** **

**United States**

**Securities and Exchange Commission**

**Washington,D.C.  20549**

** **

**Form 10-Q**

** **

**ý****  QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15 (d)**

**OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**For the Quarterly PeriodEnded March 31, 2006**

** **

**o****  TRANSITION REPORT PURSUANT TOSECTION 13 OR 15 (d)**

**OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**CommissionFile Number 0-27024**

** **

**METRO ONE TELECOMMUNICATIONS, INC.**

(Exact name ofregistrant as specified in its charter)

 
| **OREGON**                                                       | ** ** | **93-0995165**                        |
|------------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |       | (I.R.S. Employer  Identification No.) |

 

###### **11200 MurrayScholls Place, Beaverton, Oregon  97007**

(Address ofprincipal executive offices) (zip code)

** **

**(503)643-9500**

(Registrant’stelephone number, including area code)

** **

**Indicate by check mark whetherthe registrant has (1) filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor 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  ****ý   No  ****o**

** **

**Indicate by check mark whetherthe registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer.  See definition of “accelerated filer and large acceleratedfiler” in Rule 12b-2 of the Exchange Act. (Check one):**

** **
| **Large accelerated filer ****o** | ** ** | **Accelerated filer ****o** | ** ** | **Non-accelerated filer ****ý** |
|----------------------------------------|------------|----------------------------------|------------|-------------------------------------------|

 

**Indicate bycheck mark whether the registrant is a shell company (as defined in Rule 12b-2of the Act).**** Yes  ****o****   No  ****ý**

** **

**Number of shares of common stockoutstanding as of May 12, 2006: 24,933,490 shares, no par value per share.**

 

 

----

 

**METRO ONETELECOMMUNICATIONS, INC.**

** **

**INDEX TO FORM 10 - Q**

** **
| Part I   | Financial Information                                                                               |   |
|----------|-----------------------------------------------------------------------------------------------------|--------|
|     |                                                                                                |   |
| Item 1.  | Financial Statements  (Unaudited)                                                                   |   |
|     |                                                                                                |   |
|     | Condensed Consolidated Statements of  Operations for the three months ended March 31, 2006 and 2005 |   |
|     |                                                                                                |   |
|     | Condensed Consolidated Balance  Sheets as of March 31, 2006 and December 31, 2005                   |   |
|     |                                                                                                |   |
|     | Condensed Consolidated Statements of  Cash Flows for the three months ended March 31, 2006 and 2005 |   |
|     |                                                                                                |   |
|     | Notes to Condensed Consolidated  Financial Statements                                               |   |
|     |                                                                                                |   |
| Item  2. | Management’s Discussion and Analysis  of Financial Condition and Results of Operations         |   |
|     |                                                                                                |   |
| Item  3. | Quantitative and Qualitative  Disclosures About Market Risk                                         |   |
|     |                                                                                                |   |
| Item  4. | Controls and Procedures                                                                             |   |
|     |                                                                                                |   |
| Part  II | Other  Information                                                                                  |   |
|     |                                                                                                |   |
| Item  6. | Exhibits                                                                                            |   |
|     |                                                                                                |   |
|     | Signatures                                                                                          |   |

 

----

 

**Metro One Telecommunications, Inc.**

**Condensed Consolidated Statementsof Operations (Unaudited)**

 
| ** **                                                         | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| **(In thousands, except per share data)** | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
|                                                               |       |                                             |       |   |   |
| Revenues                                                           |       | $                                                | 15,229     |   | $ | 18,379 |   |
|                                                               |       |                                             |       |   |   |
| Costs and expenses:                                                |       |                                             |       |   |   |
| Direct operating                                                   |       | 7,765                                            |       | 17,220 |   |
| Selling, general  and administrative                               |       | 8,342                                            |       | 14,829 |   |
| Restructuring  charges                                             |       | 5,016                                            |       | — |   |
|                                                               |       | 21,123                                           |       | 32,049 |   |
|                                                               |       |                                             |       |   |   |
| Loss from operations                                               |       | (5,894                                           | )          | (13,670 | ) |
|                                                               |       |                                             |       |   |   |
| Other income, net                                                  |       | 187                                              |       | 295 |   |
|                                                               |       |                                             |       |   |   |
| Loss before income taxes                                           |       | (5,707                                           | )          | (13,375 | ) |
| Income tax benefit                                                 |       | —                                           |       | (31 | ) |
|                                                               |       |                                             |       |   |   |
| Net loss                                                           |       | $                                                | (5,707     | ) | $ | (13,344 | ) |
|                                                               |       |                                             |       |   |   |
|                                                               |       |                                             |       |   |   |
| Net loss per common share:                                         |       |                                             |       |   |   |
| Basic                                                              |       | $                                                | (0.23      | ) | $ | (0.53 | ) |
| Diluted                                                            |       | $                                                | (0.23      | ) | $ | (0.53 | ) |
|                                                               |       |                                             |       |   |   |
| Weighted average shares outstanding:                               |       |                                             |       |   |   |
| Basic                                                              |       | 24,937                                           |       | 24,984 |   |
| Diluted                                                            |       | 24,937                                           |       | 24,984 |   |

 

The accompanying notesare an integral part of these condensed consolidated financial statements.

