**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 December 31, 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
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                No.)





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





**(301)
      571-3476**


**(** 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 February 7, 2008, the Company
      had 775,821,796 outstanding shares of its common stock, $0.001 par value per
      share.









**TABLE
      OF CONTENTS**





**ITEM
                NUMBER AND CAPTION**
            
            **PAGE****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
            
            28ITEM
                3.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            
            41ITEM
                4.
            CONTROLS
                AND PROCEDURES
            
            41**PART
                II**
            **OTHER
                INFORMATION**
            
            44ITEM
                1.
            LEGAL
                PROCEEDINGS
            
            44ITEM
                1A.
            RISK
                FACTORS
            
            46ITEM
                2.
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            
            52ITEM
                3.
            DEFAULTS
                UPON SENIOR SECURITIES
            
            52ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            53ITEM
                5.
            OTHER
                INFORMATION
            
            53ITEM
                6.
            EXHIBITS
            
            54**SIGNATURES**
            
            60




-
          2
          -


**PART
          I**
 **FINANCIAL
          INFORMATION**
  **Item
            1. Financial Statements**
  **MOBILEPRO
          CORP. AND SUBSIDIARIES**
 **CONDENSED
          CONSOLIDATED BALANCE SHEETS**
  **ASSETS**
  **December
                    31,2007**
                
                **March
                    31,2007****(unaudited)****CURRENT
                    ASSETS**Cash
                    and cash equivalents
                
                $
                1,081,404
                
                $
                1,993,781Restricted
                    cash
                
                
                806,672
                
                
                400,000Accounts
                    receivable, net
                
                
                1,381,964
                
                
                3,222,726Note
                    receivable
                
                
                2,000,000
                
                
                -Prepaid
                    expenses and other current assets
                
                
                673,060
                
                
                693,717Assets
                    of companies held for sale
                
                
                30,111,205
                
                
                52,316,429**Total
                    Current Assets**
                
                
                36,054,305
                
                
                58,626,653**FIXED
                    ASSETS, NET OF ACCUMULATED DEPRECIATION**
                
                
                303,110
                
                
                8,414,561**OTHER
                    ASSETS**Customer
                    contracts and relationships, net of amortization
                
                
                -
                
                
                1,333,516Other
                    assets
                
                
                6,115,416
                
                
                934,1916,115,416
                
                
                2,267,707**TOTAL
                    ASSETS**
                
                $
                42,472,831
                
                $
                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)**
 **LIABILITIES
            AND STOCKHOLDERS' EQUITY**
  **December
                    31,2007**
                
                **March
                    31,2007****(unaudited)****CURRENT
                    LIABILITIES**Current
                    portion of notes payable and convertible debentures
                
                $
                14,148,871
                
                $
                15,101,081Accounts
                    payable and accrued expenses
                
                
                3,815,792
                
                
                8,557,629Proceeds
                    advanced on sale of CLEC Business
                
                
                6,064,532
                
                
                -Deferred
                    revenue
                
                
                600,000
                
                
                600,000Liabilities
                    of companies held for sale
                
                
                11,071,180
                
                
                20,199,192**Total
                    Current Liabilities**
                
                
                35,700,375
                
                
                44,457,902**LONG-TERM
                    LIABILITIES**Convertible
                    debentures, net of unamortized debt discount and current
                    portion
                
                
                -
                
                
                2,892,751**TOTAL
                    LIABILITIES**
                
                
                35,700,375
                
                
                47,350,653**STOCKHOLDERS'
                    EQUITY**Preferred
                    stock, $.001 par value, 20,035,425 shares authorized, 35,378
                    shares issued
                    and outstanding at December 31 and March 31, 2007
                
                
                35
                
                
                35Common
                    stock, $.001 par value, 1,500,000,000 shares authorized, 775,821,796
                    and
                    692,477,518 shares issued and outstandingat
                    December 31 and March 31, 2007
                
                
                775,822
                
                
                695,592Additional
                    paid-in capital
                
                
                101,473,193
                
                
                98,533,886Accumulated
                    deficit
                
                
                (95,476,594
                )
                
                (77,271,245
                )**Total
                    Stockholders' Equity**
                
                
                6,772,456
                
                
                21,958,268**TOTAL
                    LIABILITIES AND STOCKHOLDERS' EQUITY**
                
                $
                42,472,831
                
                $
                69,308,921
  The
              accompanying notes are and integral part of the condensed consolidated
              financial
              statements.
  -
              4
              -
  **MOBILEPRO
            CORP. AND SUBSIDIARIES**
 **CONDENSED
            CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(unaudited)**
 **For
                    the Three Months Ended**
                
                **For
                    the Nine Months Ended****December
                    31,**
                
                **December
                    31,****2007**
                
                **2006**
                
                **2007**
                
                **2006****REVENUES**
                
                $
                103,887
                
                $
                7,228,699
                
                $
                10,269,113
                
                $
                23,990,954**OPERATING
                    COSTS AND EXPENSES******Cost
                    of services (exclusive of depreciation and amortization)
                
                
                (15,312
                )
                
                4,330,639
                
                
                5,734,722
                
                
                13,786,710Payroll,
                    professional fees and related expenses (exclusive of stock
                    compensation)
                
                
                629,457
                
                
                3,638,038
                
                
                6,857,916
                
                
                11,685,360Office
                    rent and expenses
                
                
                11,792
                
                
                288,777
                
                
                392,205
                
                
                749,522Other
                    general and administrative expenses
                
                
                206,155
                
                
                320,654
                
                
                831,353
                
                
                992,348Depreciation
                    and amortization
                
                
                48,389
                
                
                784,001
                
                
                1,257,094
                
                
                2,308,512Stock
                    compensation
                
                
                128,007
                
                
                535,821
                
                
                763,129
                
                
                1,492,468Restructuring
                    charges
                
                
                -
                
                
                -
                
                
                -
                
                
                185,968Settlement
                    of litigation and distribution from escrow
                
                
                (239,309
                )
                
                -
                
                
                (239,309
                )
                
                -**Total
                    Operating Costs and Expenses**
                
                
                769,179
                
                
                9,897,930
                
                
                15,597,110
                
                
                31,200,888**OPERATING
                    LOSS**
                
                
                (665,292
                )
                
                (2,669,231
                )
                
                (5,327,997
                )
                
                (7,209,934
                )**INTEREST
                    INCOME (EXPENSE), NET**
                
                
                192,820
                
                
                (793,763
                )
                
                (512,204
                )
                
                (1,799,039
                )**LOSS
                    ON SALE OF ASSETS**
                
                
                -
                
                
                -
                
                
                (2,778,906
                )
                
                -**LOSS
                    ON EXTINGUISHMENT OF DEBT**
                
                
                -
                
                
                -
                
                
                -
                
                
                (409,601
                )**LOSS
                    FROM CONTINUING OPERATIONS**
                
                
                (472,472
                )
                
                (3,462,994
                )
                
                (8,619,107
                )
                
                (9,418,574
                )**DISCONTINUED
                    OPERATIONS**Loss
                    from operations of discontinued operations
                
                
                (133,452
                )
                
                (2,564,740
                )
                
                (2,068,726
                )
                
                (5,457,581
                )Loss
                    on sale of discontinued operations
                
                
                -
                
                
                -
                
                
                (7,517,516
                )
                
                -**LOSS
                    FROM DISCONTINUED OPERATIONS**
                
                
                (133,452
                )
                
                (2,564,740
                )
                
                (9,586,242
                )
                
                (5,457,581
                )**NET
                    LOSS APPLICABLE TO COMMON SHARES**
                
                $
                (605,924
                )
                $
                (6,027,734
                )
                $
                (18,205,349
                )
                $
                (14,876,155
                )**LOSS
                    PER SHARE, BASIC AND DILUTED**Continuing
                    operations
                
                $
                (0.0006
                )
                $
                (0.0059
                )
                $
                (0.0112
                )
                $
                (0.0160
                )Discontinued
                    operations
                
                
                (0.0002
                )
                
                (0.0043
                )
                
                (0.0125
                )
                
                (0.0093
                )**NET
                    LOSS PER SHARE, BASIC AND DILUTED**
                
                $
                (0.0008
                )
                $
                (0.0102
                )
                $
                (0.0237
                )
                $
                (0.0253
                )**WEIGHTED
                    AVERAGE NUMBER OF COMMON SHARES OUTSTANDING**
                
                
                775,821,796
                
                
                591,464,714
                
                
                768,589,348
                
                
                586,887,824
  The
              accompanying notes are an integral part of the condensed consolidated
              financial
              statements.
  -
              5
              -
  **MOBILEPRO
            CORP. AND SUBSIDIARIES**
 **CONDENSED
            CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(unaudited)**
 **For
                    the Nine Months EndedDecember 31,****2007**
                
                **2006****CASH
                    FLOWS FROM OPERATING ACTIVITIES**Net
                    loss
                
                $
                (18,205,349
                )
                $
                (14,876,155
                )Loss
                    from discontinued operations
                
                
                9,586,242
                
                
                5,457,581Loss
                    from continuing operations
                
                
                (8,619,107
                )
                
                (9,418,574
                )**Items
                    that reconcile net loss to net cash (used in) operating
                    activities:**Depreciation
                    and amortization
                
                
                1,257,094
                
                
                2,234,334Noncash
                    interest expense and loss on debt extinguishment
                
                
                184,087
                
                
                1,324,970Stock
                    Compensation
                
                
                763,129
                
                
                1,528,468Restructuring
                    charges
                
                
                -
                
                
                185,968Loss
                    on sale of payphone assets
                
                
                2,778,906
                
                
                -Other
                    noncash charges
                
                
                220,684
                
                
                -**Changes
                    in current assets and liabilities, net of
                    disposals**Decrease
                    in accounts receivable
                
                
                1,840,762
                
                
                1,341,111(Increase)
                    decrease in other current assets
                
                
                (386,015
                )
                
                276,244(Increase)
                    decrease in other assets
                
                
                83,776
                
                
                (313,158
                )(Increase)
                    decrease in net assets of companies held for sale
                
                
                (190,193
                )
                
                819,196Decrease
                    in accounts payable and accrued expenses
                
                
                (2,160,459
                )
                
                (2,565,958
                )Increase
                    in deferred revenue
                
                
                -
                
                
                365,7774,391,771
                
                
                5,196,952**Net
                    cash (used in) operating activities**
                
                
                (4,227,336
                )
                
                (4,221,622
                )**CASH
                    FLOWS FROM INVESTING ACTIVITIES**Proceeds
                    from sale of payphone assets
                
                
                3,248,741
                
                
                -Capital
                    expenditures, net
                
                
                (320,128
                )
                
                (1,054,057
                )Other
                    investment activities
                
                
                -
                
                
                (47,679
                )Proceed
                    from sale of investments
                
                
                361,993
                
                
                -Investing
                    activities of discontinued operations
                
                
                1,702,316
                
                
                (2,379,520
                )**Net
                    cash provided by (used in) investing activities**
                
                
                4,992,922
                
                
                (3,481,256
                )**CASH
                    FLOWS FROM FINANCING ACTIVITIES**Net
                    proceeds from common stock issuances
                
                
                -
                
                
                6,653,891Borrowings/(payments)
                    of debt, net
                
                
                (2,156,788
                )
                
                (3,768,883
                )Proceeds
                    from the issuance of convertible debentures
                
                
                -
                
                
                5,963,500Financing
                    fees
                
                
                -
                
                
                (422,750
                )Financing
                    activities of discontinued operations
                
                
                (278,625
                )
                
                (243,348
                )**Net
                    cash provided by (used in) financing activities**
                
                
                (2,435,413
                )
                
                8,182,410
  The
            accompanying notes are an integral part of the condensed consolidated
            financial
            statements.
  -
              6
              -
 **MOBILEPRO
            CORP. AND SUBSIDIARIES**
 **CONDENSED
            CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(CONTINUED)**
 **(unaudited)**
  **For the Nine Months Ended**
                  **December 31,****2007**
                
                **2006****NET
                    INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
                
                $
                (1,669,827
                )
                $
                479,532**CASH
                    AND CASH EQUIVALENTS - BEGINNING OF PERIOD**
                
                
                3,430,844
                
                
                5,397,881**CASH
                    AND CASH EQUIVALENTS - END OF PERIOD**
                
                
                1,761,017
                
                
                5,877,413**LESS
                    CASH AND CASH EQUIVALENTS OF DISCONTINUED
                    OPERATIONS**
                
                
                (679,613
                )
                
                (1,263,301
                )**CASH
                    AND CASH EQUIVALENTS OF CONTINUING OPERATIONS**
                
                $
                1,081,404
                
                $
                4,614,112**SUPPLEMENTAL
                    DISCLOSURE OF CASH FLOW **INFORMATION:****Cash
                    paid during the period for interest
                
                $
                970,519
                
                $
                1,140,998**SUPPLEMENTAL
                    DISCLOSURE OF NONCASH
**ACTIVITIES:****Convertible
                    Preferred Stock of United Systems Access, Inc.
                
