended Debenture is being amortized
          as a
          charge to interest expense over the term of the Amended Debenture. The
          unamortized debt discount amount at June 30, 2007 was $121,714.
 
 16
  The
          Debenture was recorded in the accounts net of unamortized debt discount
          reflecting the fair value on the date of issuance of the related the Warrant.
          The net carrying amount of the Debenture and the related amount of accrued
          interest, $14,590,399 and $149,650, respectively, were eliminated from
          the
          accounts in connection with the issuance of the Amended Debenture and the
          retirement of the Debenture, resulting in a loss on the extinguishment
          of the
          Debenture debt in the amount of $409,601 in June 2006.
 
 Through
          March 31, 2007, the Company issued 50,578,702 shares of its common stock
          in
          satisfaction of $2,500,000 in principal and $681,827 in accrued interest.
          On May
          10, 2007, the Company issued 4,510,933 shares of its common stock in
          satisfaction of $70,822 in principal.
 
 Under
          the
          terms of the Amended Debenture, as revised, the Company has agreed to make
          weekly scheduled principal payments of at least $250,000 commencing January
          1,
          2008 with interest on the outstanding principal balance payable at the
          same
          time. However, in the event that the Company or Cornell Capital receives
          a legal
          opinion that Cornell Capital is eligible to sell shares of the Company’s common
          stock under Rule 144 of the Securities Act of 1933, the Company will be
          required
          to resume making weekly payments of principal and accrued interest with
          shares
          of its common stock in September 2007.
 
 **Availability
          of Registered Shares**
 
 The
          Company filed a registration statement on Form S-3 on October 12, 2006
          covering
          the resale of a total of 404,474,901 shares of the Company’s common stock by
          various selling stockholders, including 55,089,635 shares that may be issued
          to
          Cornell Capital under the Amended Debenture, 120,689,655 shares related
          to
          convertible debentures issued under the Secured Debenture Agreement, and
          38,750,000 shares related to the corresponding stock warrants. This registration
          statement was declared effective by the SEC, enabling the Company’s use of
          common stock to make installment payments to Cornell Capital under the
          various
          debentures. As of May 10, 2007, the Company has issued all of the approximately
          175,779,000 shares covered by the registration statement relating to the
          convertible debentures. At June 30, 2007, the total remaining principal
          balance
          payable to Cornell Capital under the convertible debentures and the total
          amount
          of related accrued interest were $16,199,650 and $428,789, respectively.
 
 **The
          Debentures - Interest Expense**
 
 For
          the
          three months ended June 30, 2007 and 2006, the amounts of interest expense
          related to the debentures issued to Cornell Capital, and included in the
          accompanying condensed consolidated statements of operations based on the
          stated
          interest rates, were $321,196 and $289,829, respectively.
 
 Interest
          expense amounts included in the accompanying consolidated statements of
          operations for the current and prior year periods also included total debt
          discount amortization related to the debentures issued to Cornell Capital.
          Such
          amounts were $155,689 and $97,139, respectively, for the three months ended
          June
          30, 2007 and 2006.
 
 The
          discounts provided to Cornell Capital in connection with the issuance of
          shares
          of common stock in satisfaction of principal and interest payments due
          under the
          convertible debentures were charged to interest expense. Such interest
          expense
          was $131,551 for the three months ended June 30, 2007.
 
 **Notes
          Payable to Cornell Capital**
 
 In
          May
          2007, the Company borrowed $1,100,000 from Cornell Capital under a one-year
          promissory note that bears an annual interest rate of 12% for the first
          six
          months of its term and an annual rate of 15% thereafter. This promissory
          note
          and the accrued interest were repaid in July 2007. Interest expense was
          $18,082
          for the three months ended June 30, 2007.
 
 During
          the two-year period ended March 31, 2006, the Company borrowed amounts
          from
          Cornell Capital that totaled $31,500,000 pursuant to a series of promissory
          notes with maturities of one-year or less and annual interest rates ranging
          from
          8% to 12%. A remaining total principal balance of $3,600,000, plus accrued
          interest of $392,953, was owed to Cornell Capital at March 31, 2006. These
          amounts were paid during the quarter ended June 30, 2006 with cash provided
          by
          the Company’s operating units. Interest expense related to the notes payable to
          Cornell Capital, based on the stated rates of interest and included in
          the
          accompanying consolidated statements of operations for the three months
          ended
          June 30, 2006 was $25,074.
  17
  **Capital
          Leases of Discontinued Operations**
 
 Mobilepro
          Corp. remains the co-lessee on certain capital equipment leases of Kite
          Networks
          that were assumed by Gobility under the terms of the Gobility Agreement.
          The
          lease terms range from 24 to 36 months. The outstanding principal amounts
          of the
          capital leases are included in liabilities of companies held for sale at
          June
          30, 2007 and March 31, 2007 in the accompanying balance sheets. In the
          event
          that Kite Networks defaults on the leases, it is probable that the lessors
          will
          demand payment from Mobilepro Corp.
 
 At
          June
          30, 2007, a summary of the future scheduled payments of the capital leases
          was
          as follows:
 
 The
                    twelve months ending —June
                    30, 2008
                
                $
                2,559,645June
                    30, 2009
                
                
                2,209,772June
                    30, 2011
                
                
                377,9585,147,375Less
                    - Interest portions
                
                
                (628,226
                )Capital
                    leases - principal portions
                
                $
                4,519,149
 
 Aggregate
          lease proceeds in the amount of approximately $1,188,000 were used to purchase
          certificates of deposit (including $126,000 in April 2007) that are pledged
          to
          secure the lease obligations; these amount are included in the balance
          of assets
          of companies held for sale in the condensed consolidated balance sheets
          at June
          30, 2007 and March 31, 2007.
 
 **NOTE
          6-** **STOCKHOLDERS’
          EQUITY**
  **Standby
          Equity Distribution Agreement (the “SEDA”)**
 
 On
          May
          13, 2004, the Company entered into the SEDA with Cornell Capital that provided,
          generally, that Cornell Capital would 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 was entitled to
          purchase the shares at a 2% discount to a weighted-average market price
          of the
          common stock. The Company was obligated to pay a fee to Cornell Capital
          and
          other advisors at the time of each draw. On May 19, 2006, the SEDA
          expired.
 
 The
          discounts under this arrangement that were provided to Cornell Capital
          upon
          the sale of shares of common stock amounted to $137,795 in the three months
          ended June 30, 2006, and were included in interest expense.
 
 **Common
          Stock Transactions in the Three Months Ended June 30,
          2007**
 
 In
          the
          three months ended June 30, 2007, the Company issued 82,602,090 shares
          of its
          common stock in satisfaction of $1,920,164 in principal and $47,743 in
          accrued
          interest owed to Cornell Capital pursuant to various debentures.
 
 **Common
          Stock Transactions in the Three Months Ended June 30, 2006**
 
 During
          the three months ended June 30, 2007, the Company issued 22,000,000 shares
          of
          common stock to the escrow agent under the requirements of the SEDA. The
          termination of the SEDA in May 2006 resulted in the return of 3,413,367
          shares
          of common stock to the Company by Cornell Capital. The
          return of the shares was recorded in October 2006.
 
 18
  In
          April
          2006, the Company issued 6,021,624 shares of its common stock to a former
          officer pursuant to the exercise of a stock warrant.
 
 In
          June
          2006, the Company issued 200,000 shares of its common stock, valued at
          $36,000,
          in connection with an agreement with an investment banking firm.
 
 **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 three months ended June 30, 2007:
 
 **Weighted-Average****Stock
                    Options —**
                
                **Number
                    of Options**
                
                **Exercise
                    Price**Outstanding
                    - March 31, 2007
                
                
                3,877,000
                
                $
                0.2170Granted
                
                
                -
                
                $
                -Exercised
                
                
                -
                
                $
                -Cancelled
                
                
                (133,334
                )
                $
                0.2600Outstanding
                    - June 30, 2007
                
                
                3,743,666
                
                $
                0.2034Exercisable
                    - June 30, 2007
                
                
                2,475,306
                
                $
                0.2164
  **Weighted-Average****Stock
                    Warrants —**
                
                **Number
                    of Warrants**
                
                **Exercise
                    Price**Outstanding
                    - March 31, 2007
                
                
                122,905,634
                
                $
                0.1597Granted
                
                
                -
                
                $
                -Exercised
                
                
                -
                
                $
                -Cancelled
                
                
                -
                
                $
                -Outstanding
                    - June 30, 2007
                
                
                122,905,634
                
                $
                0.1597Exercisable
                    - June 30, 2007
                
                
                111,987,242
                
                $
                0.1650
 
 Options
          to purchase common stock that are awarded pursuant to the terms of the
          2001 Plan
          expire ten years from the date of grant. The options typically vest over
          two to
          three year periods according to a defined schedule set forth in the individual
          stock option agreement. Certain portions of the stock options granted in
          the
          fiscal year ended March 31, 2006 were set to vest based on the achievement
          of
          individual and Company objectives during the year. Warrants to purchase
          shares
          of common stock vest over periods that range from eleven to thirty-three
          months.
          The vesting of warrants awarded to certain of the Company’s officers were set to
          occur upon the achievement of individual and/or Company objectives. Warrants
          typically expire on the ten-year anniversary of the date of grant.
 
 19
  Most
          of
          the stock options and warrants related to Company objectives were cancelled
          at
          March 31, 2007.
 
 Effective
          April 1, 2006, the Company adopted the provisions of SFAS 123R that require
          companies to record the compensation cost associated with stock options
          and
          warrants. As required by SFAS 123R, the Company determined 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 model used by the Company in order to determine the fair values of
          the stock
          options and warrants awarded since April 1, 2006 and those previously awarded
          options and warrants with unvested portions at March 31, 2006 continues
          to be
          the Black-Scholes model. The Company used the prospective method in order
          to
          adopt this accounting standard. Accordingly, the operating results for
          the
          prior-year periods were not restated. Compensation expense is being recorded
          related to new awards and the unvested stock options and warrants at March
          31,
          2006 on a straight-line basis over the applicable vesting periods. Such
          expense
          was $200,553 and $485,091 for the three months ended June 30, 2007 and
          2006,
          respectively.
 
 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
          three months ended June 30, 2007 and 2006:
  **2007**
                
                **2006**Dividend
                    yield
                
                
                -
                %
                
                -
                %Expected
                    volatility
                
                
                60
                %
                
                60
                %Risk-free
                    interest rate
                
                
                4.00
                %
                
                4.00
                %Expected
                    term (in years)
                
                
                10.00
                
                
                10.00
  **NOTE
          7-** **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 year. 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-month periods ended June 30, 2007 and 2006 were anti-dilutive as
          the
          Company incurred net losses in these periods.
 
 **NOTE
          8-** **LITIGATION**
 
 During
          the three months ended June 30, 2007, the Company was party to the following
          material legal proceedings.
 
 1)
          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 infringements. Davel does not believe that
          the
          allegations set forth in the complaint are valid and Davel filed a Motion
          for
          Summary Judgment, which remains pending before the court. 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. These 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
  2) On
          August
          6, 2006, the Company was served with a summons and complaint filed in the
          Superior Court of the State of Arizona in Maricopa County in the matter
          captioned Michael V. Nasco, et. al. vs. MobilePro Corp., et. al. which
          makes
          claims arising out of the acquisition by the Company of Transcordia, LLC.
          The
          plaintiff alleges breach of contract, fraud, relief rescission, failure
          to pay
          wages and unjust enrichment and seeks damages in excess of $3 million.
          On or
          about November 7, 2006, the Company filed a motion to dismiss arguing lack
          of
          standing and corporate existence. The motion to dismiss was subsequently
          denied
          by the Court and the matter is in the discovery stage. The Company believes
          that
          it has meritorious defenses to the alleged claims and intends to vigorously
          defend itself in this matter. Notwithstanding the foregoing, in the event
          that
          its defenses were not successful, the Company believes that any potential
          exposure related to the claims alleged against the Company is not likely
          to be
          material.
 