 

1

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**Metro One Telecommunications, Inc.**

**Condensed Consolidated BalanceSheets (Unaudited)**

 
| ** **                                                                                                                                                    | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| **(In thousands)**                                                                                                                                       | ** ** | **2006**           | ** ** | **2005**              | ** ** |
| ** **                                                                                                                                                    | ** ** | ** **         | ** ** | ** **            | ** ** |
| **Assets**                                                                                                                                                    | ** ** | ** **         | ** ** | ** **            | ** ** |
|                                                                                                                                                          |       |               |       |                  |       |
| Current assets:                                                                                                                                               |       |               |       |                  |       |
| Cash and cash  equivalents                                                                                                                                    |       | $                  | 19,065     |                  | $          | 17,769 |   |
| Restricted cash                                                                                                                                               |       | 6,860              |       | 6,860                 |       |
| Accounts  receivable, net                                                                                                                                     |       | 5,348              |       | 11,982                |       |
| Prepaid costs  and other current assets                                                                                                                       |       | 1,499              |       | 1,759                 |       |
|                                                                                                                                                          |       |               |       |                  |       |
| Total current  assets                                                                                                                                         |       | 32,772             |       | 38,370                |       |
|                                                                                                                                                          |       |               |       |                  |       |
| Furniture, fixtures and equipment, net                                                                                                                        |       | 6,650              |       | 7,963                 |       |
| Intangible assets                                                                                                                                             |       | 5,194              |       | 5,382                 |       |
| Other assets                                                                                                                                                  |       | 130                |       | 302                   |       |
|                                                                                                                                                          |       |               |       |                  |       |
| Total assets                                                                                                                                                  |       | $                  | 44,746     |                  | $          | 52,017 |   |
|                                                                                                                                                          |       |               |       |                  |       |
| **Liabilities and Shareholders’ Equity**                                                                                                                 |       |               |       |                  |       |
|                                                                                                                                                          |       |               |       |                  |       |
| Current liabilities:                                                                                                                                          |       |               |       |                  |       |
| Accounts payable                                                                                                                                              |       | $                  | 476        |                  | $          | 534 |   |
| Accrued  liabilities                                                                                                                                          |       | 4,142              |       | 2,637                 |       |
| Accrued payroll  and related costs                                                                                                                            |       | 5,703              |       | 8,553                 |       |
|                                                                                                                                                          |       |               |       |                  |       |
| Total current  liabilities                                                                                                                                    |       | 10,321             |       | 11,724                |       |
|                                                                                                                                                          |       |               |       |                  |       |
| Other long-term liabilities                                                                                                                                   |       | 465                |       | 626                   |       |
|                                                                                                                                                          |       |               |       |                  |       |
| Total liabilities                                                                                                                                             |       | 10,786             |       | 12,350                |       |
|                                                                                                                                                          |       |               |       |                  |       |
| Commitments and contingencies                                                                                                                                 |       |               |       |                  |       |
|                                                                                                                                                          |       |               |       |                  |       |
| Shareholders’ equity:                                                                                                                                    |       |               |       |                  |       |
| Preferred stock,  no par value; 10,000 shares authorized, no shares issued or outstanding                                                                     |       | —             |       | —                |       |
| Common stock, no par  value; 50,000 shares authorized, 24,933 shares and 24,948 issued and  outstanding at March 31, 2006 and December 31, 2005, respectively |       | 119,937            |       | 119,937               |       |
| Accumulated deficit                                                                                                                                           |       | (85,977            | )          | (80,270               | )          |
|                                                                                                                                                          |       |               |       |                  |       |
| Total shareholders’ equity                                                                                                                               |       | 33,960             |       | 39,667                |       |
|                                                                                                                                                          |       |               |       |                  |       |
| Total liabilities and shareholders’ equity                                                                                                               |       | $                  | 44,746     |                  | $          | 52,017 |   |

 

The accompanying notesare an integral part of these condensed consolidated financial statements.