                $
                5,763,893
                
                $
                -Note
                    Receivable
                
                $
                2,000,000
                
                $
                -Debenture
                    maturities and accrued interest paid with common stock
                
                $
                (1,967,908
                )
                $
                (1,788,760
                )Issuance
                    of Amended Debenture to YA Global
                
                $
                -
                
                $
                15,149,650Retirement
                    of Debenture issued to YA Global
                
                $
                -
                
                $
                (15,000,000
                )Capital
                    lease
                
                $
                -
                
                $
                3,714,181
  The
            accompanying notes are an integral part of the condensed consolidated
            financial
            statements.
 -
              7
              -




**MOBILEPRO
      CORP. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**December
      31, 2007**


**(unaudited)**




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





**Overview**





MobilePro
      Corp., incorporated under the laws of the State of Delaware in July 2000, is
      a
      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). The sale of the ISP Business was completed on July
      18, 2007. The sale of the CLEC Business was subject to the receipt of
      verification of certain regulatory approvals, which was originally expected
      to
      be obtained by the end of calendar year 2007. On January 14, 2008, the Company
      received notice from USA purporting to terminate the USA Agreement with respect
      to the sale of the CLEC Business, but provided that USA remained interested
      in
      discussing terms upon which it would purchase the CLEC Business (see Disposition
      Activities below and Note 3). The Company remains in discussions concerning
      the
      sale of the CLEC Business to USA.





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”). As further discussed below, Gobility is in default with respect to
      its obligation to obtain funding and to pay amounts due under certain equipment
      obligations and leases for which the Company is a co-obligor. The Company is
      currently cooperating with Gobility in its efforts to sell the assets of Kite
      Networks in order to pay off these obligations (see Disposition Activities
      below
      and Note 3).





-
          8
          -


**Going
      Concern Uncertainty**





The
      Company has historically lost money. The Company’s accumulated deficit at
      December 31, 2007 was $95,476,594. In the nine months ended December 31, 2007,
      the Company incurred a net loss of $18,205,349. 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 experienced declining revenues. Although
      restructuring measures reduced other operating expenses, the Company was unable
      to reduce the corresponding costs of services. In addition, the Company 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 nine months ended December 31,
      2007 and the fiscal year ended March 31, 2007 were $4,227,336 and $6,558,708,
      respectively.





Because
      the cash required to fund the continuing operating losses and to complete the
      build-out of planned municipal wireless networks exceeded the Company’s
      available capital, the Company signed agreements to sell substantial portions
      of
      its operations to several unaffiliated buyers. With the expected proceeds,
      the
      Company intends to retire the amounts owed under the convertible debentures
      issued to YA Global Investments, L.P. (“YA Global”, f/k/a Cornell Capital
      Partners, L.P).





The
      Company’s financial statements have been prepared on a going concern basis which
      contemplates the realization of assets and settlement of liabilities and
      commitments based on recorded amounts for the foreseeable future. If
      the
      Company fails to permanently eliminate the cash requirements represented by
      the
      Wireless Networks Business and ProGames, and if the sale of the CLEC Businesses
      to USA is not consummated pursuant to its negotiated terms, the Company will
      not
      have the ability to continue as a going concern beyond the current fiscal year
      without additional capital and/or a significant restructuring of the YA Global
      debt. The consolidated financial statements do not include any adjustments
      that
      might result from the outcome of this uncertainty.





**Disposition
      Activities**





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 YA Global.





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 for $2 million paid with the
      issuance of a convertible debenture to Mobilepro. 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 period April 1, 2007 through July 8, 2007, the net loss of this
      business segment was approximately $2,139,000.





Gobility
      expected to raise capital for its operating purposes from an identified source
      pursuant to a funding commitment letter that was presented to the Company at
      closing. Because this funding has not been obtained, Gobility has been unable
      to
      fund its operations including the payment of amounts due under a series of
      capital equipment leases and other equipment-related obligations. On the date
      of
      the sale to Gobility, the aggregate amount of this debt included in the balance
      sheet of Kite Networks was approximately $6,111,000. Because the equipment
      leases and other equipment purchases were co-signed by Mobilepro, if Kite
      Networks fails to pay the leases, the Company is obligated to pay this debt.
      At
      December 31, 2007, the amounts recorded on the balance sheet for the lease
      obligations, accrued interest, and accounts payable were $3,972,096, $226,287,
      and $1,591,978, respectively. The Company has also recorded the certificates
      of
      deposits securing the lease obligations of $1,187,664.





-
          9
          -


The
      Company is currently cooperating with Gobility in its efforts to sell the assets
      of Kite Networks and Kite Broadband in order to pay off the obligations relating
      to the leases and other equipment. In the event Gobility is unsuccessful in
      its
      attempts to sell the assets and satisfy the lease obligations, the Company
      could
      be required to make the payments on the leases and the accounts payable for
      the
      other equipment.





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. The anticipated financing
      was
      not procured. As a result, the merger agreement was terminated and the Company
      continues to fund the operating costs of ProGames. The Company is currently
      exploring strategic alternatives with respect to its investment in ProGames.
      The
      net loss incurred by ProGames in the nine months ended December 31, 2007 was
      $549,259.





The
      operating losses incurred by Davel adversely affected the consolidated operating
      results of the Company. For the nine months ended December 31, 2007, Davel
      incurred a net loss of $5,102,327. However, most of the payphones have been
      sold
      to unaffiliated payphone operators in the current year. In June 2007, the
      Company sold approximately 730 operating payphones and received in excess of
      $200,000 in cash proceeds. On September 7, 2007, Davel sold approximately 21,405
      payphones to Sterling Payphones, LLC (“Sterling”) (see Note 3). Under the terms
      of the sale agreement, the Company received $50,000 in cash, $1,839,821 in
      cash
      was paid to YA Global to reduce the amount of principal and interest owed under
      the outstanding convertible debentures issued to YA Global, and, pursuant to
      the
      sale agreement, other amounts were placed in escrow to pay certain key vendors
      of Davel and to satisfy potential indemnification claims. Sterling also assumed
      certain liabilities of Davel. Effective September 30, 2007, Davel sold an
      additional 300 payphones for approximately $85,000. After these sales, Davel’s
      remaining operations have been significantly reduced. Davel’s remaining
      operations are being continued and Davel is pursuing the recovery of certain
      claims including the AT&T, Sprint and Qwest claims described in Note
      8.





To
      date,
      YA Global 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 YA Global under the debentures
      at
      December 31, 2007 were $14,092,697 and $92,784, 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 was exhausted. YA Global has agreed to delay
      additional installment payments until February 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 YA Global
      are tradable under Rule 144 of the Securities Act, or shares of the Company’s
      common stock are otherwise freely tradable by YA Global without restriction,
      the
      Company will be required to make these payments in cash. However, in the event
      that the Company or YA Global receives a legal opinion that YA Global is
      eligible to sell shares of the Company’s common stock under Rule 144, the
      Company will be required to resume immediately making weekly payments of
      principal and accrued interest with shares of its common stock. The Company
      has
      made a partial payment of $114,530 toward the amounts due February 1, 2008
      and
      has not made the payment due February 8, 2007. The Company will be in default
      with respect to its debt agreements if such payments are not made within fifteen
      days of their respective due dates. The Company is currently negotiating with
      YA
      Global regarding an extension of its debentures and a modification of its
      terms.





-
          10
          -


The
      Company received letters of interest regarding the acquisition of the Close
      Call, 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 $27.7 million ($30.0 million
      face
      value) includes cash proceeds of approximately $21.9 million and convertible
      preferred stock with an $8.1 million face value and valued for accounting
      purposes at $5.8 million. The sale of the ISP Business closed on July 18, 2007
      resulting in the Company’s receipt of $500,000 cash, the payment of $2,000,000
      to YA Global, and the Company’s receipt of a promissory note for $2,000,000 and
      8,100 shares of convertible preferred stock of USA. The payment to YA Global
      retired the $1.1 million promissory note issued in May 2007 and approximately
      $25,000 in related accrued interest and convertible debenture principal and
      accrued interest of approximately $393,000 and $482,000, respectively. On
      January 3, 2008, the Company entered into an amendment to the $2,000,000
      promissory note due from USA. USA made payments of $500,000 each on January
      4
      and January 11, 2008 with the remaining balance of $1,000,000, together with
      accrued interest at the rate of 7.75%, due on the earlier of the date of the
      closing of the sale of the CLEC Business or March 31, 2008. Of the $1,000,000
      of
      payments, the Company received $125,000 and the remaining $875,000 was used
      to
      pay principal and interest on the convertible debentures due to YA Global.





On
      January 14, 2008, the Company received notice from USA purporting to terminate
      the USA Agreement with respect to the sale of the CLEC Business, but provided
      that USA remained interested in discussing terms upon which it would complete
      the sale. The Company is in communications with USA and disputes the validity
      of
      the claims alleged for the purported termination, which include the alleged
      failure to obtain certain regulatory and contractual approvals and the alleged
      breach of certain representations and warranties set forth in the USA Agreement.
      The Company believes the purported termination is in bad faith, and should
      it
      not be able to resolve this matter to its satisfaction, intends to pursue any
      and all legal and equitable remedies available to it against USA. Despite the
      on-going discussions with USA, the Company has re-assumed operating control
      of
      AFN and Close Call, its CLEC subsidiaries.





With
      the
      cash proceeds expected to be received by the Company from the closing of the
      sale of the CLEC Business, the Company intended to retire the remaining amounts
      owed to YA Global under the convertible debentures, including accrued interest.
      The Company has been in communication with YA Global regarding the impact of
      USA’s actions. If the sale of the CLEC Businesses to USA is not completed in
      accordance with the negotiated terms, the Company will not have the ability
      to
      continue as a going concern beyond the current fiscal year without a significant
      restructuring of the YA Global debt. See Item 1A. below - Risk Factors -
“Failure to Complete the Sale of the Wireline Businesses to USA Will Result
      in
      Our Inability to Retire the YA Global Debentures”.





**Companies
      Held for Sale**





The
      assets and liabilities of the CLEC Business are summarized and classified as
      “held for sale” in the accompanying condensed consolidated balance sheets at
      December 31, 2007 and March 31, 2007. In addition, the assets and liabilities
      of
      the Wireless Networks and ISP Businesses are classified as “held for sale” in
      the accompanying condensed consolidated balance sheet at March 31, 2007. The
      operating results of these businesses are included in discontinued operations
      in
      the accompanying condensed consolidated statements of operations for the three
      and nine months ended December 31, 2007 and 2006.





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





**Condensed
      Consolidated Financial Statement Presentation**





The
      condensed consolidated financial statements include the accounts of the Company
      and its subsidiaries. All significant inter-company accounts and transactions
      have been eliminated in consolidation. Certain prior-period financial statement
      balances have been reclassified to conform to the December 31, 2007
      presentation.





-
          11
          -


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. These financial statements should
      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 and nine months
      ended December 31, 2007 are not necessarily indicative of the results that
      will
      be achieved for the fiscal year ending March 31, 2008.





**Impact
      of Recent Accounting Standards**





In
      July
      2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
      No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB
      Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in
      income tax positions. FIN 48 requires that the Company recognize in the
      consolidated financial statements the impact of a tax position that is more
      likely than not to be sustained upon examination based on the technical merits
      of the position. The provisions of FIN 48 were effective for the Company on
      April 1, 2007. Adoption of FIN 48 did not have a material effect on the
      consolidated financial statements.




In
      September 2006, the Securities and Exchange Commission (“SEC”) issued Staff
      Accounting Bulletin No. 108 (“SAB 108”), “Considering the Effects of Prior Year
      Misstatements When Quantifying Misstatements in Current Year Financial
      Statements”. SAB 108 provides interpretive guidance on how the effects of the
      carryover or reversal of prior year misstatements should be considered in
      quantifying a current year misstatement. SAB No. 108 states that registrants
      should use both a balance sheet approach and income statement approach when
      quantifying and evaluating the materiality of a misstatement. SAB 108 also
      provides guidance on correcting errors under the dual approach as well as
      transition guidance for correcting previously immaterial errors that are now
      considered material. The provisions of SAB 108 were applicable to financial
      statements for the Company’s fiscal year ended March 31, 2007. This guidance has
      not had any material impact on the consolidated financial condition or results
      of operations.




In
      September 2006, the FASB issued FAS No. 157, “Fair Value Measurements,” which
      defines fair value, establishes a framework and gives guidance regarding the
      methods used for measuring fair value, and expands disclosures about fair value
      measurements. The provisions of FAS 157 are effective for financial statements
      issued for the Company’s fiscal year beginning April 1, 2008, and interim
      periods within the fiscal year. The Company does not expect FAS 157 to have
      a
      significant impact on the consolidated financial statements.




In
      February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities,” which provides companies with an option to
      report selected financial assets and liabilities at fair value. The objective
      is
      to reduce both complexity in accounting for financial instruments and the
      volatility in earnings caused by measuring related assets and liabilities
      differently. The provisions of FAS 159 will be effective for the Company as
      of
      the beginning of the Company’s fiscal year ending March 31, 2009. The Company
      does not expect FAS 159 to have a significant impact on the consolidated
      financial statements.





-
          12
          -


**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. Restricted cash also includes $456,672 that will be held in escrow
      through September 8, 2008 to indemnify Sterling for possible claims that may
      arise in connection with the sale of Davel’s payphones. The cash escrow and
      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.





**Revenue
      Recognition**





The
      Company has derived a material portion of its revenues through the provision
      of
      local telephone, long distance, and 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 was 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 was entitled to receive
      its dial-around receipts related to the quarter ended June 30, 2007 in October
      2007, allowing it to adjust the second calendar quarter dial-around receivable
      amount included in the balance sheet at September 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 and nine
      months ended December 31, 2007 were approximately $114,000 and $2,291,000,
      respectively. The amounts for the corresponding periods of the prior year were
      approximately $1,415,000 and $4,785,000, respectively.