 3)
          On
          April 17, 2007, the Supreme Court of the United States issued an opinion
          in the
          case captioned Global Crossing Telecommunications, Inc. v. Metrophones
          Telecommunications, Inc. on Certiorari from the United States Court of
          Appeals
          for the Ninth Circuit (the "Ninth Circuit" and the "Metrophones Case"),
          No.
          05-705, in which it upheld the Ninth Circuit's decision that independent
          payphone providers have a private right of action to pursue recovery in
          federal
          court from telecommunication carriers who fail to pay dial around compensation.
          The ruling in the Metrophones Case permits litigation to resume that has
          been
          pending in federal district court against AT&T Corporation, Sprint
          Communications Company, LP and Qwest Communications, Inc. (the "Defendants")
          for
          non-payment of dial around compensation. Davel Communications, Inc. and
          certain
          of Davel's subsidiaries (collectively, the "Davel Entities") are directly
          or
          indirectly plaintiffs in the federal district court cases against the
          Defendants. Although the federal district court case has been pending since
          1999, the litigation remains in its preliminary phases. As a result, the
          Company
          cannot predict the likelihood of success on the merits, the costs associated
          with the pursuit of the claims, the timing of any recovery or the amount
          of
          recovery, if any. However, the industry representing a group of independent
          payphone providers, including the Davel Entities, has recently prevailed
          in a
          similar Federal Communications Commission administrative proceeding against
          another carrier for non-payment of dial-around compensation using a similar
          damages model which was accepted and pursuant to which the Federal
          Communications Commission assessed pre-judgment interest (the "Similar
          Litigation"). The Similar Litigation is being appealed to the U.S. Court
          of
          Appeals for the District of Columbia. Based upon our damages model in the
          Similar Litigation, we estimate that the amount in controversy for the
          Davel
          Entities against the Defendants extends well into the eight figures, but
          any
          recovery is conditioned on, among other things (i) prevailing on the merits
          at
          trial; (ii) having the Davel Entities' damages model and other claims approved
          in whole or in large part; and (iii) prevailing on any appeals that the
          Defendants may make. As evidenced by the eight years that this litigation
          has
          been in process, the Defendants have shown an interest in stretching the
          duration of the litigation and have the means to do so. Although the Davel
          Entities could ultimately benefit (in an absolute sense, although not
          necessarily on a present value basis) from this delay in the event that
          pre-and/or post-judgment interest (awarded at 11.25% per annum in the Similar
          Litigation) is assessed against the Defendants and the potential award
          of
          attorneys' fees and/or other remedies (in addition to compensatory damages)
          if
          the Davel Entities prevail, such delay will result in a deferral of the
          receipt
          of any cash to the Davel Entities.
  21
 
 **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 periods ended June 30, 2007 and 2006, our financial condition
        at
        June 30, 2007 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-Q.
        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-Q 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.
 
 **Background**
  Beginning
        in early calendar year 2004, we built a broadband wireless, telecommunications,
        and integrated data communication services company that, at June 30, 2007,
        delivered 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.
 
 At
        June
        30, 2007, we marketed and sold our integrated communications services through
        nine branch offices in seven states and we serviced over 123,000 billed accounts
        representing over 211,000 equivalent subscriber lines including approximately
        110,000 local and long-distance telephone lines, approximately 38,000 dial-up
        lines, approximately 5,000 DSL lines, approximately 25,000 fixed and mobile
        wireless lines, approximately 6,000 cellular lines and the remaining are
        other
        Internet-related accounts. We own and operate approximately 22,200 payphones
        located predominantly in 44 states and the District of Columbia. Most of
        our
        subscribers are residential customers.
 
 Historically,
        our revenues have been generated through three of our four business
        reporting segments:
 
 **Wireless
                  Networks**
              
              Our
                  broadband wireless network deployment efforts have been conducted
                  by our
                  wholly owned subsidiary, NeoReach, Inc., (“NeoReach”), and its subsidiary,
                  Kite Networks, Inc. (“Kite Networks,” formerly, NeoReach Wireless, Inc.).
                  This segment has also included the operations of Kite Broadband,
                  LLC
                  (“Kite Broadband”), a wireless broadband Internet service provider located
                  in Ridgeland, Mississippi.**Voice Services**
              
              Our
                  voice services segment has been led by CloseCall America, Inc.
                  (“CloseCall”), a competitive local exchange carrier (“CLEC”, which is a
                  term applied under the Telecommunications Act of 1996 to local
                  telephone
                  companies which compete with incumbent local telephone companies)
                  based in
                  Stevensville, Maryland; American Fiber Network, Inc. (“AFN”), a CLEC based
                  in Overland Park, Kansas; and Davel Communications, Inc. (“Davel”), an
                  independent payphone provider based in Cleveland, Ohio. CloseCall
                  offers
                  its customers a full array of telecommunications products and services
                  including local, long-distance, 1-800-CloseCall anytime/anywhere
                  calling,
                  digital wireless, high-speed telephone (voice over IP), and dial-up
                  and
                  DSL Internet services. AFN is licensed to provide local access,
                  long
                  distance and/or Internet services throughout the United States.
                  Davel is
                  one of the largest independent payphone operators in the United
                  States.
  22
  **Internet Services**
              
              Our
                  Internet services segment included DFW Internet Services, Inc.
                  (“DFW”,
                  doing business as Nationwide Internet), an Internet services provider
                  (“ISP”) based in Irving, Texas, its acquired Internet service provider
                  subsidiaries and InReach Internet, Inc. (“InReach”), 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 many states.**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.
                  This
                  segment also includes our Internet gaming subsidiary, ProGames
                  Network,
                  Inc. (“ProGames”) that we founded in December
                  2005.
 
 Prior
        to
        January 2004, we were a development stage company. Although we were incorporated
        approximately seven 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 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 completed twenty-two
        (22) acquisitions during this period.
 
 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
        became a wholly owned subsidiary of Mobilepro.
 
 DFW
        has
        been the principal operating subsidiary within our Internet services division.
        On January 20, 2004, we acquired DFW. From that time, we acquired nine
        additional Internet service businesses that have operated as subsidiaries
        of DFW
        and, on November 1, 2005, we acquired the business of InReach.
 
 On
        October 15, 2004, we closed our acquisition of CloseCall. One month later,
        we
        closed our acquisition of Davel. On June 30, 2005, we acquired AFN.
 
 23
 In
        June
        2005, we participated in the formation of Kite Broadband, a wireless broadband
        Internet service provider, resulting in an initial 51% ownership of this
        venture. On January 31, 2006, we acquired the remaining 49% of Kite Broadband
        and 100% of the outstanding common stock of Kite Networks, Inc.
 
 On
        March
        31, 2006, we merged Kite Networks, Inc. with and into NeoReach Wireless,
        Inc.
        and changed the name of the combined entity to Kite Networks, Inc. (“Kite
        Networks”).
 
 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-K, quarterly
        reports on Form 10-Q, 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 13,800 or 62.2%, of
        the
        payphones are located in warm climate states of the southwest, southeast
        and
        west; 8,400 or 37.8% of the payphones are located in midwest, northwest,
        and
        northeast sections of the country, with usage during the winter months thereby
        negatively affected by the cold climate. The Internet services business provides
        service to customers that are primarily located in the states of Texas, Arizona,
        Louisiana, Kansas, Missouri, Wisconsin, Ohio, Washington and
        California.
 
 **Current
        Business Conditions**
 
 Our
        acquisition strategy of the last four years was executed with one primary
        objective being the establishment of 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
        effectiveness of our business plan execution was initially confirmed by the
        selection by Tempe, Arizona, of Kite Networks (formerly NeoReach Wireless)
        for
        its network. Subsequently, we were selected by several other cities for the
        deployment, ownership, and management of such networks and have substantially
        completed city-wide wireless networks deployments in Farmers’ Branch, Texas, and
        Longmont, Colorado
 
 However,
        most of our acquired businesses experienced declining revenues. Although
        restructuring measures helped to control other operating expenses, we have
        been
        unable to reduce the corresponding costs of services sufficiently to maintain
        profitability. In addition, we have funded the start-up and operations of
        the
        municipal wireless networks and online gaming businesses without these companies
        achieving expected revenues.
 
 As
        a
        result, our business has historically lost money. Our accumulated deficit
        at
        June 30, 2007 was $82,259,910. In the quarter ended June 30, 2007, we sustained
        a net loss of $4,988,665. In the fiscal years ended March 31, 2007, 2006
        and
        2005, we sustained net losses of $45,898,288, $10,176,407 and $5,359,722,
        respectively. As a result, the amounts of cash used in operations during
        the
        fiscal quarter ended June 30, 2007 and the fiscal year ended March 31, 2007
        were
        $1,111,698 and $6,558,708, respectively. Future losses are likely to occur.
        Accordingly, we are likely to continue to experience liquidity and cash flow
        problems if we are unable to improve the Company’s operating performance, to
        raise additional capital as needed and on acceptable terms, or to sell assets
        for cash.
 
 The
        ramp-up time from selection to the completion of a municipal wireless network
        deployment can be protracted. As a result, we incur significant costs related
        to
        each deployment before any significant revenues are expected. Generally,
        the
        addition of wireless network subscribers has occurred more slowly than expected.
        As a result, we have realized that it may take up to 2 years or more for
        deployed networks to achieve positive cash flows. There can be no assurance
        that
        any deployment will achieve positive cash flow. Although this business
        contributed revenues of $133,318 in the current quarter (revenues were
        insignificant in the prior year), operating costs for Kite Networks were
        approximately $1,274,000 in the quarter ended June 30, 2007 before depreciation
        expense. The capital equipment costs for the completed networks in Tempe,
        Arizona; Farmers’ Branch, Texas; Longmont, Colorado, and other scheduled
        deployments have approximated $13.0 million. To date, the cash needs of this
        business have been substantially funded through borrowings by Mobilepro Corp.
        from Cornell Capital under a variety of debt instruments and over $5 million
        in
        equipment lease financing. Kite Networks has also been provided extended
        payment
        terms by certain significant equipment suppliers. However, we realized that
        sufficient funds will not be available from these existing sources for Kite
        Networks to effectively continue the execution of its current business plan.
        As
        a result, we commenced the search for capital as described below during the
        fourth quarter of the fiscal year 2007.
 
 24
 The
        business of Kite Broadband is experiencing declining revenues. Revenues for
        the
        most recent quarter were approximately $2,573,000 representing a 24.0% decline
        over the last 21 months. Costs of sales consist substantially of payments
        due
        Sprint for network services, which costs are mostly fixed. Although a
        substantial portion of the management cost of this business is now borne
        by Kite
        Networks, the declining revenues and the fixed costs of the services provided
        by
        Sprint have adversely affected the cash flows of this business.
 