 

2

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**Metro One Telecommunications, Inc.**

**Condensed Consolidated Statementsof Cash Flows (Unaudited)**

 
| ** **                                                                                 | ** ** | **Three Months Ended March 31,** | ** ** |
|--------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| **(In thousands)**                                                                    | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
|                                                                                       |       |                                                 |       |   |   |
| Cash flows from operating activities:                                                      |       |                                                 |       |   |   |
| Net loss                                                                                   |       | $                                                    | (5,707     | ) | $ | (13,344 | ) |
| Adjustments to  reconcile net loss to net cash provided by (used in) operating activities: |       |                                                 |       |   |   |
| Depreciation and  amortization                                                             |       | 1,235                                                |       | 1,612 |   |
| Loss on disposal  of fixed assets                                                          |       | 185                                                  |       | 1 |   |
| Deferred rent                                                                              |       | (161                                                 | )          | (7 | ) |
| Changes in  certain assets and liabilities:                                                |       |                                                 |       |   |   |
| Accounts  receivable                                                                       |       | 6,634                                                |       | 5,176 |   |
| Prepaid costs  and other assets                                                            |       | 474                                                  |       | (2,216 | ) |
| Accounts payable  and other liabilities                                                    |       | (1,403                                               | )          | 1,153 |   |
|                                                                                       |       |                                                 |       |   |   |
| Net cash  provided by (used in) operating activities                                       |       | 1,257                                                |       | (7,625 | ) |
|                                                                                       |       |                                                 |       |   |   |
| Cash flows from investing activities:                                                      |       |                                                 |       |   |   |
| Purchases of  short-term securities                                                        |       | —                                               |       | (10,500 | ) |
| Sales of  short-term securities                                                            |       | —                                               |       | 10,550 |   |
| Capital  expenditures                                                                      |       | (138                                                 | )          | (993 | ) |
| Proceeds from  sale of assets                                                              |       | 177                                                  |       | — |   |
|                                                                                       |       |                                                 |       |   |   |
| Net cash  provided by (used in) investing activities                                       |       | 39                                                   |       | (943 | ) |
|                                                                                       |       |                                                 |       |   |   |
| Net increase (decrease) in cash and cash equivalents                                       |       | 1,296                                                |       | (8,568 | ) |
|                                                                                       |       |                                                 |       |   |   |
| Cash and cash equivalents, beginning of period                                             |       | 17,769                                               |       | 24,093 |   |
|                                                                                       |       |                                                 |       |   |   |
| Cash and cash equivalents, end of period                                                   |       | $                                                    | 19,065     |   | $ | 15,525 |   |
|                                                                                       |       |                                                 |       |   |   |
| Supplemental disclosure of cash flow information:                                          |       |                                                 |       |   |   |
| Cash paid for  income taxes, net                                                           |       | $                                                    | 42         |   | $ | 43 |   |

 

The accompanyingnotes are an integral part of these condensed consolidated financialstatements.

 

3

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**Metro One Telecommunications, Inc.**

**Notes to Condensed ConsolidatedFinancial Statements (Unaudited)**

 

**1.****             ****Summary of Significant AccountingPolicies**

 

**Basis of Presentation**

 

The accompanyingunaudited interim condensed consolidated financial statements have beenprepared by Metro One Telecommunications, Inc. in conformity with accountingprinciples generally accepted in the United States of America for interimfinancial information.  Accordingly,certain financial information and footnotes have been omitted orcondensed.  In the opinion of management,the condensed financial statements include all adjustments necessary for a fairpresentation of the results for the interim periods.  These condensed consolidated financialstatements and notes thereto should be read in conjunction with our auditedfinancial statements included in our Annual Report on Form 10-K for the yearended December 31, 2005.  The results ofoperations for the interim periods shown in this report are not necessarilyindicative of results for future interim periods or the entire fiscal year.

 

The condensedconsolidated financial statements include the accounts of Metro OneTelecommunications, Inc. and its wholly-owned subsidiaries.  All significant intercompany balances andtransactions have been eliminated in consolidation.

 

**Advertising**

 

Advertising expense in priorperiods has been primarily related to marketing and promotion of our Infoneservice, which was discontinued in the fourth quarter of 2005.  Costs of advertising are expensed as incurredexcept for commercial advertising production costs, which are expensed at thetime the related commercials are first run. Advertising expense was not significant in the first quarter of 2006 andwas approximately $1.1 million in the first quarter of 2005.  Advertising expenses are included in selling,general and administrative expenses in the consolidated statements ofoperations.