**Accounts
      Receivable**





Dial-around
      receivable amounts included in the balance sheets at December 31, 2007 and
      March
      31, 2007 were $821,300 and $2,856,629, respectively. During all periods
      presented, credit losses, to the extent identifiable, were generally within
      management’s overall expectations.





-
          13
          -


**Financing
      Fees**





The
      financing fees paid in May 2004 to YA Global 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 nine months ended December 31,
      2006, completing the amortization of the cost of the deferred
      asset.




**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 and nine months ended December 31, 2007 were $128,007
      and $763,129, respectively. The amounts for the corresponding periods of the
      prior year were $535,821 and $1,492,468, 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 and nine months ended December 31, 2007 were approximately $48,389 and
      $1,041,409, respectively. The amounts for the corresponding periods of the
      prior
      year were $617,800 and $1,836,898, respectively.





**Customer
      Location Contracts**





Intangible
      assets include amounts paid to property location owners in connection with
      payphone installation contracts, which had a net balance of $1,174,205 at March
      31, 2007. These other assets, which were sold in conjunction with the sale
      of a
      majority of Davel’s payphones in September 2007, were amortized on a
      straight-line basis over their estimated useful lives based on contract terms
      (generally 5 years). Accumulated amortization related to these contracts at
      March 31, 2007 was $1,261,428. Amortization expense related to location
      contracts was $208,186 for the nine months ended December 31, 2007. Amortization
      expense was $152,706 and $458,119, respectively, for the three and nine months
      ended December 31, 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. During
      the three and nine months ended December 31, 2007, the Company sold some of
      the
      shares and wrote down the carrying value of certain remaining shares. The
      Company recognized a gain of $11,507 and a loss of $81,587 for the three and
      nine months ended December 31, 2007, respectively. The carrying value of the
      common stock included in other assets at December 31, 2007 and March 31, 2007
      was $6,910 and $450,000, respectively.





The
      Company also has an investment in 8,100 shares of USA convertible preferred
      stock received in connection with the sale of the ISP and CLEC Businesses as
      described in Note 3 below. The carrying value of the convertible preferred
      stock
      of $6,008,091 is included in other assets in the accompanying condensed
      consolidated balance sheets at December 31, 2007. If the USA transaction is
      not
      completed, the value of this asset may become impaired.





-
          14
          -


On
      January 5, 2008, the Company entered into an agreement to purchase 2,666,667
      shares (approximately 31%) of the outstanding common stock of Microlog
      Corporation (“Microlog”) from TFX Equities, Inc (“TFX”) for $1,000 in cash (the
“Microlog Agreement”). The Company also received from TFX $2,000,000 of 10%
      subordinated notes, due from Microlog on January 5, 2011, that are convertible
      into Microlog common stock at a price of $0.10 per share, warrants to purchase
      100 shares of Series A convertible preferred stock of Microlog, and warrants
      to
      purchase 750,000 shares of Microlog common stock at an exercise price of $0.10
      per share in connection with the Microlog Agreement. In addition, the Company
      invested $250,000 in cash directly in Microlog in exchange for a 10%
      subordinated note with a face value of $250,000, due January 5, 2011, that
      is
      convertible into Microlog common stock at a price of $0.10 per share. Microlog
      is a Germantown, MD based government contractor that develops, sells and
      installs software for integrated voice response and web-based customer contact
      systems in the healthcare industry. Microlog’s common stock is traded on the
“Pink Sheets” under the symbol “MLOG”.





**Accounts
      Payable and Accrued Liabilities**





The
      accounts payable and accrued liabilities of continuing operations consisted
      of
      the following at the indicated dates:





**December 31,****2007**
            
            **March
                31,**
              **2007**Accounts
                payable
            
            $
            758,062
            
            $
            2,431,438Accrued
                location usage fees
            
            
            116,794
            
            
            1,800,991Accrued
                restructuring costs
            
            
            100,218
            
            
            100,218Accrued
                compensation
            
            
            253,011
            
            
            449,021Accrued
                interest expense
            
            
            92,784
            
            
            161,950Other
                accrued liabilities
            
            
            2,494,923
            
            
            3,614,011Totals
            
            $
            3,815,792
            
            $
            8,557,629





**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 was expected to occur following receipt of the necessary
      regulatory approvals. Until the closing, USA agreed to manage the CLEC Business
      pursuant to a management agreement entered into with USA (the “USA Management
      Agreement”).





On
      January 14, 2008, the Company received notice from USA purporting to terminate
      the USA Agreement with respect to the sale of the CLEC Business, but provided
      that USA remained interested in discussing terms upon which it would complete
      the purchase. The Company is in communications with USA and disputes the
      validity of the claims alleged for the purported termination, which include
      the
      alleged failure to obtain certain regulatory and contractual approvals and
      the
      alleged breach of certain representations and warranties set forth in the USA
      Agreement. The Company believes the purported termination is in bad faith,
      and
      should it not be able to resolve this matter to its satisfaction, intends to
      pursue any and all legal and equitable remedies available to it against USA.
      Despite the on-going discussions with USA, the Company has re-assumed operating
      control of AFN and Close Call, its CLEC subsidiaries.





Under
      the
      USA Agreement, the total purchase price for the ISP and CLEC Businesses is
      $27,663,893 consisting of $21.9 million in cash and 8,100 shares of convertible
      preferred stock of USA (the “USA Preferred”) with a fair value of $5,763,893.
      The 8,100 shares of USA Preferred are 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 (the “Put Option”). Prior to that time, USA has the option to
      redeem all of the unconverted USA Preferred for $12,960,000. The fair value
      of
      the USA preferred is based on the present value of the $8.1 million Put Option
      discounted at an interest rate of 10%. The discount on the USA preferred of
      $2,336,107 is being accreted to income through the date the Put Option becomes
      exercisable using the interest method. For the three and nine months ended
      December 31, 2007, the Company recorded and included as an offset to interest
      expense $147,733 and $244,198, respectively, of income relating to the discount.





-
          15
          -


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 was originally payable upon
      the
      earlier of the closing of the CLEC Business or January 1, 2008, and the 8,100
      shares of USA Preferred. The remaining cash proceeds of $17,400,000 are to
      be
      paid by USA at the time of the CLEC closing. Until that time, USA is required
      to
      cause the managed companies to make monthly payments of interest on this balance
      at a rate of 7.75% directly to YA Global, two months in arrears. The Company
      has
      received the monthly payments due through January 1, 2008, which payments have
      been applied to principal and interest on the Secured Debenture and Amended
      Debenture. For the three and nine months ended December 31, 2007, the Company
      recorded an offset to interest expense of $339,896 and $616,985, respectively,
      relating to interest accrued on the $17,400,000 balance.





On
      January 3, 2008, the Company entered into an amendment to the $2,000,000
      promissory note due from USA. USA made payments of $500,000 each on January
      4
      and January 11, 2008 with the remaining balance of $1,000,000, together with
      accrued interest at the rate of 7.75%, due on the earlier of the date of the
      closing of the sale of the CLEC Business or March 31, 2008. Of the $1,000,000
      of
      payments, the Company received $125,000 and the remaining $875,000 was used
      to
      pay principal and interest on the convertible debentures due to YA Global.





The
      loss
      incurred in connection with this sale of the ISP and CLEC Businesses of
      $2,481,227 is included in the loss on sale of discontinued operations in the
      accompanying condensed consolidated statements of operations.





**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
      indirectly 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%.





Under
      the
      terms of the Gobility Debenture, Gobility was required to raise at least $3.0
      million in cash no later than August 15, 2007. If Gobility defaults on this
      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. To date, Gobility has not obtained financing and is in default
      with respect to the Gobility Debenture. In addition, Gobility has been unable
      to
      fund its operations including the payment of amounts due under a series of
      capital equipment leases and other equipment-related obligations. Because the
      equipment leases and other equipment purchases were co-signed by Mobilepro,
      if
      Kite Networks fails to pay the leases, absent any other defenses it may have,
      the Company could be obligated to pay the debt. As a result of these defaults
      by
      Gobility, the Company has written off the $2.0 million Gobility Debenture and
      has recorded the capital leases and equipment-related obligations as liabilities
      in connection with the sale. At December 31, 2007, the amounts recorded on
      the
      balance sheet as liabilities of companies held for sale for the lease
      obligations, accrued interest, and accounts payable were $3,972,096, $226,287,
      and $1,591,978 respectively. The Company has also recorded the certificates
      of
      deposits securing the lease obligations of $1,187,664 as assets of companies
      held for sale. As a result of these adjustments, the Company recorded a loss
      on
      the sale of its Wireless Networks Business of $5,036,289 that is included in
      the
      loss on sale of discontinued operations in the condensed consolidated statements
      of operations.




-
          16
          -


The
      Company is currently cooperating with Gobility in its efforts to sell the assets
      of Kite Networks in order to pay off the obligations relating to the leases
      and
      other equipment. In the event Gobility is unsuccessful in its attempts to sell
      the assets and satisfy the lease obligations, the Company could be required
      to
      make the payments on the leases and the accounts payable for the other
      equipment.





**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.





The
      revenues and the net losses of discontinued operations were as
      follows:




**Three Months Ended December 31,****2007**
                
                **2006**Revenues
                
                $
                8,593,531
                
                $
                13,809,985Loss
                    from discontinued operations before disposal
                
                $
                (133,452
                )
                $
                (2,564,740
                )Loss
                    on disposal
                
                
                -
                
                
                -Loss
                    from discontinued operations
                
                $
                (133,452
                )
                $
                (2,564,740
                )




**Nine months ended December 31,****2007**
            
            **2006**Revenues
            
            $
            33,382,829
            
            $
            43,801,166Loss
                from discontinued operations before disposal
            
            $
            (2,068,726
            )
            $
            (5,457,581
            )Loss
                on disposal
            
            
            (7,517,516
            )
            
            -Loss
                from discontinued operations
            
            $
            (9,586,242
            )
            $
            (5,457,581
            )





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 December 31, 2007 and March 31,
      2007. The major classifications of such assets and liabilities were as follows:





**December 31,**
              **2007**
            
            **March 31,**
              **2007**Cash
                and cash equivalents
            
            $
            679,613
            
            $
            1,437,063Restricted
                cash
            
            
            2,007,664
            
            
            1,798,200Accounts
                receivable, net
            
            
            3,130,760
            
            
            5,387,772Prepaid
                expenses and other current assets
            
            
            1,291,198
            
            
            2,401,464Fixed
                assets, net
            
            
            530,926
            
            
            10,368,844Goodwill,
                net of impairment
            
            
            20,531,278
            
            
            29,547,074Customer
                contracts and relationships, net
            
            
            501,701
            
            
            593,734Due
                from USA
            
            
            1,305,501
            
            
            -Other
                assets
            
            
            132,564
            
            
            782,278Assets
                of companies held for sale
            
            $
            30,111,205
            
            $
            52,316,429


Accounts
                payable and accrued expenses
            
            $
            6,260,180
            
            $
            11,222,807Deferred
                revenue
            
            
            798,529
            
            
            3,864,518Notes
                payable and capital lease obligations
            
            
            4,012,471
            
            
            5,111,867Liabilities
                of companies held for sale
            
            $
            11,071,180
            
            $
            20,199,192




-
          17
          -




**Sale
      of Payphones**





The
      Company has also completed a series of transactions to sell a majority of
      Davel’s payphones in order to provide cash for operating purposes and to retire
      additional amounts owed to YA Global under the convertible debentures.





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.
      A
      gain in the amount of $10,640 was recognized in connection with this
      transaction.





In
      September 2007, in three transactions, we completed the sale of approximately
      21,700 payphones to unaffiliated purchasers. After the direct payment of certain
      related liabilities and broker fees in the aggregate amount of approximately
      $851,000, and the funding of escrow accounts established for the payment of
      vendor obligations and indemnification claims in the aggregate amount of
      $1,200,000, proceeds of approximately $1,840,000 were used to retire convertible
      debenture debt of approximately $1,672,000 and related accrued interest of
      approximately $168,000. A net loss of $2,800,206 was recorded in connection
      with
      these transactions.





**NOTE
      4-** **IMPAIRMENT
      OF GOODWILL AND LONG-LIVED ASSETS**





The
      goodwill amounts included in assets of companies held for sale at December
      31,
      2007 and March 31, 2007 were 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 of $1,213,035 and $2,090,889 in the three
      and nine months ended December 31, 2006. These amounts are included in the
      loss
      from discontinued operations for the prior year periods. Management does not
      believe that additional goodwill impairment charges are required at December
      31,
      2007.





-
          18
          -


**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 December 31, 2007 and
      March 31, 2007 was as follows:




**December 31,**
            
            
            **March 31,****2007**
            
            
            **2007**Amended
                Debenture issued to YA Global
            
            $
            11,006,823
            
            $
            12,649,650Secured
                Debentures issued to YA Global
            
            
            3,085,874
            
            
            5,500,000Other
                notes payable and long-term obligations
            
            
            118,500
            
            
            138,50014,211,197
            
            
            18,288,150Less:
                Unamortized debt discounts
            
            
            (62,326
            )
            
            (294,318
            )Less:
                Amounts due within one year
            
            
            (14,148,871
            )
            
            (15,101,081
            )Long-term
                portion of debt
            
            $
            -
            
            $
            2,892,751





Based
      on
      the current terms of the YA Global debentures, as amended, the entire balance
      of
      debt at December 31, 2007 will become due for payment in the twelve-month period
      ending December 31, 2008.