 In
        December 2006, we engaged an investment banking firm to assist in evaluating
        strategic alternatives for the wireless networks business conducted by its
        Kite
        Networks and Kite Broadband subsidiaries. Efforts to secure investment capital
        for this business or to find a willing buyer resulted in the sale of the
        wireless networks business to Gobility, Inc. (“Gobility”) on July 8, 2007. The
        purchase price was $2.0 million, paid with a debenture convertible into shares
        of common stock of Gobility. However, under the terms of the debenture, Gobility
        is required to raise at least $3.0 million in cash no later than August 15,
        2007. If Gobility defaults on the financing obligation under the debenture,
        we
        will have the right but not the obligation to repurchase the wireless networks
        business with the surrender of the debenture and the payment of a nominal
        additional amount.
 
 Many
        of
        the other companies that we have acquired have also experienced declining
        revenues. For example, 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 a level of approximately $4,220,433 for the three
        months ended June 30, 2006, to approximately $3,193,000 for the three months
        ended June 30, 2007, a decline of approximately 24.3%. Likewise, the pay
        telephone business is declining due primarily to the public’s increasing usage
        of competitive technologies. Revenues for Davel for the quarter ended June
        30,
        2007 were approximately $5,968,000 compared with revenues of approximately
        $8,197,000 for the corresponding quarter of the prior year, a decline of
        27.2%.
 
 The
        declining revenues of these businesses, without proportional decreases in
        the
        costs of such services, and the operating costs of Kite Networks are the
        major
        causes of our operating losses and unfavorable cash flows from operations.
        As a
        result and as discussed above, we are engaged in various stages of negotiation
        with parties who have expressed interest in acquiring certain other portions
        of
        our business.
 
 During
        the fourth quarter of the prior year, we also engaged in extensive negotiations
        with a company that intended to purchase Davel, the Company’s payphone operator.
        The negotiations did not result in a transaction. As a result, the losses
        incurred by Davel continue to adversely affect our consolidated operating
        results. However, in June 2007, we completed the sale of approximately 730
        operating payphones to an unaffiliated payphone operator and received over
        $200,000 in cash proceeds. Currently, we are engaged in negotiations for
        the
        sale of additional operational payphones.
 
 In
        March
        2007, we announced that we had signed a definitive agreement for the merger
        of
        ProGames, our online gaming subsidiary, with and into Winning Edge
        International, Inc. Consummation of the transaction was subject to a number
        of
        closing conditions including the arrangement of financing that would have
        sustained the operations of the combined entity. Financing has not been
        arranged. As a result, the merger agreement was terminated and we continue
        to
        fund the operating costs of ProGames.
 
 To
        date,
        Cornell Capital Partners, L.P. (“Cornell Capital”) has been a significant source
        of capital for us, providing financing in several forms. During fiscal 2007,
        we
        borrowed funds under a series of convertible debentures. The total amount
        owed
        to Cornell Capital under the debentures at March 31, 2007 was $18,149,650.
        In
        May 2007, we borrowed $1,100,000 from Cornell Capital under a promissory
        note in
        order to help bridge our cash flow shortfall during the first quarter. This
        promissory note and accrued interest were repaid in July 2007. Using shares
        of
        our common stock registered on Form S-3 in November 2006, we made principal
        and
        interest payments on the debentures that totaled $4,880,489 during the fiscal
        year ended March 31, 2007, and that totaled $1,967,908 from April 2007 through
        May 2007. However, the supply of registered shares available for the conversion
        of the debentures has been exhausted. Cornell Capital has agreed to delay
        additional installment payments until January 2008 when we will be obligated
        to
        resume making total weekly principal payments of $375,000 plus accrued interest.
        Unless additional shares are registered by the Company under the Securities
        Act
        of 1933 (the “Securities Act”), shares acquired by Cornell Capital are tradable
        under Rule 144 of the Securities Act, or shares of our common stock are
        otherwise freely tradable by Cornell Capital without restriction, we will
        be
        required to make these payments in cash. However, in the event that the Company
        or Cornell Capital receives a legal opinion that Cornell Capital is eligible
        to
        sell shares of the Company’s common stock under Rule 144, the Company will be
        required to resume making weekly payments of principal and accrued interest
        with
        shares of its common stock in September 2007.
 
 25
 **Strategic
        Direction**
 
 In
        April
        2007, we announced that our Board of Directors had decided to explore potential
        strategic alternatives for the entire Company, and that it had received
        inquiries from potential buyers regarding the purchase of portions of its
        business. This initiative was undertaken with the goals of maximizing the
        value
        of our assets, returning value to our stockholders and eliminating the Company’s
        debt, particularly amounts owed to Cornell Capital which exceeded $17.7 million
        at June 30, 2007.
 
 We
        received letters of interest regarding the acquisition of the CloseCall,
        AFN and
        the Internet service provider businesses (the “Wireline Businesses”) and several
        potential purchasers conducted due diligence activities. This process resulted
        in the execution of an agreement to sell the Wireline Businesses to United
        Systems Access, Inc. (“USA”) on June 30, 2007 (the “USA Purchase Agreement”).
        Pursuant to the USA Purchase Agreement, we closed the sale of the Internet
        service provider companies to USA on July 18, 2007, and received cash proceeds
        of $2,500,000, a promissory note for $2,000,000 and preferred stock of USA
        convertible into 7.5% of the fully diluted shares of USA’s common stock valued
        at $8.1 million. Simultaneously, we used $2,000,000 of this cash to pay down
        principal and accrued interest owed to Cornell Capital under the promissory
        note
        and debentures.
 
 The
        sale
        of CloseCall and AFN requires the receipt of certain state regulatory approvals
        before it can be completed. The receipt of all of the approvals may not occur
        until the end of calendar 2007. In the meantime and pursuant to a management
        agreement that was signed in July 2007 (the “USA Management Agreement”), USA
        shall operate the businesses, retain any cash provided by the operations
        of
        these companies and fund any cash requirements of the companies until the
        sale
        of these companies is completed. In addition, USA shall reimburse us for
        the
        amount of interest expense that accrues during the term of the USA Management
        Agreement related to the Cornell Capital debentures.
 
 Upon
        the
        close and pursuant to the terms of the USA Purchase Agreement, we shall receive
        additional cash proceeds of $19.4 million, including payment of the $2.0
        million
        promissory note. Using cash proceeds from the sale of the remainder of the
        Wireline Business, we expect to be in a position to retire the Cornell Capital
        debentures plus accrued interest.
 
 If
        the
        sale of the Wireline Businesses is not completed in accordance with the
        negotiated terms, the Company will not have the ability to continue as a
        going
        concern beyond the third quarter of the current fiscal year without a
        significant restructuring of the Cornell Capital debt.
 
 **Discontinued
        Operations**
 
 In
        connection with the activities summarized above, we have reclassified the
        assets
        and liabilities of the Wireline Business and the wireless networks business
        as
        assets and liabilities related to companies held for sale in the consolidated
        condensed balance sheets at June 30, 2007 and March 31, 2007. In addition,
        we
        have classified the results of operations of these companies in discontinued
        operations in the consolidated condensed statements of operations for the
        three
        months ended June 30, 2007 and 2006.
 
 26
 
 **Critical
        Accounting Policies**
  We
        consider the accounting policies related to the disposal of long-lives assets,
        discontinued operations, the valuation of goodwill and other intangible assets,
        transactions related to our debt and equity financing activity, and revenue
        and
        related cost recognition 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.
 
 **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 number of acquisitions that we have completed
        and
        the significant number of shares of our common stock that we have issued
        to the
        former owners of acquired companies and Cornell Capital. In order to analyze
        ourselves, we focus not only on achieving increasing amounts of net income
        and
        EBITDA, but emphasize the change of net income/(loss) per share.
  **The
        Three Months Ended June 30, 2007 and 2006**
 
 Consolidated
        revenues of continuing operations (representing the revenues of Davel and
        ProGames) for the quarter ended June 30, 2007 were $5,967,820 compared with
        revenues of $8,197,498 in the prior year quarter, a decrease of 27.2%. Davel
        derives most of its operating revenues from coin revenue and “dial-around”
revenues (intercarrier compensation paid to us by the providers of 800 and
        other
        toll-free numbers at the rate of 49.4 cents per call) that are generated
        by our
        communications services.
 
 The
        proliferation of cell phone use by consumers has caused a continuous reduction
        in the use of payphones. As a result, the revenues of Davel continue to decline.
        In addition, the location of a significant number of payphones in areas of
        the
        country that are subject to severe winter weather contributes to the seasonality
        of this business. In order to attempt to maintain operating margins, we have
        reduced the number of payphones by removing those phones receiving minimal
        use
        and thereby eliminating the costs to support and maintain those phones. For
        example, Davel had an average of 24,911 payphones in operation during the
        quarter ended June 30, 2007, compared with an average of 34,208 payphones
        in
        operation during the quarter ended June 30, 2006, a decline of approximately
        27.2%. Nonetheless, the cost of services for Davel (excluding depreciation
        and
        amortization) for the quarter ended June 30, 2007, expressed as a percentage
        of
        corresponding revenues, was 59.7% compared with a percentage of 58.2% in
        the
        first quarter of the prior fiscal year. The average monthly revenues per
        average
        payphone for the fiscal quarters ended June 30, 2007 and 2006 were $76.76
        and
        $78.44, respectively, representing a decline of 2.1% between years.
 
 The
        total
        operating costs and expenses of continuing operations for the quarter ended
        June
        30, 2007, excluding the cost of services, depreciation and amortization,
        were
        $4,328,302, representing approximately 72.3% of consolidated revenues for
        the
        current quarter. Comparable operating costs and expenses of continuing
        operations for the quarter ended June 30, 2006, were $5,096,944, or 62.2%
        of
        consolidated revenues for the corresponding period. Included in the operating
        costs and expenses for each quarter were stock compensation expense amounts
        (recorded pursuant to the requirements of FAS 123R) of $200,553 and $485,091,
        respectively. Such costs for the prior year quarter also included a charge
        related to the write-off of investment banking fees of approximately $166,000.
        Depreciation and amortization expenses were $717,181 and $760,737 in the
        quarters ended June 30, 2007 and 2006, respectively, representing primarily
        the
        depreciation of the costs of deployed payphones and the amortization of payphone
        location contracts.  The operating costs and expenses of ProGames for the
        three months ended June 30, 2007 and 2006 were approximately $207,000 and
        $88,000, respectively.
 27
 Interest
        and other expense, net, was $630,725 for the quarter ended June 30, 2007
        compared with $503,651 in the corresponding quarter of the prior fiscal year.
        During the current quarter, we retired principal owed under the Cornell Capital
        debentures in the amount of $1,950,000. However, in May 2007, we borrowed
        $1,100,000 from Cornell Capital pursuant to a promissory note bearing an
        annual
        interest rate of 12%. During the prior year quarter, we completed the retirement
        of notes payable to Cornell Capital. The major components of net interest
        and
        other expense for quarters ended June 30, 2007 and 2006 are presented in
        the
        following schedule.
 
 **Type
                  of Debt**
              
              **2007**
              
              **2006****Convertible
                  debentures (at stated rates)**
              
              $
              321,196
              
              $
              289,829**Convertible
                  debentures (debt discount amortization)**
              
              
              155,689
              
              
              97,139**Convertible
                  debentures (stock issuance discounts)**
              
              
              131,551
              
              
              -**SEDA
                  draw discounts**
              
              
              -
              
              
              137,795**Notes
                  payable to Cornell Capital**
              
              
              18,082
              
              
              25,074**Other,
                  net**
              
              
              4,207
              
              
              (46,186
              )**Interest
                  and Other Expense, net**
              
              $
              630,725
              
              $
              503,651
 
 The
        losses from continuing operations for the three months ended June 30, 2007
        and
        2006 were $3,273,174 and $3,625,783, respectively. The prior year quarter
        amount
        included a loss incurred on the extinguishment of debt in the amount of
        $409,601.
 