 

**Cash, Cash Equivalents, andRestricted Cash**

 

Cash and cash equivalentsinclude cash deposits in banks and highly liquid investments with maturitydates of three months or less at the date of acquisition.  Restricted cash consists of cash restricted tosecure a letter of credit related to our workers’ compensation program and isinvested in a bank certificate of deposit.

 

**Stock-Based Compensation**

 

In December 2004,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounts Standards No. 123 (Revised 2004), “Share-Based Payment” (“SFASNo. 123R”); an amendment of SFAS No. 123, “Accounting for Stock-BasedCompensation” and SFAS No. 95, “Statement of Cash Flows,” which requirescompanies to recognize in their statements of operations the grant-date fairvalue of stock options and other equity-based compensation issued toemployees.  We adopted the fair valuerecognition provisions of SFAS No. 123R effective January 1,2006.  We have elected themodified-prospective transition method as permitted by SFAS No. 123R andaccordingly, prior periods have not been restated to reflect the effect of SFASNo. 123R.  The effects of theadoption of this statement were not material to our consolidated financialstatements for the first quarter of 2006.

 

4

----

 

The following tableillustrates the effect on net income and earnings per share for the threemonths ended March 31, 2005 if we had applied the fair value recognitionprovisions of SFAS No. 123 to our stock-based compensation:

 
| **(In thousands, except per share amounts)** | ** ** | **2005** | ** ** |
|-----------------------------------------------------------------------|------------|----------|------------|
|                                                                  |       |     |       |
| Net loss, as reported                                                 |       | $        | (13,344    | ) |
| Stock-based compensation expense                                      |       | (1,970   | )          |
| Net loss, pro forma                                                   |       | $        | (15,314    | ) |
|                                                                  |       |     |       |
| Basic net loss per share, as reported                                 |       | $        | (.53       | ) |
| Basic net loss per share, pro forma                                   |       | $        | (.61       | ) |
|                                                                  |       |     |       |
| Diluted net loss per share, as reported                               |       | $        | (.53       | ) |
| Diluted net loss per share, pro forma                                 |       | $        | (.61       | ) |

 

In March 2005, our Boardof Directors accelerated vesting on all of the then outstanding stock options,of which all had fair market values that were less than the exercise prices atthat time.  In determining to acceleratethe vesting of these options, the Board considered the effect on our reported stockoption expense in future periods, the comparability of our statements ofoperations in prior and subsequent periods, and the potential benefit to theCompany and our shareholders in retaining the services of affected officers andemployees.  The pro forma expenseincluded in the stock-based compensation expense noted above associated withthe accelerated vesting was approximately $1,592,000.

 

**2.****             ****Restructuring Charges and ExitActivities**

 

Primarily during the second and third quarters of 2005, as part of ourongoing efforts to cut costs and align expenses with reduced revenues, weclosed and consolidated the operations of 12 of our call centers.  Most significant costs associated withclosing those call centers were accrued and paid in 2005.  At December 31, 2005, we had approximately$498,000 of accrued restructuring costs, primarily related to remaining leaseobligations of those closed facilities.

 

In the first quarter of2006, we undertook additional restructuring activities, due primarily to thedeparture of call volume from Nextel that resulted in the closure of anadditional 13 call centers with call volumes transferred into the remaining sixcall centers.  These closures and otherrestructuring activities resulted in the reduction of approximately 1,350 callcenter employees, the payment of approximately $1.8 million of terminationbenefits, and payment of approximately $700,000 of other costs, primarily legaland advisory services and dismantling costs, related to our restructuringefforts.  We have significant remainingcosts associated with ongoing lease obligations of the closed callcenters.  We expect to pay out the leaseterms, sublease the properties, buy out or otherwise dispose of these leasesduring the remainder of 2006.  In thefirst quarter we have recorded approximately $2.5 million for our estimate ofthe costs associated with those activities. Additionally, we have plans to reduce headcount at our corporateheadquarters in the second and third quarters of 2006.  We expect to incur approximately $280,000 ofseverance costs related to these reductions during those periods.