**The
      Secured Debenture Agreement**





On
      August
      28, 2006, the Company entered into a financing agreement with YA Global 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 YA Global 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, YA Global 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 related to these debentures at December
      31,
      2007 was $7,117.





Under
      conditions similar to those included in the Amended Debenture (see discussion
      below), the Company has the right to make any and all such principal and
      interest payments by issuing shares of its common stock to YA Global 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. On July 18, 2007,
      the Company also paid $145,821 in principal and $265,678 in accrued interest
      from the proceeds of sale of the ISP Business. On September 7, 2007 and October
      19, 2007, the Company paid an additional $347,009 in principal and $68,493
      of
      interest from the proceeds of sale of Davel’s payphones. During the quarter
      ended December 31, 2007, the Company paid $42,117 in principal and $38,128
      of
      interest from the monthly interest payments received from USA on the $17.4
      million cash balance due at the time of the CLEC closing. In January 2008,
      the
      Company paid $865,393 of principal and $26,521 of interest from the payments
      received from USA relating to the $2,000,000 note receivable and the monthly
      interest payment.




-
          19
          -


Under
      the
      terms of the Secured Debenture Agreement, as amended through January 16, 2007,
      the Company has agreed to make weekly principal payments of at least $125,000
      in
      satisfaction of the remaining principal commencing February 1, 2008, with
      interest on the outstanding principal balance payable at the same time. However,
      in the event that the Company or YA Global receives a legal opinion that YA
      Global is eligible to sell shares of the Company’s common stock under Rule 144
      of the Securities Act of 1933, the Company may make such weekly payments of
      principal and accrued interest with shares of its common stock. The Company
      has
      made a partial payment of $114,530 toward the amounts due on the Secured
      Debenture and Amended Debenture on February 1, 2008 and has not made the payment
      due February 8, 2007. The Company will be in default with respect to the Secured
      Debenture Agreement if such payments are not made within fifteen days of their
      respective due dates. The Company is currently negotiating with YA Global
      regarding an extension of its debentures and a modification of its
      terms.





**The
      Amended Debenture**





On
      May 13, 2005, the Company issued a 7.75% secured convertible debenture (the
“Debenture”) to YA Global 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.





On
      June
      30, 2006, the Company entered into an amended secured convertible debenture
      in
      the amount of $15,149,650 with YA Global (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 YA Global 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 YA Global 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. YA Global 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 YA Global
      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, YA Global was issued an additional
      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 expired in November 2007.





The
      Debenture was recorded in the accounts net of unamortized debt discount
      reflecting the fair value on the date of issuance of the related 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.





-
          20
          -


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 December
      31,
      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 reflects 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 December 31, 2007 was $55,209.





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. . On July 18, 2007, the Company also
      paid
      $247,005 in principal and $216,181 in accrued interest from the proceeds of
      sale
      of the ISP Business. On September 7, 2007, the Company paid an additional
      $1,325,000 in principal and $116,853 of interest from the proceeds of sale
      of
      Davel’s payphones. During the quarter ended December 31, 2007, the Company paid
      $196,313 of interest from the monthly interest payments received from USA on
      the
      $17.4 million cash balance due at the time of the CLEC closing. In January
      2008,
      the Company paid $98,157 of interest from the payments received from USA
      relating to the $2,000,000 note receivable and the monthly interest
      payment.





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 February
      1,
      2008 with interest on the outstanding principal balance payable at the same
      time. However, in the event that the Company or YA Global receives a legal
      opinion that YA Global is eligible to sell shares of the Company’s common stock
      under Rule 144 of the Securities Act of 1933, the Company may make such weekly
      payments of principal and accrued interest with shares of its common stock.
      The
      Company has made a partial payment of $114,530 toward the amounts due on the
      Secured Debenture and Amended Debenture on February 1, 2008 and has not made
      the
      payment due February 8, 2007. The Company will be in default with respect to
      the
      Secured Debenture Agreement if such payments are not made within fifteen days
      of
      their respective due dates. The Company is currently negotiating with YA Global
      regarding an extension of its debentures and a modification of its
      terms.





**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
      YA Global 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 YA Global 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
      December 31, 2007, the total remaining principal balance payable to YA Global
      under the convertible debentures and the total amount of related accrued
      interest were $14,092,697 and $92,784, respectively.





**The
      Debentures - Interest Expense**





For
      the
      three and nine months ended December 31, 2007, the amounts of interest expense
      related to the debentures issued to YA Global, and included in the accompanying
      condensed consolidated statements of operations based on the stated interest
      rates, were $275,732 and $886,837, respectively. The amounts for the
      corresponding periods of the prior year were $363,803 and $966,173,
      respectively.





-
          21
          -


Interest
      expense amounts included in the accompanying condensed consolidated statements
      of operations for the current and prior year periods also included total debt
      discount amortization related to the debentures issued to YA Global.
      Amortization amounts were $38,151 and $231,992, respectively, for the three
      and
      nine months ended December 31, 2007. The amounts for the corresponding periods
      of the prior year were $307,532 and $553,786, respectively. Interest expense
      for
      the three and nine months ended December 31, 2006 also included an amount,
      $89,000, equal to the increase in the fair value of the Warrant based on its
      terms that were reset during the prior year quarter.





The
      discounts provided to YA Global 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 during the three-month
      period ended June 30, 2007. The amount included in interest expense for the
      nine
      months ended December 31, 2007 was $148,550.





**Notes
      Payable to YA Global**





In
      May
      2007, the Company borrowed $1,100,000 from YA Global under a one-year promissory
      note with annual interest at a rate of 12% for the first six months of its
      term
      and an annual rate of 15% thereafter. This promissory note and the related
      accrued interest were repaid in July 2007 from the proceeds of sale of the
      ISP
      Business. Interest expense was $25,315 for the nine months ended December 31,
      2007.





During
      the two-year period ended March 31, 2006, the Company borrowed amounts from
      YA
      Global 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 YA Global 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 YA Global
      for
      the nine months ended December 31, 2006, based on the stated rates of interest
      and included in the accompanying condensed consolidated statement of operations,
      was $25,704.





**Capital
      Leases of Discontinued Operations**





The
      Company 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. As a result of Gobility’s
      default under the Gobility Agreement as described in Note 3, including their
      failure to make the monthly lease payments, the Company continues to be liable
      for these capital lease obligations. In September 2007, the Company was required
      to make lease payments totaling $64,165 and could be required to make additional
      payments if Gobility does not make the payments or otherwise satisfy the lease
      obligations. Although the leasing companies have not done so, they could
      accelerate the payment date and demand immediate payment of the outstanding
      balances from the Company as a result of the default in lease payments by
      Gobility. The Company could also be subject to late payment penalties and
      interest at the default rate.





The
      outstanding principal amounts of the capital leases are included in liabilities
      of companies held for sale at December 31 and March 31, 2007 in the accompanying
      condensed consolidated balance sheets. At December 31, 2007, a summary of the
      future scheduled payments based on the original terms of the capital leases
      was
      as follows:





The
                twelve months ending —December
                31, 2008
            
            $
            3,249,100December
                31, 2009
            
            
            1,198,063December
                31, 2010
            
            
            40,0864,487,249Less
                – Interest portions
            
            
            (695,153
            )Capital
                leases – principal portions
            
            $
            3,792,096




-
          22
          -




Aggregate
      lease proceeds in the amount of $1,187,664 were used to purchase certificates
      of
      deposit (including $126,000 in April 2007) that are pledged to secure the lease
      obligations. This amount was included in the balance of assets of companies
      held
      for sale in the condensed consolidated balance sheet at December
      31, 2007. At
      December 31, 2007, the condensed consolidated balance sheet also includes
      accrued interest of $226,287 relating to the past due payments under the
      leases.





**NOTE
      6-** **STOCKHOLDERS’
      EQUITY**




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





On
      May
      13, 2004, the Company entered into the SEDA with YA Global that provided,
      generally, that YA Global 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. YA Global 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 YA Global 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 YA Global upon
      the sale of shares of common stock amounted to $137,795 in the prior year,
      and were included in interest expense in the accompanying condensed consolidated
      statement of operations for the nine months ended December 31,
      2006.





**Common
      Stock Transactions in the Nine months ended December 31,
      2007**





In
      the
      nine months ended December 31, 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 YA Global pursuant to the convertible debentures.





In
      September 2007, the Company issued 742,188 shares of common stock, valued at
      $118,750 in settlement of an obligation to an officer of one of the Company’s
      subsidiaries.





**Common
      Stock Transactions in the Nine months ended December 31, 2006**





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 the termination of an agreement with an investment banking
      firm.





In
      August
      2006, the Company issued 300,996 shares of its common stock to a former employee
      pursuant to the exercise of stock options.





During
      the nine months ended December 31, 2006, 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 YA Global. The
      return of the shares was recorded in October 2006.





**Stock
      Options and Warrants**





The
      stockholders of the Company have approved the issuance of 30,000,000 shares
      of
      common stock in connection with stock options granted pursuant to the 2001
      Equity Performance Plan (the “2001 Plan”). In addition, the Company has issued
      options and warrants to purchase common stock to key personnel pursuant to
      specific authorization of the board of directors outside the scope of the 2001
      Plan. The following tables summarize the stock option activity and the warrant
      activity for the nine months ended December 31, 2007:





-
          23
          -





**Stock
                Options —**
            
            **Number
                of Options**
            
            **Weighted-**
              **Average**
              **Exercise
                Price**Outstanding
                – March 31, 2007
            
            
            3,877,000
            
            $
            0.2170Granted
            
            
            -
            
            $
            -Exercised
            
            
            -
            
            $
            -Cancelled
            
            
            (133,334
            )
            $
            0.2600Outstanding –
                June 30, 2007
            
            
            3,374,666
            
            $
            0.2034Granted
            
            
            -
            
            $
            -Exercised
            
            
            -
            
            $
            -Cancelled
            
            
            -
            
            $
            -Outstanding –
                September 30, 2007
            
            
            3,743,666
            
            $
            0.2034Granted
            
            
            -
            
            $
            -Exercised
            
            
            -
            
            $
            -Cancelled
            
            
            (1,927,666
            )
            $
            0.1877Outstanding –
                December 31, 2007
            
            
            1,816,000
            
            $
            0.2200Exercisable –
                December 31, 2007
            
            
            1,377,333
            
            $
            0.2200




**Stock
                Warrants —**
            
            **Number
                of**
              **Warrants**
            
            **Weighted-**
                **Average**
              **Exercise**
              **Price**Outstanding –
                March 31, 2007
            
            
            122,905,634
            
            $
            0.1597Granted
            
            
            -
            
            $
            -Exercised
            
            
            -
            
            $
            -Cancelled
            
            
            -
            
            $
            -Outstanding –
                June 30, 2007
            
            
            122,905,634
            
            $
            0.1597Granted
            
            
            19,000,000
            
            $
            0.0075Exercised
            
            
            -
            
            $
            -Cancelled
            
            
            -
            
            $
            -Outstanding –
                September 30, 2007
            
            
            141,905,634
            
            $
            0.1393Granted
            
            
            1,000,000
            
            $
            0.0089Exercised
            
            
            -
            
            $
            -Cancelled
            
            
            (18,966,666
            )
            $
            0.1526Outstanding –
                December 31, 2007
            
            
            123,938,968
            
            $
            0.1362Exercisable –
                December 31, 2007
            
            
            104,799,951
            
            $
            0.1568




-
          24
          -




In
      August
      2007, the Company’s board of directors approved the award of warrants,
      exercisable at a purchase price of $0.0075 per share, covering up to 19,000,000
      shares of its common stock as follows: a warrant for up to 10,000,000 shares
      of
      its common stock to Jay O. Wright, Chief Executive Officer; a warrant to each
      of
      Richard H. Deily, our former Chief Accounting Officer, and Tammy L. Martin,
      Chief Administrative Officer and General Counsel, for 3,000,000 shares of its
      common stock to vest at the earlier of June 30, 2008 or the date his/her
      employment with the Company is terminated without cause, including as a result
      of a merger or acquisition resulting in a change of control; and 1,000,000
      shares of common stock to each of the Company’s three independent directors to
      vest equally over 12 months commencing September 2007.





The
      warrant awarded to Mr. Wright is scheduled to vest as follows: 3,000,000 shares
      to vest immediately upon the closing of the sale of the CLEC Businesses to
      USA;
      2,000,000 shares to vest immediately upon the elimination of the Company’s debt
      to YA Global; 2,000,000 shares to vest immediately upon the closing of the
      sale
      of at least 80% of the pay telephones of Davel; 1,000,000 shares to vest
      immediately upon the elimination of the Company’s contingent obligations to pay
      certain debts of Kite Broadband, LLC and Kite Networks, Inc. related to the
      purchase of equipment (including the capital leases discussed above); and
      2,000,000 shares to vest immediately upon the completion of an acquisition
      into
      a new line of business, which acquisition shall have received the approval
      of
      the Company’s board of directors.