 The
        losses from discontinued operations for the three months ended June 30, 2007
        and
        2006 were $1,715,491 and $1,111,724, respectively. The prior year quarter
        results included a charge for goodwill impairment of $348,118.
 
 We
        reported a net loss of $4,988,665 for the quarter ended June 30, 2007, or
        $0.0066 per share, compared with a net loss of $4,737,507 for the quarter
        ended
        June 30, 2006, or $0.0082 per share. Corporate expenses were $1,767,995 in
        the
        current quarter, including $658,673 in net interest and other expenses and
        $207,275 in ProGames operating expenses. Corporate expenses were $2,559,159
        in
        the prior year quarter, including $540,643 in net interest and other expenses,
        $281,635 of restructuring charges, the loss on the debt extinguishment in
        the
        amount of $409,601, the write-off of $166,000 in previously deferred investment
        banking fees and $88,000 of ProGames organizational costs.
 
 **Liquidity
        and Capital Resources**
 
 We
        have
        forecasted our operating cash requirements through the end of calendar 2007
        based on several important assumptions. We have not forecasted the use of
        cash
        that would be required to repay the transferred liabilities of the wireless
        networks business in the event that Gobility fails to raise sufficient capital.
        Mobilepro Corp. is co-obligor on the capital leases transferred to Gobility.
        The
        total principal balance of these leases was approximately $4,519,000 at June
        30,
        2007. Monthly lease payments on these capital leases total approximately
        $213,000. In addition, Mobilepro Corp. was a co-purchaser of certain wireless
        network equipment obtained by Kite Networks. The amount owed to the supplier
        of
        this equipment for the purchase of this equipment, and included in the accounts
        payable of Kite Networks at June 30, 2007, approximates $1,591,000.
 
 We
        have
        also assumed additional sales of operational payphones and the reduction
        of
        corresponding Davel operating costs such that additional funding of this
        business by Mobilepro Corp. would not be required.
 
 If
        the
        Company fails to eliminate the cash requirements represented by the wireless
        network business, Davel and ProGames as planned, the Company’s will not have
        sufficient cash to sustain operations until the completion of the Wireline
        Business sale without raising additional capital.
 
 28
 During
        the quarter ended June 30, 2007, the balance of unrestricted cash and cash
        equivalents relating to continuing operations decreased by $246,871 to
        $1,746,910. The decrease in the current quarter relating to discontinued
        operations was $341,109.
 
 Net
        cash
        used in operations during the quarter ended June 30, 2007 was $1,111,698,
        reflecting the funding of operating expenses incurred by Davel and the corporate
        segment and including $143,700 used in the operating activities of discontinued
        operations. There were reductions in the accounts receivable and the accounts
        payable and accrued liabilities of continuing operations in the amounts of
        $539,627 and $493,822, respectively.
 
 We
        used
        net cash of $2,851 in connection with investing activities during the current
        quarter, reflecting $87,013 related to the investing activities of discontinued
        operations. We made capital expenditures during the current quarter relating
        to
        continuing operations in the approximate amount of $183,000. Offsetting this
        amount was over $200,000 in cash proceeds related to the sale of payphones
        in
        the current quarter.
 
 Our
        financing activities during the current quarter provided net cash of $526,569.
        Cash provided to us by Cornell Capital pursuant to a promissory note issued
        by
        us in May 2007 was $1,100,000. We used $29,836 in cash to retire principal
        amounts owed to Cornell Capital under the debentures. The financing activities
        of discontinued operations used $543,595 in cash.
 
 On
        May
        19, 2006, the SEDA expired without renewal. The SEDA was important to the
        growth
        of our Company. However, we came to believe that the potential additional
        issuances of common stock pursuant to the SEDA resulted in an overhang that
        was
        depressive to the trading price of our common stock. At the time, we believed
        that less expensive financing alternatives would be available to us. However,
        the successful pursuit of alternative sources of capital was very difficult.
        Our
        group of businesses, our history of net losses, our lack of a sufficient
        corporate credit history with significant suppliers and the uncertain payback
        associated with investments in municipal wireless networks proved to be
        significant obstacles to overcome in our search for capital.
 
 Despite
        the expiration of the SEDA, Cornell Capital has continued to support the
        Company. On June 30, 2006, we issued an amended 7.75% secured convertible
        debenture in the amount of $15,149,650 to Cornell Capital, replacing the
        convertible debenture with an outstanding principal amount of $15,000,000
        (and
        accrued interest payable at June 30, 2006 of approximately $149,650) that
        was
        issued to Cornell Capital in May 2005. With the issuance of the Amended
        Debenture, we deferred a cash requirement of $4,500,000 (the amount of the
        originally scheduled principal payments in the twelve month period ending
        March
        31, 2007) relating to fiscal year 2007.
 
 On
        August
        28, 2006, the Company entered into a financing agreement with Cornell Capital
        that provided $7.0 million in funding with the proceeds received upon the
        issuance of a series of secured, convertible debentures. At each closing,
        the
        Company issued Cornell Capital a 7.75% secured convertible debenture in the
        principal amount for that closing, convertible into common stock at $0.174
        per
        share and paid a transaction fee equal to 7% of the proceeds. On August 30,
        2006, the first closing provided gross cash proceeds of $2,300,000. During
        the
        quarter ended December 31, 2006, additional gross cash proceeds of $3,525,000
        were received. Pursuant to the final closing under this agreement, we received
        gross proceeds of $1,175,000 on February 1, 2007.
 
 Using
        shares of our common stock registered on Form S-3 in November 2006 and as
        permitted by the terms of the debentures, the Company made principal and
        interest payments on the debentures issued to Cornell Capital that totaled
        $4,880,489 during the fiscal year ended March 31, 2007, and that totaled
        $1,967,908 from April 2007 through May 2007. However, the supply of shares
        registered and related to the convertible debentures has been exhausted.
        Cornell
        Capital has agreed to delay additional installment payments until early January
        2008 when the Company will be obligated to make total weekly principal payments
        of $375,000 plus accrued interest. Unless additional shares are registered
        by
        the Company under the Securities Act of 1933 (the “Securities Act”), shares
        acquired by Cornell Capital are tradable under Rule 144 of the Securities
        Act,
        or shares of the Company’s common stock are otherwise freely tradable by Cornell
        Capital without restriction, the Company will be required to make these payments
        in cash. However, in the event that the Company or Cornell Capital receives
        a
        legal opinion that Cornell Capital is eligible to sell shares of the Company’s
        common stock under Rule 144, the Company will be required to resume making
        weekly payments of principal and accrued interest with shares of its common
        stock in September 2007.
 
 29
 During
        the prior year, we were successful in obtaining lease financing covering
        certain
        municipal wireless network equipment. On
        June
        28, 2006, the Company executed a master equipment lease agreement intended
        to
        provide financing for the acquisition of qualifying municipal wireless network
        equipment. On June 30, 2006, the Company received $2,000,000 in gross cash
        proceeds from the sale of certain municipal wireless network equipment that
        is
        deployed in Tempe, Arizona, and is leasing back the equipment pursuant to
        the
        master lease agreement. The
        leaseback period is 36 months and the terms include a fair-market-value purchase
        option at the end of the lease term. However, in order to satisfy concerns
        about
        our credit worthiness, we were required to purchase certificates of deposit
        totaling $700,000 that serve as collateral for the benefit of the lessor.
        On
        December 26, 2006, we completed the receipt of approximately $1,207,000 in
        gross
        cash proceeds from the sale of certain wireless network equipment deployed
        in
        Farmers’ Branch, Texas, and commenced a leaseback of the equipment under the
        master lease agreement. As above, the leaseback period is thirty-six months
        and
        the terms include a fair-market-value purchase option at the end of the lease
        term. The Company was required to purchase certificates of deposit totaling
        approximately $362,000 in order to collateralize this transaction.
 
 On
        October 10, 2006, the Company signed a master equipment lease agreement with
        a
        different lease financing firm that may provide up to $3 million in lease
        financing capital for future wireless network equipment purchases. The
        commitment is available only for equipment manufactured by Cisco Systems.
        Fifty
        percent of the commitment is designated for core network infrastructure
        equipment. The remainder of the commitment is available for transmission
        equipment purchases and can be used to finance up to 50% of the cost of such
        purchases. The lease term for each equipment purchase is 24 months. Pursuant
        to
        this arrangement and since December 2006, the Company has recorded capital
        lease
        transactions covering equipment with a total cost of approximately
        $1,950,000.
 
 Currently,
        our major challenge is to assure the funding of current operations during
        the
        next two quarters. As discussed above, if we obtain the necessary regulatory
        approvals, we expect to complete the sale of the Wireline Business by the
        end of
        calendar year 2007 providing us with sufficient cash to retire the Cornell
        Capital debentures and related accrued interest.
 
 **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.
 
 **Item
        3. Quantitative and Qualitative Disclosures about Market
        Risk.**
 
 Our
        exposure to market risk for changes in interest rates relates primarily to
        our
        purchase of certificates of deposit to secure letters of credit and capital
        leases. In addition, we own common stock issued by two companies, one of
        which
        is a publicly-traded security. The carrying value of these investments
        approximated $443,000 at June 30, 2007. The difference between the total
        carrying value of these investments and the current market value of the publicly
        traded securities was not material. Further, we do not use derivative financial
        instruments in our investments. Accordingly, we do not believe that there
        is any
        material market risk exposure with respect to derivative or other financial
        instruments that would require disclosure in this item.
 
 **Item
        4. Controls and Procedures.**
 
 **Evaluation
        of Disclosure Controls and Procedures**
 
 Under
        the
        supervision and with the participation of our management, including our Chief
        Executive Officer (CEO) and Chief Accounting Officer (CAO), 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-Q. Based upon that
        evaluation, our CEO and our CAO 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. Our quarterly evaluation
        of
        disclosure controls includes an evaluation of some components of our internal
        control over financial reporting, and internal control over financial reporting
        is also separately evaluated on an annual basis for purposes of providing
        the
        management report, which is set forth below.
 