On
      November 5, 2007, the Company’s board of directors approved the award of
      warrants, exercisable at a purchase price of $0.0089 per share, to purchase
      1,000,000 shares of its common stock to Donald Paliwoda, the Company’s Chief
      Accounting Officer. The warrants vest on the earlier of June 30, 2008 or the
      date his employment with the Company is terminated without cause, including
      as a
      result of a merger or acquisition resulting in a change of control, and expire
      five years from the grant date.





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 typically vest over periods that range from twelve to thirty-six
      months. The vesting provisions 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
      award.





Most
      of
      the stock options and warrants with vesting 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 $128,007 and $763,129 for the three and nine months ended December 31,
      2007,
      respectively. The amounts for the corresponding periods of the prior year were
      $535,821 and $1,492,468, respectively.





-
          25
          -


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
      nine months ended December 31, 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-
      and nine-month periods presented herein were anti-dilutive as the Company
      incurred net losses in these periods.





**NOTE
      8-** **LITIGATION**





During
      the nine months ended December 31, 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 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 the amount of $7.5 million in connection with the alleged
      infringements. Davel does not believe that the allegations set forth in the
      complaint are valid, and accordingly, filed a motion for summary judgment,
      which
      was granted by the court on October 4, 2007. On November 1, 2007, plaintiff
      filed its notice of appeal of the court’s ruling on the motion for summary
      judgment to the United Stated Court of Appeals for the Federal Circuit (the
      “Appellate Court”), and on February 14, 2007, filed with the Appellate Court its
      brief in support of the appeal. Davel is expected to file its response with
      the
      Appellate Court during the month of February 2008. 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 granted the defendants’ motion
      for summary judgment and dismissed the case with prejudice based upon the
      court’s finding that the Gammino patents were invalid. The Plaintiff has also
      appealed the ruling of the court in the Texas litigation. Oral arguments in
      the
      Texas litigation are expected to be heard in February 2008.





According
      to the terms of the Davel acquisition agreement, the former secured lenders,
      subject to certain limitations, had agreed to reimburse Davel for the litigation
      costs and any losses resulting from the Gammino lawsuit from future regulatory
      receipts that were assigned previously to them. Any such regulatory receipts
      have been deposited into a third-party escrow account and used to reimburse
      Davel for costs incurred. The former secured lenders were not required to fund
      the escrow account or otherwise reimburse Davel for amounts, if any, in excess
      of actual regulatory receipts collected. Any amount remaining in the escrow
      account at the conclusion of the litigation was to be returned to the former
      secured lenders. Davel has received significant regulatory receipts that have
      been held in escrow.





-
          26
          -


On
      or
      about December 3, 2007, Davel, the former secured lenders and the Company
      revised the terms of the escrow agreement to permit a portion of the funds
      previously held in escrow to be released to the former secured lenders. In
      consideration of the release of the funds, the Company received the sum of
      $250,000, which has been included as a reduction of operating costs and expenses
      in the condensed consolidated statements of operations during the third quarter.
      The Company believes that there are sufficient funds remaining in the escrow
      account to pay both Davel’s legal defense costs and any potential judgment that
      the Company believes could reasonably be expected.  This $7.5 million claim
      represents exposure to Davel in the event that escrowed regulatory receipts
      are
      insufficient to cover any potential judgment against Davel should it be found
      liable for the full monetary amount of the claim.




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 remains 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. During January 2008 the parties verbally agreed
      to
      a settlement of the matter for an amount not deemed to be material to the
      Company. Final settlement documents are being reviewed and are expected to
      be
      executed by the parties resulting in a dismissal of the litigation. The Company
      has accrued an amount on its financial statements sufficient to cover its costs
      associated with the pending settlement. Notwithstanding the foregoing, in the
      event that the settlement documents are not finalized and the Company is
      required to litigate the matter and 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 impacts litigation 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 (the “District Court Litigation”). Davel
      Communications, Inc. and certain of Davel's subsidiaries (collectively, the
      "Davel Entities") are directly or indirectly plaintiffs in the District Court
      Litigation. Following the Supreme Court ruling in the Metrophones Case, AT&T
      Corporation and Sprint Communications Company, L.P. filed with the United States
      Supreme Court a Petition for a Writ of Certiorari No. 07-552 seeking review
      of
      the ruling of the United States Court of Appeals for the District of Columbia
      Circuit that the plaintiffs had standing in the District Court Litigation.
      On
      January 4, 2008 the United States Supreme Court granted the Petition for a
      Writ
      of Certiorari. It is expected that the parties will file their respective briefs
      during the first calendar quarter of 2008, with the United States Supreme Court
      hearing oral arguments and issuing a ruling during the second calendar quarter
      of 2008. The Company expects that the District Court Litigation will be held
      in
      abeyance pending the ruling of the Supreme Court in this matter.





-
          27
          -


Although
      the District Court Litigation 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
      the
      pending appeal and any future 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.





4)  Under
      the
      authority granted by the Management Agreement to USA, CloseCall America filed
      a
      complaint in the Circuit Court for Howard County, Maryland, against Skyrocket
      Communications, Inc. (“Skyrocket”) Case No. 13-C-07-70296 for breach of contract
      and unjust enrichment. CloseCall’s claim arose from an unpaid credit owing to
      CloseCall in the amount of $23,913.53, owed under a terminated technical support
      services agreement. In response thereto, Skyrocket filed a counter-claim
      alleging breach of contract and asserting damages in the amount of $1.5 million.
      In January 2008 Skyrocket filed an amended counter-complaint asserting an
      additional claim for intentional misrepresentation, seeking $5 million in actual
      damages and $5 million in punitive damages. We believe that CloseCall has
      meritorious defenses to the alleged claims and we intend to vigorously defend
      CloseCall in this matter. We further believe the amended counter-claims are
      without merit, inappropriately pleaded and amount to an abuse of process. We
      expect CloseCall to file a motion to dismiss the amended counter-complaint
      and
      investigate other legal remedies available as a result of the wrongful
      prosecution. Notwithstanding the foregoing, in the event that CloseCall is
      required to litigate the matter and its defenses were not successful, we believe
      that any potential exposure related to the claims alleged against CloseCall
      are
      not likely to be material.




5)
      The
      Company is involved in other claims and litigation arising in the ordinary
      course of business, which it does not expect to materially affect its financial
      position or results of operations. The Company has been threatened by several
      former employees with litigation; however, to date, no litigation or other
      action has commenced which is material to the Company.





**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- and nine-month periods ended December 31, 2007 and 2006, our financial
      condition at December 31, 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.





-
          28
          -


**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**





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 owned and operated approximately 22,200 payphones
      located predominantly in 44 states and the District of Columbia. Most of our
      subscribers are residential customers.





Historically,
      our revenues had been generated through three of our four business
      reporting segments:


**Wireless
                  Networks**
              Our
                  broadband wireless network deployment efforts had 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 was
                  one of the largest independent payphone operators in the United
                  States.**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 provided 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.




-
          29
          -




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, we entered into an Agreement and Plan of Merger with NeoReach, a
      private Delaware company, pursuant to which we merged a newly formed, wholly
      owned subsidiary 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.





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) 571-3476.
      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.





-
          30
          -


**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 citywide 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 were
      unable to reduce the corresponding costs of services sufficiently to maintain
      profitability. In addition, we 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
      December 31, 2007 was $95,476,594. In the nine months ended December 31, 2007,
      we sustained a net loss of $18,205,349. 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 nine months ended December 31, 2007 and the fiscal year ended March
      31, 2007 were $4,227,336 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 complete the planned sale of assets,
      to
      improve the Company’s operating performance, or to raise additional capital as
      needed and on acceptable terms.





To
      date,
      YA Global 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 YA Global under the debentures
      at March 31, 2007 was $18,149,650. In May 2007, we borrowed $1,100,000 from
      YA
      Global 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 was exhausted. YA Global
      has agreed to delay additional installment payments until February 1, 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 YA Global are tradable under Rule 144 of the Securities Act, or shares of
      our
      common stock are otherwise freely tradable by YA Global without restriction,
      we
      will be required to make these payments in cash. However, in the event that
      the
      Company or YA Global receives a legal opinion that YA Global is eligible to
      sell
      shares of the Company’s common stock under Rule 144, the Company will be
      permitted make weekly payments of principal and accrued interest with shares
      of
      its common stock. The Company has made a partial payment of $114,530 toward
      the
      amounts due on the debentures on February 1, 2008 and has not made the payment
      due February 8, 2007. The Company will be in default with respect to its debt
      agreements if such payments are not made within fifteen days of their respective
      due dates. The Company is currently negotiating with YA Global regarding an
      extension of its debentures and a modification of its terms.





-
          31
          -




**The
      Sale of the Wireless Networks Business to Gobility**





The
      cash
      needs of Kite Networks have been substantially funded through borrowings by
      the
      Company from YA Global 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 were not available from these existing sources for Kite
      Networks to effectively continue the execution of its business plan. As a
      result, we commenced the search for capital as described below during the fourth
      quarter of the fiscal year 2007.





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
      was required to raise at least $3.0 million in cash no later than August 15,
      2007. This did not occur. As a result of this default by Gobility on the
      financing obligation under the debenture, we 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.





Gobility
      expected to raise capital for its operating purposes from an identified source
      pursuant to a funding commitment letter that was presented to the Company at
      closing. Because this funding has not been obtained, Gobility has been unable
      to
      fund its operations including the payment of amounts due under a series of
      capital equipment leases and other equipment-related obligations. On the date
      of
      the sale to Gobility, the aggregate amount of this debt included in the balance
      sheet of Kite Networks was approximately $6,111,000. Because the equipment
      leases and other equipment purchases were co-signed by Mobilepro, if Kite
      Networks fails to pay the leases, the Company, subject to any defenses it may
      have, may be obligated to pay this debt. The Company could also be subject
      to
      late payment penalties and interest at the default rate. At December 31, 2007,
      the amounts recorded on the balance sheet for the lease obligations, accrued
      interest, and accounts payable were $3,297,096, $226,287, and $1,591,978,
      respectively. The Company has also recorded the certificates of deposits
      securing the lease obligations of $1,187,664 as assets of companies held for
      sale.





The
      Company is currently cooperating with Gobility in its efforts to sell the assets
      of Kite Networks in order to pay off the obligations relating to the leases
      and
      other equipment. In the event Gobility is unsuccessful in its attempts to sell
      the assets and satisfy the lease obligations, the Company could be required
      to
      make the payments on the leases and the accounts payable for the other
      equipment.




**The
      Sale of the ISP and CLEC Businesses to USA Telecom**





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 YA Global which exceeded $14 million at
      December 31, 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 Agreement”). Pursuant to
      the USA 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 8,100 shares of preferred stock of USA convertible
      into
      7.5% of the fully diluted shares of USA’s common stock valued at $5,763,893.
      Simultaneously, we used $2,000,000 of this cash to pay down principal and
      accrued interest owed to YA Global under the promissory note and debentures.





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          32
          -


Completion
      of the sale of CloseCall and AFN (the “CLEC Business”) requires the receipt of
      certain state regulatory approvals before it could be completed. Pursuant to
      a
      management agreement that was signed in July 2007 (the “USA Management
      Agreement”), USA operated the CLEC Business, retained any cash provided by the
      operations of these companies and funded any cash requirements of the companies
      pending completion of the sale of these companies. In addition, USA was required
      to make debenture interest payments to YA Global on the Company’s behalf during
      the term of the USA Management Agreement based on an assumed principal balance
      of $17.4 million at an interest rate of 7.75%.





Upon
      the
      close and pursuant to the terms of the USA Agreement, we expected to receive
      cash proceeds of $19.4 million, including payment of the $2.0 million promissory
      note. On January 3, 2008, the Company entered into an amendment to the
      $2,000,000 promissory note due from USA. USA made payments of $500,000 each
      on
      January 4 and January 11, 2008 with the remaining balance of $1,000,000,
      together with accrued interest at the rate of 7.75%, due on the earlier of
      the
      date of the closing of the sale of the CLEC Business or March 31, 2008. Of
      the
      $1,000,000 of payments, the Company received $125,000 and the remaining $875,000
      was used to pay principal and interest on the convertible debentures due to
      YA
      Global.





On
      January 14, 2008, the Company received notice from USA purporting to terminate
      the USA Agreement with respect to the sale of the CLEC Business, but provided
      that USA remained interested in discussing terms upon which it would complete
      the purchase. The Company is in communications with USA and disputes the
      validity of the claims alleged for the purported termination, which include
      the
      alleged failure to obtain certain regulatory and contractual approvals and
      the
      alleged breach of certain representations and warranties set forth in the USA
      Agreement. The Company believes the purported termination is in bad faith,
      and
      should it not be able to resolve this matter to its satisfaction, intends to
      pursue any and all legal and equitable remedies available to it against USA.
      Despite the on-going discussions with USA, the Company has re-assumed operating
      control of AFN and Close Call, its CLEC subsidiaries.





The
      Company expected to use the cash proceeds from the sale of the remainder of
      the
      Wireline Businesses, to retire the YA Global debentures plus the remaining
      amounts of accrued interest. If the sale of the Wireline Businesses is not
      completed in accordance with the negotiated terms, or sold to an alternative
      buyer, the Company will not have the ability to continue as a going concern
      beyond the fourth quarter of the current fiscal year without a significant
      restructuring of the YA Global debt. See Item 1A. below - Risk Factors -
“Failure to Complete the Sale of the Wireline Businesses to USA Will Result
      in
      Our Inability to Retire the YA Global Debentures”.





**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 condensed
      consolidated balance sheets at December 31, 2007 and March 31, 2007. In
      addition, we have classified the results of operations of these companies in
      discontinued operations in the condensed consolidated statements of operations
      for the three and nine months ended December 31, 2007 and 2006.





**Sales
      of Payphone Assets**





The
      Company has also completed a series of transactions to sell a majority of
      Davel’s payphones in order to provide cash for operating purposes and additional
      retirements of convertible debenture debt.





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.
      A
      gain in the amount of $10,640 was recognized in connection with this
      transaction.





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          33
          -


In
      September 2007, in three transactions, we completed the sale of approximately
      21,700 payphones to unaffiliated purchasers. After the direct payment of certain
      related liabilities and broker fees in the aggregate amount of approximately
      $851,000, and the funding of escrow accounts established for the payment of
      vendor obligations and indemnification claims in the aggregate amount of
      $1,200,000, proceeds of approximately $1,840,000 were used to retire convertible
      debenture debt of approximately $1,672,000 and related accrued interest of
      approximately $168,000. A net loss of $2,800,206 was recorded in connection
      with
      these transactions.





**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.





**Impact
      of Recent Accounting Standards**





In
      July
      2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
      No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB
      Statement No. 109” (“FIN 48”), which clarifies the accounting for uncertainty in
      income tax positions. FIN 48 requires that the Company recognize in the
      consolidated financial statements the impact of a tax position that is more
      likely than not to be sustained upon examination based on the technical merits
      of the position. The provisions of FIN 48 were effective for the Company on
      April 1, 2007. Adoption of FIN 48 did not have a material effect on the
      consolidated financial statements.




In
      September 2006, the Securities and Exchange Commission (“SEC”) issued Staff
      Accounting Bulletin No. 108 (“SAB 108”), “Considering the Effects of Prior Year
      Misstatements When Quantifying Misstatements in Current Year Financial
      Statements.” SAB 108 provides interpretive guidance on how the effects of the
      carryover or reversal of prior year misstatements should be considered in
      quantifying a current year misstatement. SAB No. 108 states that registrants
      should use both a balance sheet approach and income statement approach when
      quantifying and evaluating the materiality of a misstatement. SAB 108 also
      provides guidance on correcting errors under the dual approach as well as
      transition guidance for correcting previously immaterial errors that are now
      considered material. The provisions of SAB 108 were applicable to financial
      statements for the Company’s fiscal year ended March 31, 2007. This guidance has
      not had any material impact on the consolidated financial condition or results
      of operations.




In
      September 2006, the FASB issued FAS No. 157, “Fair Value Measurements,” which
      defines fair value, establishes a framework and gives guidance regarding the
      methods used for measuring fair value, and expands disclosures about fair value
      measurements. The provisions of FAS 157 are effective for financial statements
      issued for the Company’s fiscal year beginning April 1, 2008, and interim
      periods within the fiscal year. The Company does not expect FAS 157 to have
      a
      significant impact on the consolidated financial statements.




In
      February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities,” which provides companies with an option to
      report selected financial assets and liabilities at fair value. The objective
      is
      to reduce both complexity in accounting for financial instruments and the
      volatility in earnings caused by measuring related assets and liabilities
      differently. The provisions of FAS 159 will be effective for the Company, as
      of
      the beginning of the Company’s fiscal year ending March 31, 2009. The Company
      does not expect FAS 159 to have a significant impact on the consolidated
      financial statements.




-
          34
          -


**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 not be helpful in understanding our financial condition and results of
      operation in light of the recent sale of certain of our subsidiaries. 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 December 31, 2007 and 2006**





Consolidated
      revenues of continuing operations (principally representing the revenues of
      Davel) for the quarter ended December 31, 2007 were $103,887 compared with
      revenues of $7,228,699 in the prior year quarter, a decrease of 98.6%. Davel
      derived most of its operating revenues in the current quarter from adjustments
      to “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
      were
      generated by our communications services in prior quarters. As discussed above,
      during the current fiscal year, we sold most of our remaining operational
      payphones in a series of transactions including the sale of approximately 21,700
      payphones in September 2007. The operating results related to these assets
      are
      reflected in the condensed consolidated statement of operations through the
      sale
      dates.





In
      the
      three months ended December 31, 2006, Davel derived most of its operating
      revenues from coin revenue and “dial-around” revenues generated by its
      payphones. 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
      have declined since its acquisition by us.





Cost
      of
      services (exclusive of depreciation and amortization) in the quarter ended
      December 31, 2007 was a negative $15,312 due primarily to adjustments and
      refunds relating to Davel’s phone bill expenses. In the third quarter of the
      prior fiscal year, cost of services was $4,330,639, or 59.9% of revenues, which,
      as a percentage of revenues, was slightly higher than prior quarters of the
      current fiscal year. In order to maintain operating margins, we reduced the
      number of payphones in the first quarters of the current fiscal year by removing
      those phones receiving minimal use and thereby eliminating the costs to support
      and maintain those phones.





The
      total
      operating costs and expenses of continuing operations for the quarter ended
      December 31, 2007, excluding the cost of services, depreciation and
      amortization, were $736,102 compared to $4,783,290 in the third quarter of
      the
      prior fiscal year. This was principally due to the elimination of the majority
      of Davel’s expenses following the sale of its payphone assets, which expenses
      declined by $3,349,927 compared to the corresponding period of the prior fiscal
      year. The Company was also able to reduce operating costs through the reduction
      in payroll, professional fees and related expense and a reduction in stock
      compensation expense. Stock compensation expense (recorded pursuant to the
      requirements of FAS 123R) decreased from $535,821 to $128,007 in the three
      months ended December 31, 2007. Depreciation and amortization expenses were
      $48,389 and $784,001 in the quarters ended December 31, 2007 and 2006,
      respectively, representing the reductions in depreciation of the costs of
      deployed payphones and the amortization of payphone location contracts resulting
      from phone sales and removals. The operating costs and expenses of ProGames
      for
      the three months ended December 31, 2007 and 2006 were approximately $144,000
      and $94,000, respectively.





Interest
      and other (income) expense, net, was $192,280 of income for the quarter ended
      December 31, 2007 compared with $793,763 of expense in the corresponding quarter
      of the prior fiscal year. The major components of net interest and other
      (income) expense for quarters ended December 31, 2007 and 2006 are presented
      in
      the following schedule.





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          35
          -




**Type
                of Debt**
            
            **2007**
            
            **2006****Convertible
                debentures (at stated rates)**
            
            $
            275,732
            
            $
            363,808**Convertible
                debentures (debt discount amortization)**
            
            
            38,151
            
            
            307,532**Notes
                payable to YA Global**
            
            
            -
            
            
            134,971**USA
                interest on cash due at CLEC closing**
            
            
            (339,896
            )
            
            -**Accretion
                of discount - USA Preferred Stock**
            
            
            (147,733
            )
            
            -**Other,
                net**
            
            
            _(19,074
            )
            
            (12,548
            )**Interest
                and Other (Income) Expense, net**
            
            $
            (192,820
            )
            $
            793,763





The
      losses from continuing operations for the three months ended December 31, 2007
      and 2006 were $472,472 and $3,462,994, respectively.





The
      losses from discontinued operations for the three months ended December 31,
      2007
      and 2006 were $133,452 and $2,564,740, respectively. The prior year quarter
      results included a charge for goodwill impairment of $1,213,035.





We
      reported a net loss of $605,924 for the quarter ended December 31, 2007, or
      $0.0008 per share, compared with a net loss of $6,027,734 for the quarter ended
      December 31, 2006, or $0.0102 per share. Corporate expenses from continuing
      operations were $574,606 in the current quarter, including $192,698 in net
      interest and other income and $144,761 in ProGames operating expenses. Corporate
      expenses were $2,051,071 in the prior year quarter, including $803,936 in net
      interest and other expenses and approximately $94,263 of ProGames operating
      costs.





**The
      Nine months ended December 31, 2007 and 2006**





Consolidated
      revenues of continuing operations (principally representing the revenues of
      Davel) for the nine months ended December 31, 2007 were $10,269,113 compared
      with revenues of $23,990,954 in the corresponding period of the prior year,
      a
      decrease of 57.2%. As discussed above, during the current fiscal year, we sold
      most of our remaining operational payphones in a series of transactions
      including the sale of approximately 21,700 payphones in September 2007. The
      operating results related to these assets are reflected in the condensed
      consolidated statement of operations for the nine months ended December 31,
      2007
      through the sale dates.





The
      cost
      of services for Davel (excluding depreciation and amortization) for the nine
      months ended December 31, 2007 of $5,734,722, expressed as a percentage of
      corresponding revenues, was 55.8% compared with $13,786,710, or 57.5% of
      revenues in the corresponding period of the prior fiscal year. The dollar
      decrease in cost of services was principally due to phone sales and
      removals.





The
      total
      operating costs and expenses of continuing operations for the nine months ended
      December 31, 2007, excluding the cost of services, depreciation and
      amortization, were $8,605,294 compared to $15,105,666 for the corresponding
      period of the prior year, a decrease of $6,500,372. This was principally due
      to
      the elimination of the majority of Davel’s operating costs and expenses
      following the sale of its payphone assets, which expenses declined by $5,392,267
      compared to the nine months ended December 31, 2006. Included in the operating
      costs and expenses for each nine-month period were stock compensation expense
      amounts (recorded pursuant to the requirements of FAS 123R) of $763,129 and
      $1,492,468, respectively. Depreciation and amortization expenses were $1,257,094
      and $2,308,512 in the nine months ended December 31, 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 nine months ended December 31, 2007
      and
      2006 were approximately $520,000 and $276,000, respectively.





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          36
          -


Interest
      and other expense, net, was $512,204 for the nine months ended December 31,
      2007
      compared with $1,799,079 in the corresponding period of the prior fiscal year.
      During the nine months ended December 31, 2007, we retired principal owed under
      the YA Global debentures in the amount of approximately $4,056,000 and the
      YA
      Global promissory note in the amount of $1,100,000 that we issued in May 2007.
      During the prior year period, we issued new debentures to YA Global in the
      amount of $5,825,000 and completed the retirement of notes payable to YA Global
      in the aggregate amount of $3,600,000. The major components of net interest
      and
      other expense for the nine months ended December 31, 2007 and 2006 are presented
      in the following schedule:


**Type
                of Debt**
            
            **2007**
            
            **2006****Convertible
                debentures (at stated rates)**
            
            $
            886,837
            
            $
            966,178**Convertible
                debentures (debt discount amortization)**
            
            
            231,992
            
            
            642,786**Convertible
                debentures (stock issuance discounts)**
            
            
            148,550
            
            
            134,971**SEDA
                draw discounts**
            
            
            -
            
            
            137,795**Notes
                payable to YA Global**
            
            
            25,315
            
            
            25,074**USA
                interest on cash due at CLEC closing**
            
            
            (616,985
            )
            
            -**Accretion
                of discount - USA Preferred Stock**
            
            
            (244,198
            )
            
            -**Other,
                net**
            
            
            80,693
            
            
            (107,765
            )**Interest
                and Other Expense, net**
            
            $
            512,204
            
            $
            1,799,039





The
      losses from continuing operations for the nine months ended December 31, 2007
      and 2006 were $8,619,107 and $9,418,574, respectively. The nine-month loss
      in
      the current year included a $2,778,906 loss on sale of assets relating to the
      sale of the Davel payphones and certain related liabilities. The prior period
      loss included $185,968 of restructuring charges and a $409,601 loss on
      extinguishment of debt relating to the refinancing of the $15 million Debenture.





The
      losses from discontinued operations for the nine months ended December 31,
      2007
      and 2006 were $9,586,242 and $5,457,581, respectively. The current period loss
      includes a $5,036,289 loss on the sale of the Wireless Networks Business and
      a
      $2,481,227 loss on the sale of the ISP and CLEC Businesses. The prior year
      period results included a charge for goodwill impairment of
      $2,090,889.





We
      reported a net loss of $18,205,349 for the nine months ended December 31, 2007,
      or $0.0237 per share, compared with a net loss of $14,876,155 for the nine
      months ended December 31, 2006, or $0.0253 per share. Corporate expenses were
      $3,517,290 in the current year period, including $516,765 in net interest and
      other expenses and approximately $521,121 in ProGames operating expenses.
      Corporate expenses were $6,268,086 in the prior year period, including
      $1,897,047 in net interest and other expenses, the $409,601 loss on the
      extinguishment of debt, $185,968 of restructuring charges, and approximately
      $276,263 of ProGames operating costs.





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          37
          -


**Liquidity
      and Capital Resources**





We
      have
      forecasted our operating cash requirements through the end of fiscal year 2008
      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
      to fund these obligations. Mobilepro Corp. is co-obligor on the capital leases
      and has retained the lease obligations as liabilities of companies held for
      sale
      in the accompanying condensed consolidated balance sheets. The total principal
      balance of these leases was approximately $3,792,000 at December 31, 2007.
      These
      capital leases are secured by approximately $1,188,000 of certificates of
      deposits. Monthly lease payments on these capital leases total approximately
      $190,000. In addition, the Company 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 approximates $1,591,000.
      The
      certificates of deposit and the equipment-related obligation are included in
      the
      Company’s condensed consolidated balance sheets at December 31, 2007 as assets
      and liabilities of companies held for sale, respectively.