 30
 **Management
        Report on Internal Control over Financial Reporting**
  Our
        management is responsible for establishing and maintaining adequate internal
        control over financial reporting to provide reasonable assurance regarding
        the
        reliability of our financial reporting and the preparation of financial
        statements for external purposes in accordance with U.S. generally accepted
        accounting principles. Internal control over financial reposting includes
        those
        policies and procedures that (i) pertain to the maintenance of records that
        in
        reasonable detail accurately and fairly reflect the transactions and
        dispositions of the assets of the company; (ii) provide reasonable assurance
        that transactions are recorded as necessary to permit preparation of financial
        statements in accordance with authorizations of management and directors
        of the
        company; and (iii) provide reasonable assurance regarding prevention of timely
        detection of unauthorized acquisition, use, or disposition of the company’s
        assets that could have a material effect on the financial
        statements.
  Management
        assessed our internal control over financial reporting as of March 31, 2007,
        the
        end of our most recently completed fiscal year. Management based its assessment
        on criteria established in Internal Control—Integrated Framework issued by the
        Committee of Sponsoring Organizations of the Treadway Commission. Management’s
        assessment included evaluation of elements such as the design and operating
        effectiveness of key financial reporting controls, process documentation,
        accounting policies, and our overall control environment. This assessment
        was
        supported by testing and monitoring performed by both our outsourced internal
        auditing firm and certain of our own finance and accounting
        personnel.
  Based
        on
        our assessment, management concluded that our internal control over financial
        reporting was ineffective as of the end of the fiscal year to provide reasonable
        assurance regarding the reliability of financial reporting and the preparation
        of financial statements for external reporting purposes in accordance with
        U.S.
        generally accepted accounting principles except as described below. We reviewed
        the results of management’s assessment with the Audit Committee of our Board of
        Directors. In addition, on a quarterly basis we will evaluate any changes
        to our
        internal control over financial reporting to determine if material change
        has
        occurred.
  Our
        independent registered public accounting firm, Bagell, Josephs, Levine &
Company L.L.C. (“Bagell”), audited management’s assessment and independently
        assessed the effectiveness of the company’s internal control over financial
        reporting and issued an attestation report concurring with management’s
        assessment, which was included in Part II, Item 8, of our Annual Report on
        Form
        10-K for the fiscal year ended March 31, 2007.
  **Material
        Weaknesses in Internal Controls**
  Bagell
        provided us with an unqualified report on our consolidated financial statements
        for the fiscal year ended March 31, 2007. However, during the conduct of
        our
        assessment of internal control over financial reporting, we identified material
        weaknesses in the design of certain general controls governing computer
        processing activities and have advised the audit committee that the following
        material weaknesses existed at March 31, 2007. As defined by the Public Company
        Accounting Oversight Board Auditing Standard No. 2, a material weakness is
        a
        significant control deficiency or a combination of significant deficiencies
        that
        results in a more than remote likelihood that a material misstatement of
        the
        annual or interim financial statements will not be prevented or
        detected.
  The
        material weaknesses exist in the design and execution of certain general
        controls governing computer processing (“I/T”) activities. **** Most
        significantly, the management of the customer information database utilized
        by
        the customer care and customer billing functions of one of our companies
        is
        performed offsite by a subcontracted consultant without proper controls over
        access to the data or changes to the system. In addition, we do not have
        processes established to document the control over changes made to certain
        proprietary information systems that supply transactions amounts. Finally,
        we do
        not have the proper processes in place at all subsidiaries for the establishment
        and maintenance of individual access codes and passwords.
 
 31
 While
        these material weaknesses did not have an effect on our reported results
        or
        result in the restatement of any previously issued financial statements or
        any
        other related disclosure, they nevertheless constituted deficiencies in our
        controls. In light of these material weaknesses and the requirements enacted
        by
        the Sarbanes-Oxley Act of 2002, and the related rules and regulations adopted
        by
        the SEC, our CEO and CAO concluded that, as of March 31, 2007, our controls
        and
        procedures needed improvement and were not effective at a reasonable assurance
        level. Despite those deficiencies in our internal controls, management believes
        that there were no material inaccuracies or omissions of material fact in
        this
        quarterly report.
 
 Since
        the
        discovery of the material weaknesses in I/T internal controls described above,
        management is strengthening the Company's oversight over the I/T functions
        and
        its attendant controls, procedures, documentation and security beyond what
        has
        existed in prior years. Specifically, we have taken, and plan to take, whatever
        additional steps necessary to improve our I/T controls and procedures and
        eliminate the identified material weaknesses. Management has prepared for
        publication within the Company a set of information security program standards
        that shall provide requirements to the I/T staff members throughout the Company
        in a wide range of I/T areas including IT governance, computer operations,
        system changes and information security.
 
 The
        elimination of the material weaknesses identified above is among our highest
        priorities. We have discussed our corrective actions and future plans with
        our
        audit committee and Bagell as of the date of this annual report, and believe
        the
        planned actions should serve to correct the above listed material weaknesses
        to
        our internal controls. However, we cannot provide assurance that neither
        we nor
        our independent auditors will in the future identify further material weaknesses
        or significant deficiencies in our internal control over financial reporting
        that we have not discovered to date.
  **Inherent
        Limitations on Effectiveness of Controls**
  The
        Company’s management, including the CEO and CAO, does not expect that our
        disclosure controls or our internal control over financial reporting will
        prevent or detect all error and all fraud. A control system, no matter how
        well
        designed and operated, can provide only reasonable, not absolute, assurance
        that
        the control system’s objectives will be met. The design of a control system must
        reflect the fact that there are resource constraints, and the benefits of
        controls must be considered relative to their costs. Further, because of
        the
        inherent limitations in all control systems, no evaluation of controls can
        provide absolute assurance that misstatements due to error or fraud will
        not
        occur or that all control issues and instances of fraud, if any, within the
        company have been detected. These inherent limitations include the realities
        that judgments in decision-making can be faulty and that breakdowns can occur
        because of simple error or mistake. Controls can also be circumvented by
        the
        individual acts of some persons, by collusion of two or more people, or by
        management override of the controls. The design of any system of controls
        is
        based in part on certain assumptions about the likelihood of future events,
        and
        there can be no assurance that any design will succeed in achieving its stated
        goals under all potential future conditions. Projections of any evaluation
        of
        controls effectiveness to future periods are subject to risks. Over time,
        controls may become inadequate because of changes in conditions of deterioration
        in the degree of compliance with policies or procedures.
  **Changes
        in Internal Control over Financial Reporting**
 
 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-Q
        that
        have materially affected, or are reasonably likely to materially affect,
        our
        internal controls over financial reporting.
 
 32
  **PART
        II**
 **OTHER
        INFORMATION**
 
 **Item
        1. Legal Proceedings.**
  In
        addition to certain other litigation arising in the normal course of its
        business that we believe will not materially affect our financial position
        or
        operating results, we were involved with the following legal proceedings
        during
        the fiscal quarter ended June 30, 2007.
 
 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 infringements. 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. The plaintiff
                  is
                  seeking monetary relief of at least $7,500,000. Davel does not
                  believe
                  that the allegations set forth in the complaint are valid and Davel
                  filed
                  a Motion for Summary Judgment, which remains pending before the
                  court. In
                  a similar action filed by the plaintiff in the United States District
                  Court of Texas against Southwestern Bell Telephone, LP and SWBT
                  Texas, LLC
                  the Court recently granted the defendants’ Motion for Summary Judgment and
                  dismissed the case with prejudice based upon that court’s finding that the
                  Gammino Patents were invalid. The decision of the United States
                  District
                  Court of Texas has been appealed.
  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,
        including legal fees, 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 in defending against this plaintiff's infringement claims and
        any
        potential judgment that could be reasonably expected in our view. 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
                  August 6, 2006, we were served with a summons and complaint filed
                  in the
                  Superior Court of the State of Arizona in Maricopa County in the
                  matter
                  captioned Michael V. Nasco, et. al. vs. MobilePro Corp., et. al.
                  which
                  makes claims arising out of the acquisition by the Company of Transcordia,
                  LLC. The plaintiff alleges breach of contract, fraud, relief rescission,
                  failure to pay wages and unjust enrichment and seeks damages in
                  excess of
                  $3 million. On or about November 7, 2006, we filed a motion to
                  dismiss
                  arguing lack of standing and corporate existence. The motion to
                  dismiss
                  was subsequently denied by the Court and the matter is in the discovery
                  stage. We believe that we have meritorious defenses to the alleged
                  claims
                  and intend to vigorously defend ourselves in this matter. In the
                  event
                  that our defenses were not successful, we believe that any potential
                  exposure related to the claims alleged against the Company is not
                  likely
                  to be material.
  3)
              On
                  April 17, 2007, the Supreme Court of the United States issued an
                  opinion
                  in the case captioned Global Crossing Telecommunications, Inc.
                  v.
                  Metrophones Telecommunications, Inc. on Certiorari from the United
                  States
                  Court of Appeals for the Ninth Circuit (the "Ninth Circuit" and
                  the
                  "Metrophones Case"), No. 05-705, in which it upheld the Ninth Circuit's
                  decision that independent payphone providers have a private right
                  of
                  action to pursue recovery in federal court from telecommunication
                  carriers
                  who fail to pay dial around compensation. The ruling in the Metrophones
                  Case permits litigation to resume that has been pending in federal
                  district court against AT&T Corporation, Sprint Communications
                  Company, LP and Qwest Communications, Inc. (the "Defendants") for
                  non-payment of dial around compensation. Davel Communications,
                  Inc. and
                  certain of Davel's subsidiaries (collectively, the "Davel Entities")
                  are
                  directly or indirectly plaintiffs in the federal district court
                  cases
                  against the Defendants. Although the federal district court case
                  has been
                  pending since 1999, the litigation remains in its preliminary phases.
                  As a
                  result, we cannot predict the likelihood of success on the merits,
                  the
                  costs associated with the pursuit of the claims, the timing of
                  any
                  recovery or the amount of recovery, if any. However, the industry
                  representing a group of independent payphone providers, including
                  the
                  Davel Entities, has recently prevailed in a similar Federal Communications
                  Commission administrative proceeding against another carrier for
                  non-payment of dial-around compensation using a similar damages
                  model
                  which was accepted and pursuant to which the Federal Communications
                  Commission assessed pre-judgment interest (the "Similar Litigation").
                  The
                  Similar Litigation is being appealed to the U.S. Court of Appeals
                  for the
                  District of Columbia. Based upon our damages model in the Similar
                  Litigation, we estimate that the amount in controversy for the
                  Davel
                  Entities against the Defendants extends well into the eight figures,
                  but
                  any recovery is conditioned on, among other things (i) prevailing
                  on the
                  merits at trial; (ii) having the Davel Entities' damages model
                  and other
                  claims approved in whole or in large part; and (iii) prevailing
                  on any
                  appeals that the Defendants may make. As evidenced by the eight
                  years that
                  this litigation has been in process, the Defendants have shown
                  an interest
                  in stretching the duration of the litigation and have the means
                  to do so.
                  Although the Davel Entities could ultimately benefit (in an absolute
                  sense, although not necessarily on a present value basis) from
                  this delay
                  in the event that pre-and/or post-judgment interest (awarded at
                  11.25% per
                  annum in the Similar Litigation) is assessed against the Defendants
                  and
                  the potential award of attorneys' fees and/or other remedies (in
                  addition
                  to compensatory damages) if the Davel Entities prevail, such delay
                  will
                  result in a deferral of the receipt of any cash to the Davel Entities.
  33
 **Item
        1A. Risks Factors**
 
 *Investing
        in our securities involves a high degree of risk. Before investing in our
        securities, you should carefully consider the risks and uncertainties described
        below and those included in our Annual Report on Form 10-K for the fiscal
        year
        ended March 31, 2007, and the other information contained in this report.* *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
        Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.* *If
        any of these risks or uncertainties actually occurs, our business, financial
        condition or future operating results could be materially harmed. In such
        an
        event, the trading price of our common stock could decline and you could
        lose
        part or all of your investment.*
 
 **The
        Sale of Portions of Our Business May Not Be Concluded and We May Not Have
        Sufficient Cash to Continue Operations**
 
 We
        have
        forecasted our operating cash requirements through the end of calendar 2007
        based on several important assumptions. We have assumed that Gobility will
        succeed in obtaining sufficient funding for its operations enabling Kite
        Networks to make the scheduled payments on its liabilities including the
        capital
        equipment leases.
 
 We
        have
        also assumed additional sales of operational payphones and the reduction
        of
        corresponding Davel operating costs such that additional funding of this
        business by Mobilepro Corp. would not be required.
 
 If
        the
        Company fails to permanently eliminate the cash requirements represented
        by the
        wireless network business and Davel as planned, the Company’s will not have
        sufficient cash to sustain operations until the completion of the Wireline
        Business sale without raising additional capital.
 
 Included
        in its audit report on our consolidated financial statements included in
        our
        Annual Report on Form 10-K for the fiscal year ended March 31, 2007, our
        independent registered public accounting firm included a paragraph describing
        that there is substantial doubt about the Company’s ability to continue as a
        going concern.
 
 **The
        Failure of Gobility to Raise Capital May Result in Our Payment of Transferred
        Liabilities**
 
 In
        December 2006, we engaged an investment banking firm to assist in evaluating
        strategic alternatives for the wireless networks business conducted by its
        Kite
        Networks and Kite Broadband subsidiaries. Efforts to secure investment capital
        for this business or to find a willing buyer resulted in the sale of the
        wireless networks business to Gobility on July 8, 2007. The purchase price
        was
        $2.0 million, paid with a debenture convertible into shares of common stock
        of
        Gobility. However, under the terms of the debenture, Gobility is required
        to
        raise at least $3.0 million in cash no later than August 15, 2007. If Gobility
        defaults on the financing obligation under the debenture, we will have the
        right
        to repurchase the wireless networks business with the surrender of the debenture
        and the payment of a nominal additional amount.
 
 34
 Mobilepro
        Corp. is co-obligor on the capital leases transferred to Gobility. The total
        principal balance of these leases was approximately $4,519,000 at June 30,
        2007.
        Monthly lease payments on these capital leases total approximately $213,000.
        In
        addition, Mobilepro Corp. was a co-purchaser of certain wireless network
        equipment obtained by Kite Networks. The amount owed to the supplier of this
        equipment for the purchase of this equipment, and included in the accounts
        payable of Kite Networks at June 30, 2007, approximates $1,591,000.
 
 Although
        Gobility has represented to us that it has identified $8 million of potential
        funding, we understand that Gobility has not yet closed on any funding and
        that
        it is behind in making scheduled lease payments. If Gobility fails to raise
        capital and make the required payments on the liabilities described above,
        it is
        likely that the creditors described above will demand payment from Mobilepro
        Corp. and they may find Mobilepro Corp. to be in default on these obligations.
  **Failure
        to Complete the Sale of the Wireline Businesses to USA Will Result in Our
        Inability to Retire the Cornell Capital Debentures**
 
 On
        June
        30, 2007, we executed an agreement to sell the Wireline Businesses (including
        CloseCall, AFN and the Internet service provider companies) to USA. Pursuant
        to
        the USA Purchase Agreement, we closed the sale of the Internet service provider
        companies to USA on July 18, 2007 and received cash proceeds of $2,500,000,
        a
        promissory note for $2,000,000 and preferred stock convertible into 7.5%
        of the
        fully diluted shares of USA’s common stock valued at $8.1 million.
        Simultaneously, we used $2,000,000 of this cash to pay down principal and
        accrued interest owed to Cornell Capital under the debentures.
 
 The
        sale
        of CloseCall and AFN requires the receipt of certain state regulatory approvals
        before it can be completed. The receipt of all of the approvals may not occur
        until the end of calendar 2007. Upon the close and pursuant to the terms
        of the
        USA Purchase Agreement, are scheduled to receive additional cash proceeds
        of
        $19.4 million, including payment of the $2.0 million promissory note. Using
        cash
        proceeds from the sale of the remainder of the Wireline Business, we expect
        to
        be in a position to retire the Cornell Capital debentures plus accrued interest.
 
 If
        the
        sale of the Wireline Businesses is not completed pursuant to the negotiated
        terms by December 31, 2007, the Company will not have the ability to continue
        as
        a going concern beyond the third quarter of the current fiscal year without
        a
        significant restructuring of the Cornell Capital debt.
 
 **We
        Have Lost Money Historically Which Means That We May Not Be Able to Continue
        Operations**
  The
        Company has historically lost money. The Company’s accumulated deficit at June
        30, 2007 was $82,259,910. In the three months ended June 30, 2007, the Company
        incurred a net loss of $4,988,665. In the years ended March 31, 2007, 2006
        and
        2005, the Company sustained net losses of $45,898,288, $10,176,407 and
        $5,359,722, respectively. During these periods, most of the acquired businesses
        of Mobilepro have experienced declining revenues. Although restructuring
        measures have reduced other operating expenses, the Company has been unable
        to
        reduce the corresponding costs of services. In addition, the Company has
        funded
        the start-up and operations of the municipal wireless networks and online
        gaming
        businesses without these companies achieving expected revenues. As a result,
        the
        amounts of cash used in operations during the fiscal quarter ended June 30,
        2007
        and the fiscal year ended March 31, 2007 were $1,111,698 and $6,558,708,
        respectively. Future losses are likely to occur. Accordingly, the Company
        will
        continue to experience liquidity and cash flow problems if it is unable to
        improve its operating performance, to sell assets for cash, or to raise
        additional capital as needed and on acceptable terms.
 
 **We
        Do Not Have Enough Registered Shares to Cover the Scheduled Debenture Payments
        with Our Common Stock**
 
 To
        date,
        Cornell Capital has been a significant source of capital for the Company,
        providing financing in several forms. Most recently, the Company has borrowed
        funds under a series of convertible debentures. The total amount owed to
        Cornell
        Capital under the debentures at March 31, 2007 was $18,149,650. Using shares
        of
        its common stock registered on Form S-3 in November 2006, the Company made
        principal and interest payments on the debentures that totaled $4,880,489
        during
        the fiscal year ended March 31, 2007, and that totaled $1,967,908 from April
        2007 through May 2007. However, the supply of shares registered for Cornell
        Capital’s benefit related to the convertible debentures has been exhausted.
        Cornell Capital has agreed to delay additional installment payments until
        January 2008 when the Company will be obligated to make total weekly principal
        payments of $375,000 plus accrued interest. Unless additional shares are
        registered by the Company under the Securities Act of 1933 (the “Securities
        Act”), shares acquired by Cornell Capital are tradable under Rule 144 of the
        Securities Act, or shares of the Company’s common stock are otherwise freely
        tradable by Cornell Capital without restriction, the Company will be required
        to
        make these payments in cash. However, in the event that the Company or Cornell
        Capital receives a legal opinion that Cornell Capital is eligible to sell
        shares
        of the Company’s common stock under Rule 144, the Company will be required to
        resume making weekly payments of principal and accrued interest with shares
        of
        its common stock in September 2007.
 
 35
 Because
        of the decline in the total market value of the outstanding shares of our
        common
        stock, we are not now eligible to use Form S-3 for primary issuances of shares
        of our common stock. As a result, we may be required to use a more extensive
        and
        time-consuming process in order to register additional shares of our common
        stock in the future.
 
 The
        Company may not have the ability to continue as a going concern beyond the
        third
        quarter of the current fiscal year without the closing of the CLEC portion
        of
        the sale of the Wireline Businesses described above or a significant
        restructuring of the Cornell Capital debentures.
 
 **Legal
        Actions May Be Required by Us in order to Enforce Certain Legal Rights**
 
 The
        telecommunications industry includes hundreds of companies, many with
        substantially greater infrastructure, financial, personnel, technical,
        marketing, and other resources, and larger numbers of established customers
        and
        more prominent name recognition than us. We transact business with certain
        of
        these companies. In addition, certain of our businesses operate in areas
        of the
        industry that are subject to federal and/or state regulations. As a result,
        in
        order to enforce rights under negotiated contracts with transaction partners
        or
        to obtain the benefits of certain government regulations, we may be forced
        to
        initiate or to participate in legal action. For example, as discussed in
        the
        third matter included in the “Legal Proceedings” section of this report, Davel
        is engaged in a lengthy and expensive legal process relating to the nonpayment
        of dial-around compensation by large, long distance carriers. Using their
        greater resources, defendants may take actions that stretch the duration
        of
        litigation and substantially delay our receipt of the benefits of favorable
        legal decisions.
 
 **Federal
        Regulators Have Taken and May Take Positions in the Future with Which We
        Disagree or Which We Believe are Contrary to Existing Law and Regulation,
        Which
        May Impose Substantial Litigation Costs on Our Business, Impede Our Access
        to
        Capital and/or Force Us to Seek a Merger Partner or Cease
        Operations**
  As
        a
        publicly traded telecommunications company, we are subject to the regulatory
        scrutiny of both the FCC and the SEC. Both agencies are so-called
“administrative agencies” with statutory authority to implement and enforce laws
        passed by the U.S. Congress. Despite this limited scope, both the FCC and
        SEC
        have the ability to use discretion in certain cases both in interpreting
        what
        the laws passed by Congress mean and when to enforce such laws. The FCC and/or
        SEC may even take positions with which we disagree or which we believe are
        unfounded in statute, regulation, or prior agency guidance and which are
        adverse
        to Mobilepro. For instance, the FCC has been repeatedly overruled by federal
        courts in recent years for misinterpretations of the 1996 Telecom Act. In
        order
        to contest such behavior, Mobilepro may be forced to resort to litigation.
        In
        the context of the SEC, Mobilepro’s ability to have any registration statement
“go effective” may be impeded if in its comments to a future registration
        statement the SEC were to take a position with which we disagree based on
        prior
        law, regulation or prior SEC interpretative guidance. The registration process
        that resulted in our Form S-3 becoming effective in November 2006 commenced
        in
        September 2005 with the filing of Form SB-2. The protracted registration
        process
        included the filing of several registration statement amendments in order
        to
        incorporate changes from the SEC received in a series of comment letters.
        If we
        were to encounter similar difficulties and a prolonged registration process
        in
        connection with a future registration statement, it could materially impair
        Mobilepro’s access to the capital markets, potentially force Mobilepro to incur
        substantial litigation related costs and may force Mobilepro to seek a merger
        with another company or cease operations.
 
 36
 **Our
        Payphone Division is Experiencing Intense Competition That Has Resulted in
        Revenue Declines That Will Likely Continue**
  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 $30,028,114 for the fiscal year ended
        March 31, 2007 compared with $40,305,697 for the corresponding period of
        the
        prior year, a decline of 25.5%.
  If
        the
        revenues continue to decline, it is likely that additional consolidated
        operating losses will be incurred by Davel and anticipated proceeds from
        additional sales of groups of payphones may not be realized.
 
 **If
        Cornell Capital or Other Large Stockholders Sell Part or All of Their Shares
        of
        Common Stock in the Market, Such Sales May Cause Our Stock Price to
        Decline**
  From
        time
        to time, Cornell Capital and other selling stockholders may sell in the public
        market up to all of the shares of common stock owned at that time.
 
 In
        November 2006, we filed a registration statement on Form S-3 covering the
        resale
        by selling stockholders of up to 404,474,901 shares of common stock that
        was
        declared effective by the SEC. To date, we have issued 175,779,290 shares
        of our
        common stock to Cornell Capital that were covered by the registration statement.
        The remaining number of shares registered in this offering represents
        approximately 33.0% of the total number of shares of common stock outstanding
        at
        March 31, 2007. In the event that the selling stockholders dispose of some
        or
        all of the remaining shares of common stock covered by this registration
        statement, such sales may cause our stock price to decline.
  The
        offering registered a large percentage of the shares of common stock held
        by
        current and former executive officers and directors. While we are not aware
        of
        any plans of any current officer or director to sell shares, it is likely
        that
        former officers of the Company whose service with us is being terminated
        in
        connection with the business disposition transactions described herein may
        sell
        shares held by them.
 