We
      have
      also forecasted our operating cash requirements assuming we will be able to
      complete the sale of the CLEC Business. As further discussed below, the Company
      received notice from USA on January 14, 2008 purporting to terminate the USA
      Agreement with respect to the sale of the CLEC Business, but provided that
      USA
      remained interested in discussing terms upon which it would complete the
      purchase (see “Current Business Conditions” - “Sale of the ISP and CLEC
      Businesses to USA Telephone” above). The Company expected to use the cash
      proceeds from the sale of the CLEC Businesses, to retire the YA Global
      debentures plus the remaining amounts of accrued interest. If the sale of the
      CLEC Businesses is not completed in accordance with the negotiated terms, or
      sold to an alternative buyer, or if the Company is required to make payments
      on
      the transferred obligations of Gobility, the Company will not have the ability
      to continue as a going concern beyond the fourth quarter of the current fiscal
      year without a significant restructuring of the YA Global debt. The Company
      is
      currently negotiating with YA Global regarding an extension of its debentures
      and a modification of its terms.





During
      the nine months ended December 31, 2007, the balance of unrestricted cash and
      cash equivalents relating to continuing operations decreased by $912,377 to
      $1,081,404. The decrease in the current year relating to discontinued operations
      was $757,450. Restricted cash of continuing operations includes $456,672 held
      in
      escrow to indemnify Sterling for possible claims in connection with the sale
      of
      Davel’s payphones. Davel has accrued for claims due to and from Sterling, which
      are currently being disputed, and expects the balance in the escrow account
      to
      be sufficient to cover the disputed amounts and any other claims that may
      arise.


Net
        cash
        used in operations during the nine months ended December 31, 2007 was
        $4,227,336, reflecting the funding of operating expenses incurred by Davel
        and
        the corporate segment and $190,193 of cash used in operating activities of
        discontinued operations. There were reductions in accounts receivable and
        in
        accounts payable and accrued liabilities of continuing operations, net of
        liabilities sold in connection with the sale of Davel’s payphones, in the
        amounts of $1,840,762 and $2,160,549, respectively. Included in accounts
        receivable at December 31, 2007 is approximately $784,000 relating to
        dial-around compensation earned through the date of sale of Davel’s payphones
        during the quarter ended September 30, 2007. As a result of claims and disputes
        with Sterling, Sterling has not agreed to the calculation and payment of
        the
        Company’s portion of the quarterly payment that was due from the dial-around
        processor in January 2008. In the event Sterling continues to dispute its
        other
        claims and the payment to the Company, it could result in a delay in the
        Company’s receipt of dial-around compensation and adversely affect its cash flow
        and its ability to meet its obligations. The Company intends to pursue all
        available legal and equitable remedies to collect the amount due for dial-around
        compensation.





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          38
          -


Net
      cash
      provided by investing activities is $4,992,922 during the current fiscal year,
      including $1,702,316 provided by investing activities of discontinued
      operations. Investing activities of discontinued operations includes $2,500,000
      of cash proceeds from the sale of the ISP Business in July 2007. We made capital
      expenditures during the current year relating to continuing operations in the
      approximate amount of $320,000. Offsetting this amount was over $3,200,000
      in
      cash proceeds related to the sale of payphones in the current fiscal year.
      The
      Company also received approximately $362,000 from the sale of investments during
      the nine months ended December 31, 2007. These amounts were primarily used
      to
      fund operations and to pay long term-debt.





Our
      financing activities during the current fiscal year used net cash of $2,435,413,
      including $278,265 used in discontinued operations. Cash provided to us by
      YA
      Global pursuant to a promissory note issued by us in May 2007 was $1,100,000.
      We
      used $3,236,788 in cash to retire principal amounts owed to YA Global under
      the
      debentures and the aforementioned promissory note. The financing activities
      of
      discontinued operations used $278,265 in cash to pay debt obligations, including
      obligations under capital leases prior to the sale to Gobility.





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 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, YA Global 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 YA Global, 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 YA Global in May
      2005. With the issuance of the Amended Debenture, we deferred a cash payment
      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 YA Global 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
      YA Global 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 YA Global 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 was exhausted. YA Global has agreed to
      delay additional installment payments until February 1, 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 YA Global
      are tradable under Rule 144 of the Securities Act, or shares of the Company’s
      common stock are otherwise freely tradable by YA Global without restriction,
      the
      Company will be required to make these payments in cash. However, in the event
      that the Company or YA Global receives a legal opinion that YA Global 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. The Company has made a partial
      payment of $114,530 toward the amounts due on its debentures on February 1,
      2008
      and has not made the payment due February 8, 2007. The Company will be in
      default with respect to the debenture agreements if such payments are not made
      within fifteen days of their respective due dates. The Company is currently
      negotiating with YA Global regarding an extension of its debentures and a
      modification of its terms.





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          -


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. In April 2007, we completed a
      sale/leaseback transaction relating to approximately $419,000 in additional
      equipment deployed in Tempe under similar terms and conditions. However, in
      order to satisfy concerns about our credit worthiness, we were required to
      purchase certificates of deposit totaling approximately $825,000 that serve
      as
      collateral for the benefit of the lessor. On December 26, 2006, we received
      approximately $845,000 in net 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. As security for this lease, proceeds of
      approximately $362,000 were held back.





On
      October 10, 2006, the Company signed a master equipment lease agreement with
      a
      different lease financing firm that originally provided up to $3 million in
      lease financing capital for wireless network equipment purchases. The commitment
      was available only for equipment manufactured by Cisco Systems. Fifty percent
      of
      the commitment was designated for core network infrastructure equipment. The
      remainder of the commitment was available for transmission equipment purchases
      and could be used to finance up to 50% of the cost of such purchases. The lease
      term for each equipment purchase was 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.





Because
      the equipment leases and other equipment purchases were co-signed by Mobilepro
      Corp., as described above, the Company could be required to make the payments
      due on these leases and other equipment-related obligations that were
      transferred to Gobility in connection with the sale of the Wireless Networks
      Business. To date Gobility has not made any lease payments and has not raised
      at
      least $3.0 million in cash as required under the terms of the Gobility
      Debenture, As a result, the Company has 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. The Company
      is
      currently cooperating with Gobility in its efforts to sell the assets of Kite
      Networks in order to pay off the obligations relating to the leases and other
      equipment. In the event Gobility is unsuccessful in its attempts to sell the
      assets, the Company could be required to make the payments on the leases and
      the
      accounts payable for the other equipment.





Our
      major
      challenge is to sustain the funding of current operations until the sale of
      the
      CLEC Businesses can be completed. On January 14, 2008, the Company received
      notice from USA purporting to terminate the USA Agreement with respect to the
      sale of the CLEC Business, but provided that USA remained interested in
      discussing terms upon which it would complete the purchase. The Company is
      in
      communications with USA and disputes the validity of the claims alleged for
      the
      purported termination, which include the alleged failure to obtain certain
      regulatory and contractual approvals and the alleged breach of certain
      representations and warranties set forth in the USA Agreement. The Company
      believes the purported termination is in bad faith, and should it not be able
      to
      resolve this matter to its satisfaction, intends to pursue any and all legal
      and
      equitable remedies available to it against USA. Regardless of on-going
      discussions with USA, the Company has re-assumed operating control of AFN and
      Close Call, its CLEC subsidiaries.





If
      the
      CLEC closing occurs in accordance with it original terms, the Company will
      receive $17.4 million in cash at closing. In early January 2008, we received
      $1.0 million in payments from USA under a short-term note, as amended, and
      expect to receive an additional $1.0 million payment on the earlier of March
      31,
      2008 or the date of the CLEC closing. If we receive these amounts, the Company
      would have sufficient cash to make the installments due on the YA Global
      debentures and ultimately retire the debt and related accrued interest. If
      the
      CLEC closing does not occur, or if the Company is required to fund the capital
      lease and equipment-related obligations relating to the Wireless Networks
      Business, the Company will not be able to continue as a going concern without
      restructuring the YA Global debentures. As previously discussed, the Company
      is
      currently negotiating with YA Global regarding an extension of its debentures
      and a modification of its terms.





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          40
          -





**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 convertible preferred stock received in connection
      with the sale of the ISP and CLEC Businesses and common stock issued by a public
      company. The carrying value of these investments approximated $6,015,000 at
      December 31, 2007. The difference between the total carrying value of these
      investments and the current market value of the preferred stock and 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 Principal Accounting Officer 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.





**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 reporting 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.




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          41
          -


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.





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, management 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 are no material inaccuracies or omissions of material fact in this
      quarterly report.





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          42
          -


Upon
      the
      discovery of the material weaknesses in I/T internal controls described above,
      management planned to strengthen the Company's oversight over the I/T functions
      and its attendant controls, procedures, documentation and security beyond what
      had existed in prior years. However, the material weaknesses identified above
      reside in the operations of the Company that have been sold or subjected to
      the
      USA Management Agreement. Nonetheless, 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 the Principal Financial and
      Accounting Officer, 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.




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          -


**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 nine-month period ended December 31, 2007.





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
                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 the amount of $7.5 million in connection
                with the alleged infringements. Davel does not believe that the
                allegations set forth in the complaint are valid and filed a motion
                for
                summary judgment, which was granted by the court on October 4, 2007.
                On
                November 1, 2007, plaintiff filed its notice of appeal of the ruling
                to
                the United Stated Court of Appeals for the Federal Circuit (the “Appellate
                Court”), and on February 14, 2007, filed with the Appellate Court its
                brief in support of the appeal. Davel is expected to file its response
                with the Appellate Court during the month of the February 2008. 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 granted the defendants’ motion for summary judgment and dismissed
                the case with prejudice based upon the court’s finding that the Gammino
                patents were invalid. The Plaintiff has also appealed the ruling of the
                court in the Texas litigation. Oral arguments in the Texas litigation
                are
                expected to be heard in February 2008.




According
      to the terms of the Davel acquisition agreement, the former secured lenders,
      subject to certain limitations, had agreed to reimburse Davel for the litigation
      costs and any losses resulting from the Gammino lawsuit from future regulatory
      receipts that were assigned previously to them. Any such regulatory receipts
      have been deposited into a third-party escrow account and used to reimburse
      Davel for costs incurred. The former secured lenders were not required to fund
      the escrow account or otherwise reimburse Davel for amounts, if any, in excess
      of actual regulatory receipts collected. Any amount remaining in the escrow
      account at the conclusion of the litigation was to be returned to the former
      secured lenders. Davel has received significant regulatory receipts that have
      been held in escrow.





On
      or
      about December 3, 2007, Davel, the former secured lenders and the Company
      revised the terms of the escrow agreement to permit a portion of the funds
      previously held in escrow to be released to the former secured lenders. In
      consideration of the release of the funds, the Company received the sum of
      $250,000, which has been included as a reduction of operating costs and expenses
      in the condensed consolidated statements of operations during the third quarter.
      The Company believes that there are sufficient funds remaining in the escrow
      account to pay both Davel’s legal defense costs and any potential judgment that
      the Company believes could reasonably be expected. This $7.5 million claim
      represents exposure to Davel in the event that escrowed regulatory receipts
      are
      insufficient to cover any potential judgment against Davel should it be found
      liable for the full monetary amount of the claim.





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 remains in the
                discovery stage. We believe that we have meritorious defenses to
                the
                alleged claims and intend to vigorously defend ourselves in this
                matter.
                During January 2008 the parties verbally agreed to a settlement of
                the
                matter for an amount not deemed to be material to the Company. Final
                settlement documents are being reviewed and are expected to be executed
                by
                the parties resulting in a dismissal of the litigation. The Company
                has
                accrued an amount on its financial statements sufficient to cover
                its
                costs associated with the pending settlement. Notwithstanding the
                foregoing, in the event that the settlement documents are not finalized
                and the Company is required to litigate the matter and its defenses
                were
                not successful, we believe that any potential exposure related to
                the
                claims alleged against the Company is not likely to be
                material.




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          44
          -




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 impacts litigation 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 (the “District Court Litigation”). Davel Communications, Inc.
                and certain of Davel's subsidiaries (collectively, the "Davel Entities")
                are directly or indirectly plaintiffs in the District Court Litigation.
                Following the Supreme Court ruling in the Metrophones Case, AT&T
                Corporation and Sprint Communications Company, L.P. filed with the
                United
                States Supreme Court a Petition for a Writ of Certiorari No. 07-552
                seeking review of the ruling of the United States Court of Appeals
                for the
                District of Columbia Circuit that the plaintiffs had standing in
                the
                District Court Litigation. On January 4, 2008 the United States Supreme
                Court granted the Petition for a Writ of Certiorari. It is expected
                that
                the parties will file their respective briefs during the first calendar
                quarter of 2008, with the United States Supreme Court hearing oral
                arguments and issuing a ruling during the second calendar quarter
                of 2008.
                The Company expects that the District Court Litigation will be held
                in
                abeyance pending the ruling of the Supreme Court in this
                matter.




Although
      the District Court Litigation 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.