 Any
        significant downward pressure on our stock price caused by the sale of stock
        by
        large selling stockholders could encourage short sales by third parties.
        Such
        short sales could place further downward pressure on our stock
        price.
 
 **If
        Our Previous Capital Raising Transactions with Cornell Capital Were Held
        to Be
        in Violation of the Securities Act of 1933, We Could Experience Significant
        Negative Consequences**
  During
        its review of Amendment No. 1, filed on November 30, 2005, to our Registration
        Statement on Form SB-2, originally filed on September 30, 2005 and withdrawn
        by
        us on September 22, 2006, the SEC issued a comment stating that it believed
        that
        the repayment of promissory notes to Cornell Capital using proceeds from
        advances under the SEDA may have somehow violated Section 5 of the Securities
        Act of 1933 (the “Securities Act”). We requested guidance from the SEC regarding
        these transactions and how the transactions we had completed implicated Section
        5. The only guidance we received was a reference to Section VIII of the
        Commission’s Current Issues and Rulemaking Projects Quarterly Update dated March
        31, 2001 (the “Quarterly Update”). We analyzed each requirement for an equity
        line to comply with the Securities Act set forth in the Quarterly Update.
        We
        believe that we fully complied with the SEC’s guidance and that the guidance
        does not explicitly or implicitly prohibit or in any way limit the use of
        proceeds under the SEDA to repay debt obligations to Cornell Capital or any
        other party or limit any other use of proceeds. We are not aware of any other
        law, regulation or interpretive guidance on this subject and have not been
        advised of the existence of any by the SEC. Once we became aware of the new
        position of the staff of the SEC on this issue, however, we nevertheless
        immediately changed our repayment of notes issued to Cornell Capital to ensure
        that such repayments of debt were made only from cash generated by our
        operations or provided from other sources. Furthermore, all such notes payable
        to Cornell Capital were repaid during the quarter ended June 30, 2006, and
        no
        such notes were payable to Cornell Capital at March 31, 2007.
  37
 Accordingly,
        we do not believe that these transactions constitute a violation of the
        Securities Act. However, the SEC could commence an enforcement action against
        us, and if these transactions were held by a court to be in violation of
        the
        Securities Act, we could experience a material adverse effect and the market
        price of our common stock could decline, which could force us to sell or
        merge
        the company because our ability to raise additional financing would be
        significantly compromised. Any claim would be bound by the one-year statute
        of
        limitations under Section 13 of the Securities Act.
  We
        do not
        believe we have violated the Securities Act, and we would contest vigorously
        any
        claim that a violation of the Securities Act occurred.
 
 **The
        Federal and State Regulations under Which We Operate Could Change,
        Resulting in Harm to Our Business**
  The
        enactment of the Telecommunications Act of 1996 significantly altered the
        regulatory landscape in which our businesses operate. In addition, state
        regulators maintain jurisdiction over certain over our services. We cannot
        predict whether future FCC or state regulatory decisions may adversely affect
        our ability to operate certain of our business or impact our
        profitability.
 
 Although
        the Telecommunications Act of 1996, as implemented by the FCC, addressed
        certain
        historical inequities in the payphone marketplace, uncertainties relating
        to the
        impact and timing of the implementation of this framework still exist. The
        uncertainty with the greatest potential financial impact relates to revenue
        from
        and collectibility of access code calls and toll-free dialed calls, or dial
        around compensation. Dial around compensation accounts for a material percentage
        of our revenues. Historically, many parties legally obligated by the FCC
        to pay
        dial around compensation have nevertheless failed to do so. We believe that
        such
        failures exist today. While we believe that we would have the right to sue
        in
        order to collect amounts owed, such efforts may consume management time and
        attention and our cash, and there can be no assurance that such efforts would
        result in the collection of any additional amounts. Consequently, such illegal
        nonpayment activities may adversely affect our cash flows, receivable
        collectibility, and future business profitability.
  **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 25% of our
        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.
  **Our
        Common Stock Is Deemed to Be “Penny Stock,” Which May Make It More Difficult for
        Investors to Resell Their Shares Due to Suitability
        Requirements**
  Our
        common stock is deemed to be “penny stock” as that term is defined in Rule
        3a51-1 promulgated under the Securities Exchange Act of 1934. A penny stock
        has
        the following characteristics:
  ·
              It
                  is traded at a price of less than $5.00 per share;
  38
  ·
              It
                  is not traded on a “recognized” national exchange;·
              Its
                  price is not quoted on the Nasdaq automated quotation system
                  (Nasdaq-listed stock must still have a price of not less than $5.00
                  per
                  share); or·
              Its
                  issuer has net tangible assets less than $2.0 million (if the issuer
                  has
                  been in continuous operation for at least three years) or $5.0
                  million (if
                  in continuous operation for less than three years), or has average
                  annual
                  revenues of less than $6.0 million for the last three years.
 
 Trading
        of our stock may be restricted by the SEC’s penny stock regulations that may
        limit a stockholder’s ability to buy and sell our stock.
  The
        penny
        stock rules impose additional sales practice requirements on broker-dealers
        who
        sell to persons other than established customers and “accredited investors.” The
        term “accredited investor” refers generally to institutions with assets in
        excess of $5,000,000 or individuals with a net worth in excess of $1,000,000
        or
        annual income exceeding $200,000 or $300,000 jointly with their spouse. The
        penny stock rules require a broker-dealer, prior to a transaction in a penny
        stock not otherwise exempt from the rules, to deliver a standardized risk
        disclosure document in a form prepared by the SEC that provides information
        about penny stocks and the nature and level of risks in the penny stock market.
        The broker-dealer also must provide the customer with current bid and offer
        quotations for the penny stock, the compensation of the broker-dealer and
        its
        salesperson in the transaction and monthly account statements showing the
        market
        value of each penny stock held in the customer’s account. The bid and offer
        quotations, and the broker-dealer and salesperson compensation information,
        must
        be given to the customer orally or in writing prior to effecting the transaction
        and must be given to the customer in writing before or with the customer’s
        confirmation. Moreover, broker/dealers are required to determine whether
        an
        investment in a penny stock is a suitable investment for a prospective investor.
        The penny stock rules require that prior to a transaction in a penny stock
        not
        otherwise exempt from these rules, the broker-dealer must make a special
        written
        determination that the penny stock is a suitable investment for the purchaser
        and receive the purchaser’s written agreement to the transaction.
  These
        disclosure requirements may have the effects of reducing the number of potential
        investors and the level of trading activity in the secondary market for the
        stock that is subject to these penny stock rules. Consequently, these penny
        stock rules may affect the ability of broker-dealers to trade our securities.
        This may make it more difficult for investors in our common stock to sell
        shares
        to third parties or to otherwise dispose of them. This could cause our stock
        price to decline. We believe that the penny stock rules discourage investor
        interest in and limit the marketability of our common stock.
  In
        addition, the National Association of Securities Dealers, or NASD, has adopted
        sales practice requirements that may also limit a stockholder’s ability to buy
        and sell our stock. Before recommending an investment to a customer, a
        broker-dealer must have reasonable grounds for believing that the investment
        is
        suitable for that customer. Prior to recommending speculative low priced
        securities to their non-institutional customers, broker-dealers must make
        reasonable efforts to obtain information about the customer’s financial status,
        tax status, investment objectives and other information. Under interpretations
        of these rules, the NASD believes that there is a high probability that
        speculative low priced securities will not be suitable for at least some
        customers. The NASD requirements make it more difficult for broker-dealers
        to
        recommend that their customers buy our common stock, which may limit investors’
ability to buy and sell our stock and have an adverse effect on the market
        for
        our shares.
 
 **Item
        2. Unregistered Sales of Equity Securities and Use of
        Proceeds**
 
 In
        the
        period November 27, 2006 through May 10, 2007, the Company issued a total
        of
        55,089,635 unregistered shares of its common stock to Cornell Capital in
        satisfaction of its obligation under the Amended Debenture to make weekly
        installment principal payments plus interest in the total amount of
        $3,252,649.
 
 39
 In
        the
        period January 11, 2007 through May 10, 2007, the Company issued a total
        of
        120,689,655 unregistered shares of its common stock to Cornell Capital in
        satisfaction of its obligation under the Amended Debenture to make weekly
        installment principal payments plus interest in the total amount of
        $3,595,740.
 
 Except
        as
        otherwise noted, the securities described in this Item were issued pursuant
        to
        the exemption from registration provided by Section 4(2) of the Securities
        Act
        of 1933 and/or Regulation D promulgated under the Securities Act. Each such
        issuance was made pursuant to individual contracts that are discrete from
        one
        another and are made only with persons who were sophisticated in such
        transactions and who had knowledge of and access to sufficient information
        about
        Mobilepro Corp. to make an informed investment decision. Among this information
        was the fact that the securities were restricted securities.
 
 **Item
        3. Defaults upon Senior Securities.**
 
 There
        were no defaults upon senior securities during the three months ended June
        30,
        2007. Please see the Risk Factor presented above titled “The Failure of Gobility
        to Raise Capital May Result in Our Payment of Transferred Liabilities”.
 
 **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 June 30, 2007.
 
 **Item
        5. Other Information.**
  Not
        applicable.
  40
  **Item
        6. Exhibits.**
 
 (a)
              The
                  following exhibits are filed as part of this
                  report:
 
 **Exhibit
                  No.**
              **Description**
              
              **Location**
 
 2.1
              Asset
                  Purchase Agreement, dated as of December 29, 2006, by and among
                  TeleCommunication Systems, Inc., Mobilepro Corp., and CloseCall
                  America,
                  Inc.
              
              Incorporated
                  by reference to Exhibit 10.01 to the Registrant’s Current Report on Form
                  8-K filed on January 10, 20072.2
              Purchase
                  Agreement, dated as of June 29, 2007, by and between Mobilepro
                  Corp. and
                  United Systems Access, Inc.
              
              Incorporated
                  by reference to Exhibit 10.01 to the Registrant’s Current Report on Form
                  8-K filed on July 6, 20072.3
              Amendment
                  to the Purchase Agreement by and between Mobilepro Corp. and United
                  Systems Access, Inc., dated July 6, 2007
              
              Incorporated
                  by reference to Exhibit 10.02 to the Registrant’s Current Report on Form
                  8-K filed on July 6, 20072.4
              Second
                  Amendment to the Purchase Agreement by and between Mobilepro Corp.
                  and
                  United Systems Access, Inc., dated July 13, 2007
              
              Incorporated
                  by reference to Exhibit 10.03 to the Registrant’s Current Report on Form
                  8-K filed on July 19, 20072.5
              Third
                  Amendment to the Purchase Agreement by and between Mobilepro Corp.
                  and
                  United Systems Access, Inc., dated July 13, 2007
              
              Incorporated
                  by reference to Exhibit 10.04 to the Registrant’s Current Report on Form
                  8-K filed on July 19, 20072.6
              Management
                  Agreement, dated as of July 18, 2007, by and between Mobilepro
                  Corp.,
                  United Systems Telecom Access, Inc. and United Systems Access,
                  Inc.
              
              Incorporated
                  by reference to Exhibit 10.05 to the Registrant’s Current Report on Form
                  8-K filed on July 19, 20072.7
              Purchase
                  Agreement, dated as of July 8, 2007, by and between Mobilepro Corp.
                  and
                  Gobility, Inc.
              