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          -




4)
            Under
                the authority granted by the Management Agreement to USA, CloseCall
                America filed a complaint in the Circuit Court for Howard County,
                Maryland, against Skyrocket Communications, Inc. (“Skyrocket”) Case No.
                13-C-07-70296 for breach of contract and unjust enrichment. CloseCall’s
                claim arose from an unpaid credit owing to CloseCall in the amount
                of
                $23,913.53, owed under a terminated technical support services agreement.
                In response thereto, Skyrocket filed a counter-claim alleging breach
                of
                contract and asserting damages in the amount of $1.5 million. In
                January
                2008 Skyrocket filed an amended counter-complaint asserting an additional
                claim for intentional misrepresentation, seeking $5 million in actual
                damages and $5 million in punitive damages. We believe that CloseCall
                has
                meritorious defenses to the alleged claims and we intend to vigorously
                defend CloseCall in this matter. We further believe the amended
                counter-claims are without merit, inappropriately pleaded and amount
                to an
                abuse of process. We expect CloseCall to file a motion to dismiss
                the
                amended counter-complaint and investigate other legal remedies available
                as a result of the wrongful prosecution. Notwithstanding the foregoing,
                in
                the event that CloseCall is required to litigate the matter and its
                defenses were not successful, we believe that any potential exposure
                related to the claims alleged against CloseCall are not likely to
                be
                material.




5.
            Other
                Ongoing and Threatened Litigation




The
      Company is involved in other claims and litigation arising in the ordinary
      course of business, which it does not expect to materially affect its financial
      position or results of operations. The Company has been threatened by several
      former employees with litigation; however, to date, no litigation or other
      action has commenced which is material to the Company.





**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, our Quarterly Report on Form 10-Q for the fiscal quarters
      ended June 30, 2007 and September 30, 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 fiscal year 2008
      based on several important assumptions. We have assumed that Gobility will
      succeed in selling some or all of its assets, thus enabling Kite Networks to
      satisfy its liabilities including the capital equipment leases or that the
      wireless networks can be sold by Gobility to a party or parties that are capable
      of paying these obligations or otherwise renegotiating the terms of the leases
      in a satisfactory manner. A sale of the wireless networks further assumes that
      in addition to finding a willing and able buyer, Gobility can also negotiate
      an
      assignment or other transfer of the existing lease obligations with the various
      leasing companies, as well as obtaining approval of the various municipalities
      in which the wireless networks are deployed. The Company understands that
      negotiations between potential buyers, Gobility and the various leasing
      companies have to date been difficult and lacking in reasonable cooperation.
      As
      a result, despite the interest of potential buyers, it may be difficult or
      impossible to negotiate a reasonable settlement with certain leasing companies.
      The lack of reasonable cooperation by the leasing companies could cause a
      potential buyer to choose not to purchase the Gobility assets and have a
      material adverse effect on the Company and its ability to continue as a going
      concern.





If
      Gobility is unsuccessful in facilitating a sale of some or all of its assets,
      the Company will be unable to permanently eliminate the cash requirements
      represented by the wireless network business as planned, the Company will not
      have sufficient cash to sustain operations without the completion of the
      Wireline Business sale or without raising additional capital.





-
          46
          -


On
      June
      30, 2007, we executed an agreement to sell the Wireline Businesses (including
      CloseCall, AFN and the Internet service provider companies) to USA. We have
      assumed that the sale of CloseCall and AFN would occur in accordance with the
      terms of the Purchase Agreement. However, on January 14, 2008 we received notice
      from USA, which purports to terminate the Purchase Agreement but provides that
      USA remains interested in discussing the terms upon which it would purchase
      CloseCall and AFN. In the event that the Company is unsuccessful in closing
      the
      Purchase Agreement with USA, or otherwise selling the businesses to an
      alternative buyer, the Company will not have sufficient cash to satisfy the
      cash
      requirements represented by the wireless network businesses





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 was required
      to
      raise at least $3.0 million in cash no later than August 15, 2007. Gobility
      has
      defaulted on the financing obligation under the debenture, providing us the
      right to repurchase the wireless networks business with the surrender of the
      debenture and the payment of a nominal additional amount.





Mobilepro
      is co-obligor on the capital leases transferred to Gobility. The total principal
      balance of these leases was approximately $3,792,000 at December 31, 2007.
      Monthly payments on these capital leases total approximately $190,000 and they
      are more than five months in arrears. In addition, Mobilepro 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
      approximates $1,591,000.





Although
      Gobility has represented to us that it continues to pursue the sale of its
      various assets, including the wireless networks, we understand that Gobility
      has
      not yet closed on the sale of the wireless networks and that it has defaulted
      in
      making scheduled lease payments. If Gobility fails to consummate the sale of
      its
      assets and/or the sale of the wireless networks and make the required payments
      on the liabilities described above, it is likely that the creditors described
      above will demand payment of the past due amounts from Mobilepro and may
      commence legal collection actions. The leasing companies may also elect to
      accelerate the payment date for the balance of the remaining monthly payments.
      In such event, Mobilepro would not have sufficient cash to satisfy the
      obligations to the leasing companies.




**Failure
      to Complete the Sale of the Wireline Businesses to USA Will Result in Our
      Inability to Retire the YA Global 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 $5.8 million.
      Simultaneously, we used $2,000,000 of this cash to pay down principal and
      accrued interest owed to YA Global under the debentures. The balance
      of the promissory note is $1 million and is scheduled to be paid by USA on
      or
      before March 31, 2008.





-
          47
          -


Upon
      the
      close and pursuant to the terms of the USA Purchase Agreement, the Company
      is
      scheduled to receive additional cash proceeds of $18.4 million, including
      payment of the balance of the promissory note. The cash proceeds from the sale
      of the CLEC Business were expected to be utilized to retire the YA Global
      debentures plus accrued interest. ** However,
      on January 14, 2008 we received notice from USA which purports to terminate
      the
      Purchase Agreement but provides that USA remains interested in discussing the
      terms upon which it would purchase CloseCall and AFN. In the event that the
      Company is unsuccessful in closing the Purchase Agreement with USA, or otherwise
      selling the businesses to an alternative buyer, the Company will not have the
      ability to continue as a going concern beyond the fourth quarter of the current
      fiscal year without a significant restructuring of the YA Global 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
      December 31, 2007 was $95,476,594. In the nine months ended December 31, 2007,
      the Company incurred a net loss of $18,205,349. 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 the Company experienced declining revenues. Although
      restructuring measures reduced other operating expenses, the Company was 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 nine months ended
      December 31, 2007 and the fiscal year ended March 31, 2007 were $4,227,336
      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 sell assets for cash, to improve its operating performance, or to
      raise additional capital as needed and on acceptable terms.





**Our
      Ongoing Business May Be Insufficient to Attract Additional
      Investors**





In
      the
      event the Company consummates the sale of the remainder of the Wireline Business
      to USA or an alternative buyer, the Company will have limited ongoing revenue
      and operations. As a result, the Company may be unable to attract new
      investors.





**We
      Do Not Have Enough Registered Shares to Cover the Scheduled Debenture Payments
      with Our Common Stock**





To
      date,
      YA Global 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 YA Global under
      the
      debentures at December 31, 2007 was $14,092,697. 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 YA Global benefit related
      to the convertible debentures has been exhausted. YA Global has agreed to delay
      additional installment payments until February 1, 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 YA Global are
      tradable under Rule 144 of the Securities Act, or shares of the Company’s common
      stock are otherwise freely tradable by YA Global without restriction, the
      Company will be required to make these payments in cash. However, in the event
      that the Company or YA Global receives a legal opinion that YA Global 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.





-
          48
          -


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
      fourth 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 YA Global 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 and has
      also failed to fulfill judicial decrees to implement rules related to the
      payphone industry. 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.





**If
      YA Global 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, YA Global and other selling stockholders may sell in the public market
      up to all of the shares of common stock owned at that time.




-
          49
          -





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 YA Global 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 YA Global 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 YA Global 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 YA Global 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 YA Global 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 YA Global were repaid during the quarter
      ended June 30, 2006, and no such notes were payable to YA Global after June
      30,
      2006.




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.





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          50
          -


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 previously accounted 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
      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;•
            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.




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          51
          -


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 YA Global 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.





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 YA Global 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.





On
      August
      27, 2007, the Board of Directors approved the issuance of up to 19,000,000
      shares of common stock as follows: a warrant for up to 10,000,000 shares of
      common stock to Jay O. Wright, Chairman of the Board and Chief Executive
      Officer; a warrant to each of Richard H. Deily, former Chief Accounting Officer,
      and Tammy L. Martin, Chief Administrative Officer and General Counsel, for
      3,000,000 shares of common stock; and 1,000,000 shares of common stock to each
      of the independent directors, Donald Sledge, Michael O’Neil and Christopher
      MacFarland. The exercise price for each warrant is $0.0075 per share.





On
      November 5, 2007, the Company’s board of directors approved the award of
      warrants, exercisable at a purchase price of $0.0089 per share, to purchase
      1,000,000 shares of its common stock to Donald Paliwoda, the Company’s Chief
      Accounting Officer.





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 December
      31, 2007. However, please see the Risk Factors above titled “The Failure of
      Gobility to Raise Capital May Result in Our Payment of Transferred
      Liabilities”.





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          52
          -


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




None.





**Item
      5. Other Information.**




(a)
      The
      Company filed a Current Report on Form 8K, dated January 17, 2008, reporting
      that Christopher W. MacFarland resigned as a director of the Company due to
      the
      pending sale of McLeod USA, in which Mr. MacFarland serves as Group Vice
      President and Chief Technology Officer, to PaeTec Communications. Mr. MacFarland
      is likely to become an officer of PaeTec Communications, a telecommunications
      provider and a potential competitor of the Company. Mr. MacFarland’s resignation
      was effective January 31, 2008. The Company’s Current Report on Form 8K also
      reported that, on January 17, 2008, Martin Gray, President of ProGames Network,
      Inc., an internet gaming subsidiary of the Company, resigned to pursue other
      interests. Jack W. Beech, Jr., now Chief Technology Officer of ProGames, and
      formerly President of our first ISP Subsidiary, DFW Internet Services, Inc.,
      will assume his duties as president of ProGames.




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          53
          -


**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, 20072.9
            Asset
                Purchase Agreement by and between Davel Communications, Inc. and
                Sterling
                Payphones, LLC effective as of August 30, 2007
            
            Incorporated
                by reference to Exhibit 10.01 to the Registrant’s Current Report on Form
                8-K filed on September 7, 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, 2003




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3.4
            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, 20014.1
            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




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          -




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, 200510.12
            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
            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, 200610.20
            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, 200610.21
            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, 200610.22
            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, 2006




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          -




10.23
            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, 200610.24
            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, 200610.25
            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, 200610.26
            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, 200610.27
            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, 200610.28
            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, 200610.29
            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, 200610.30
            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, 200610.31
            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, 200710.32
            Amendment
                No. 2 to Convertible Debentureissued
                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, 200710.33
            Amendment
                No. 2 to Convertible Debenturesissued
                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, 200710.34
            Amendment
                No. 3 to Convertible Debenturesissued
                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, 200710.35
            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, 2007




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          -




10.36
            Amendment
                No. 4 to Convertible Debenturesissued
                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, 200710.37
            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, 200710.38
            Amendment
                No. 5 to Convertible Debenturesissued
                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, 200710.39
            Amendment
                No. 3 to Convertible Debentureissued
                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, 200710.40
            Addendum
                to Second Amended and Restated Executive Employment Agreement for
                Jay O.
                Wright, dated August 27, 2007
            
            Incorporated
                by reference to Exhibit 10.01 to the Registrant’s Current Report on Form
                8-K filed on August 29, 200710.41
            Asset
                Purchase Agreement by and between Davel Communications, Inc. and
                Sterling
                Payphones, L.L.C. date September 7, 2007
            
            Incorporated
                by reference to Exhibit 10.01 to the Registrant’s Current Report on Form
                8-K filed on September 10, 200710.42
            Amendment
                to Promissory Note dated January 3, 2008 by and between Mobilepro
                Corp.
                and United System Access, Inc.
            
            Incorporated
                by reference to Exhibit 10.01 to the Registrant’s Current Report on Form
                8-K filed on January 8, 200810.43
            Amendment
                No. 4 to Convertible Debenture issued to YA Global, dated January
                16, 2008
                (the $15,149,650 debenture)
            
            Incorporated
                by reference to Exhibit 10.01 to the Registrant’s Current Report on Form
                8-K filed on January 18, 200810.44
            Amendment
                No. 6 to Convertible Debenture issued to YA Global, dated January
                16, 2008
                (the $7,000,000 debenture)
            
            Incorporated
                by reference to Exhibit 10.02 to the Registrant’s Current Report on Form
                8-K filed on January 18, 200821.1
            Subsidiaries
                of Registrant
            
            Provided
                herewith31.1
            Certification
                by Jay O. Wright, Chief Executive Officer, pursuant to Rule
                13a-14(a)
            
            Provided
                herewith31.2
            Certification
                by Donald L. Paliwoda, Principal Financial Officer, pursuant to Rule
                13a-14(a)
            
            Provided
                herewith32.1
            Certification
                by Jay O. Wright and Donald L. Paliwoda, 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.


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          -





**
      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.




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          59
          -





**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:February
                  11, 2008
              By:
              /s/
                Jay O. WrightJay
                  O. Wright, Chief Executive OfficerDate:February
                  11, 2008
              By:
              /s/
                Donald L. PaliwodaDonald
                  L. Paliwoda, Chief Accounting Officer




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