              Incorporated
                  by reference to Exhibit 10.01 to the Registrant’s Current Report on Form
                  8-K filed on July 10, 20072.8
              Convertible
                  Debenture issued to Mobilepro Corp. by Gobility, Inc., made as
                  of July 8,
                  2007
              
              Incorporated
                  by reference to Exhibit 10.02 to the Registrant’s Current Report on Form
                  8-K filed on July 10, 20073.1
              Certificate
                  of Incorporation, dated April 20, 2001, of Registrant
              
              Incorporated
                  by reference to Exhibit 3.1 to the Registrant’s Registration Statement on
                  Form S-8 filed on May 11, 20013.2
              Certificate
                  of Amendment of Certificate of Incorporation of Mobilepro Corp
                  dated
                  November 16, 2001.
              
              Incorporated
                  by reference to Exhibit 3.1 to the Registrant’s Registration Statement on
                  Form S-8 filed on December 4, 20013.3
              Certificate
                  of Amendment to Certificate of Incorporation of Mobilepro Corp.
                  dated
                  March 11, 2003
              
              Incorporated
                  by reference to Exhibit 3.11 to the Registrant’s Registration Statement on
                  Form SB-2 filed on May 6, 20033.4
              By-Laws
                  of Registrant
              
              Incorporated
                  by reference to Exhibit 3.2 to the Registrant’s Registration Statement on
                  Form S-8 filed on May 11, 2001
  41
  4.1
              2001
                  Equity Performance Plan
              
              Incorporated
                  by reference to Exhibit 4.1 to the Registrant’s Registration Statement on
                  Form S-8 filed on December 4, 20014.2
              Amended
                  and Restated 2001 Equity Performance Plan
              
              Incorporated
                  by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form
                  10-KSB filed on June 29, 2004
 
 10.1
              Executive
                  Employment Agreement, dated December 15, 2003, between Jay O. Wright
                  and
                  the Company
              
              Incorporated
                  by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form
                  10-QSB filed on February 13, 200410.2
              Executive
                  Employment Agreement, dated April 15, 2004 between Jay O. Wright
                  and the
                  Company
              
              Incorporated
                  by reference to Exhibit 10.15 to the Amendment to Registrant’s
                  Registration Statement on Form SB-2 filed on May 14, 200410.3
              Amended
                  and Restated Executive Employment Agreement, dated June 9, 2004
                  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 15, 200410.4
              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, 200510.5
              Standby
                  Equity Distribution Agreement, dated May 13, 2004 between the Company
                  and
                  Cornell Capital
              
              Incorporated
                  by reference to Exhibit 10.20 to the Registrant’s Registration Statement
                  on Form SB-2 filed on May 14, 200410.6
              Registration
                  Rights Agreement, dated May 13, 2004 between the Company and Cornell
                  Capital
              
              Incorporated
                  by reference to Exhibit 10.21 to the Registrant’s Registration Statement
                  on Form SB-2 filed on May 14, 200410.7
              Placement
                  Agent Agreement, dated May 13, 2004 between the Company and Newbridge
                  Securities Corporation
              
              Incorporated
                  by reference to Exhibit 10.22 to the Registrant’s Registration Statement
                  on Form SB-2 filed on May 14, 200410.8
              Escrow
                  Agreement, dated May 13, 2004 between the Company and Cornell
                  Capital
              
              Incorporated
                  by reference to Exhibit 10.23 to the Registrant’s Registration Statement
                  on Form SB-2 filed on May 14, 2004
 
 10.9
              Employment
                  Agreement dated February 28, 2005 between Davel Communications,
                  Inc. and
                  Tammy L. Martin
              
              Incorporated
                  by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form
                  10-KSB filed on June 28, 200510.10
              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 Annual Report on Form
                  10-KSB filed on June 28, 2005
  42
  10.11
              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 Annual Report on Form
                  10-KSB filed on June 28, 2005
  10.12
              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 Annual Report on Form
                  10-KSB filed on June 28, 200510.13
              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 Annual Report on Form
                  10-KSB filed on June 28, 200510.14
              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 Annual Report on Form
                  10-KSB filed on June 28, 200510.15
              Amended
                  and Restated Security Agreement, dated May 13, 2005, by and among
                  the
                  Company, the subsidiaries identified therein and Cornell
                  Capital
              
              Incorporated
                  by reference to Exhibit 10.38 to the Registrant’s Annual Report on Form
                  10-KSB filed on June 28, 200510.16
              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 Annual Report on Form
                  10-KSB filed on June 28, 200510.17
              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 Annual Report on Form
                  10-KSB filed on June 28, 200510.18
              Warrant
                  issued by the Company to Cornell Capital
              
              Incorporated
                  by reference to Exhibit 10.41 to the Registrant’s Annual Report on Form
                  10-KSB filed on June 28, 200510.19
              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 November
                  14, 200510.20
              Agreement
                  between the City of Tempe and NeoReach, Inc. for the Use of City
                  Property
                  in Connection with the Operation of a WiFi Network, dated August
                  17,
                  2005
              
              Incorporated
                  by reference to Exhibit 10.48 to the Registrant’s Annual Report on Form
                  10-KSB filed on June 29, 200610.21
              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 Current Report on Form
                  8-K filed February 13, 200510.22
              Secured
                  Convertible Debenture, issued on June 30, 2006 by the Company to
                  Cornell
                  Capital
              
              Incorporated
                  by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
                  8-K filed July 7, 2006
  43
  10.23
              Warrant
                  issued by the Company to Cornell Capital
              
              Incorporated
                  by reference to Exhibit 10.40 to the Registrant’s Quarterly Report on Form
                  10-Q for the quarter ended June 30, 200610.24
              Master
                  Lease Agreement dated June 28, 2006 between JTA Leasing Co., LLC,
                  Mobilepro Corp., and NeoReach, Inc.
              
              Incorporated
                  by reference to Exhibit 10.41 to the Registrant’s Quarterly Report on Form
                  10-Q for the quarter ended June 30, 200610.25
              Letter
                  Agreement between American Fiber Network, Inc. and FSH Communications
                  LLC,
                  dated June 30, 2006*
              
              Incorporated
                  by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
                  8-K, dated July 11, 200610.26
              Securities
                  Purchase Agreement, dated as of August 28, 2006, by and between
                  the
                  Company and Cornell Capital
              
              Incorporated
                  by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
                  8-K filed on August 30, 200610.27
              Secured
                  Convertible Debenture, issued on August 28, 2006, by the Company
                  to
                  Cornell Capital
              
              Incorporated
                  by reference to Exhibit 10.2 to the Registrant’s Current Report on Form
                  8-K filed on August 30, 200610.28
              Investor
                  Registration Rights Agreement, dated as of August 28, 2006, by
                  and between
                  the Company and Cornell Capital
              
              Incorporated
                  by reference to Exhibit 10.4 to the Registrant’s Current Report on Form
                  8-K filed on August 30, 200610.29
              Irrevocable
                  Transfer Agent Instructions dated August 28, 2006 among the Company,
                  Interwest Transfer Company, Inc. and David Gonzalez, Esq., as Escrow
                  Agent
              
              Incorporated
                  by reference to Exhibit 10.5 to the Registrant’s Current Report on Form
                  8-K filed on August 30, 200610.30
              Warrant
                  issued by the Company to Cornell Capital
              
              Incorporated
                  by reference to Exhibit 10.3 to the Registrant’s Current Report on Form
                  8-K filed on August 30, 200610.31
              Amendment
                  No. 1 to the Securities Purchase Agreement, dated September 20,
                  2006,
                  between the Company and Cornell Capital, and the related Convertible
                  Debenture
              
              Incorporated
                  by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
                  8-K filed on September 21, 200610.32
              Amendment
                  No. 2 to the Securities Purchase Agreement, dated October 23, 2006,
                  between the Company and Cornell Capital
              
              Incorporated
                  by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
                  8-K filed on October 24, 200610.33
              Master
                  Equipment Lease dated September 27, 2006, between Data Sales Co.,
                  Mobilepro Corp., and Kite Networks, Inc.
              
              Incorporated
                  by reference to Exhibit 10.46 to the Registrant’s Quarterly Report on Form
                  10-Q for the quarter ended September 30, 200610.34
              Amendment
                  No. 1 to Convertible Debentures issued to Cornell Capital, dated
                  January
                  17, 2007
              
              Incorporated
                  by reference to Exhibit 10.01 to the Registrant’s Current Report on Form
                  8-K filed on January 23, 200710.35
              Amendment
                  No. 2 to Convertible Debenture
                issued
                  to Cornell Capital, dated February 20, 2007
                (the
                  $15,149,650 debenture)
              
              Incorporated
                  by reference to Exhibit 10.01 to the Registrant’s Current Report on Form
                  8-K filed on February 26, 2007
  44
  10.36
              Amendment
                  No. 2 to Convertible Debentures
                issued
                  to Cornell Capital, dated February 20, 2007
                (the
                  $7,000,000 debentures)
              
              Incorporated
                  by reference to Exhibit 10.02 to the Registrant’s Current Report on Form
                  8-K filed on February 26, 200710.37
              Amendment
                  No. 3 to Convertible Debentures
                issued
                  to Cornell Capital, dated April 2, 2007
                (the
                  $7,000,000 debentures)
              
              Incorporated
                  by reference to Exhibit 10.02 to the Registrant’s Current Report on Form
                  8-K filed on April 5, 200710.38
              Consent
                  and Waiver Agreement dated March 30, 2007 with Cornel Capital
              
              Incorporated
                  by reference to Exhibit 10.01 to the Registrant’s Current Report on Form
                  8-K filed on April 5, 200710.39
              Amendment
                  No. 4 to Convertible Debentures
                issued
                  to Cornell Capital, dated May 11, 2007
                (the
                  $7,000,000 debentures)
              
              Incorporated
                  by reference to Exhibit 10.01 to the Registrant’s Current Report on Form
                  8-K filed on May 15, 200710.40
              Promissory
                  Note, dated May 11, 2007, issued to Cornell Capital
              
              Incorporated
                  by reference to Exhibit 10.02 to the Registrant’s Current Report on Form
                  8-K filed on May 15, 200710.41
              Amendment
                  No. 5 to Convertible Debentures
                issued
                  to Cornell Capital, dated July 18, 2007
                (the
                  $7,000,000 debentures)
              
              Incorporated
                  by reference to Exhibit 10.01 to the Registrant’s Current Report on Form
                  8-K filed on July 19, 200710.42
              Amendment
                  No. 3 to Convertible Debenture
                issued
                  to Cornell Capital, dated July 18, 2007
                (the
                  $15,149,650 debenture)
              
              Incorporated
                  by reference to Exhibit 10.02 to the Registrant’s Current Report on Form
                  8-K filed on July 19, 200721.1
              Subsidiaries
                  of Registrant
              
              Incorporated
                  by reference to Exhibit 21.1 to the Registrant’s Annual Report on Form
                  10-KSB filed on June 29, 200631.1
              Certification
                  by Jay O. Wright, Chief Executive Officer, pursuant to Rule
                  13a-14(a)
              
              Provided
                  herewith31.2
              Certification
                  by Richard H. Deily, Principal Financial Officer, pursuant to Rule
                  13a-14(a)
              
              Provided
                  herewith32.1
              Certification
                  by Jay O. Wright and Richard H. Deily, pursuant to 18 U.S.C. Section
                  1350,
                  as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002**
              
              Provided
                  herewith
  *
        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.
  45
  **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:August
                  9, 2007
                By:
                /s/
                  Jay O.
                  WrightJay
                  O. Wright, Chief Executive
                  Officer
  Date:August
                  9, 2007
                By:
                /s/
                  Richard H. DeilyRichard
                    H. Deily, Chief Accounting Officer
  46