 

5

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Costsincurred to close the 13 call centers and costs related to other restructuringactivities during the quarter ended March 31, 2006 are shown in the followingtable.  In addition to costs incurred inthe first quarter, we expect to incur approximately $200,000 of additionalcosts, primarily related to dismantling of the closed call centers, during thesecond quarter of 2006.

 
| ** **                    | ** ** | **Three months ended** | ** ** |
|-------------------------------|------------|------------------------|------------|
| ** **                    | ** ** | **March 31, 2006**     | ** ** |
| Major cost type               |       |                   |       |
|                          |       |                   |       |
| One-time termination benefits |       | $                      | 1,764      |   |
| Lease termination costs       |       | 2,514                  |       |
| Other                         |       | 738                    |       |
|                          |       |                   |       |
|                          |       | $                      | 5,016      |   |

 

The following summarizesthe provisions, payments, adjustments and liability for costs associated with ourcost reduction efforts for the period shown (in thousands):

 
| ** **                 | ** ** | **One-time  termination  benefits** | ** ** | **Lease  termination costs** | ** ** | **Other** | ** ** | **Total** | ** ** |
|----------------------------|------------|-------------------------------------|------------|------------------------------|------------|-----------|------------|-----------|------------|
|                       |       |                                |       |                         |       |      |       |      |       |
| Balance at January 1, 2006 |       | $                                   | —     |                         | $          | 355       |       | $         | 143        |   | $ | 498 |   |
| Provisions                 |       | 1,764                               |       | 2,514                        |       | 738       |       | 5,016     |       |
| Payments                   |       | (1,764                              | )          | (566                         | )          | (764      | )          | (3,094    | )          |
| Adjustments                |       | —                              |       | —                       |       | —    |       | —    |       |
| Balance at March 31, 2006  |       | $                                   | —     |                         | $          | 2,303     |       | $         | 117        |   | $ | 2,420 |   |

 

We may undertakeadditional restructuring and/or consolidation efforts in the future that wouldcause us to incur additional restructuring charges.

 

**3.****              Net Loss Per Share**

 

Basic net loss per shareis based on the weighted average number of common shares outstanding.  Diluted net loss per share reflects thepotential dilution that could occur if outstanding options to purchase commonstock were exercised or converted into common stock.  Basic and diluted weighted average sharesoutstanding were the same for the three month periods ended March 31, 2006 and2005 because inclusion of the potential dilutive effect of common stock optionsin the calculation would be anti-dilutive. There were no adjustments to net loss for the calculation of both basicand diluted net loss per share for either period.

 

Options to purchase 2,583,000 and 3,647,000 shares of common stock wereoutstanding at March 31, 2006 and 2005, respectively, but were not included inthe computation of diluted net loss per share for the three months ended March31, 2006 and 2005, respectively, because their effect would be anti-dilutive.

 

**4.****              Commitments andContingencies**

 

We are party to various legal actions and administrative proceedingsarising in the ordinary course of business. We believe the disposition of thesematters will not have a material adverse effect on our financial position,results of operations or cash flows.

 

6

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From time to time, in the normal course of our business, we issuestandby letters of credit and bank guarantees. At March 31, 2006, we had one letter of credit outstanding in the amountof $6,860,000 related to our workers’ compensation program.  The letter of credit is secured by acertificate of deposit for the same amount that is recorded as restrictedcash.  This commitment was renewed onApril 1, 2006 in the amount of $6,160,000.

 

**5.****              Significant Events**

 

**Termination of contracts**

 

In February 2005, weentered into a Master Services Agreement for Directory Assistance Services (the“Services Agreement”) with Nextel Operations, Inc., acting on behalf of certainaffiliates (collectively “Nextel”) of Nextel Communications, Inc.  The Services Agreement superseded our previousservices agreement dated in June 1999. Under the Services Agreement, we agreedto provide directory assistance services to Nextel’s customers on anon-exclusive basis, and Nextel could transition call volume away from us onshort notice and/or terminate services entirely.

 

In October 2005, wereceived notification from Nextel that it would be terminating the ServicesAgreement effective January 9, 2006.  InFebruary 2006, we entered into a Settlement Agreement and DisentanglementTransition Plan (the “Plan”) with Nextel that resolved certain disputed mattersin connection with the termination of the Services Agreement.  The Plan called for Metro One to continue toprovide services to Nextel callers, as needed, through March 31, 2006, for theresolution of any disputes with respect to the termination by Nextel, and forthe payment by Nextel to Metro One of up to $5.75 million in three installmentsthrough the end of March.  Those paymentsare in addition to $2.5 million previously paid by Nextel in December 2005 inconnection with the transition and in addition to the contractual payments byNextel for normal service provided by Metro One to Nextel callers through thetransition period.  Calls from Nextelwere substantially transitioned away from us by March 31, 2006 and, except forcontractual payments not yet due for normal service, we have received allamounts due from Nextel as of the date of this filing.  Including the $5.75 million received in thefirst quarter of 2006 as part of the settlement payments, Nextel representedapproximately 74% and 72% of our revenues for the first quarter of 2006 and2005, respectively.

 

Termination of the ServicesAgreement has had, and will continue to have, a significant adverse impact onour results of operations and cash flows and raises doubt as to whether we cancontinue to operate as a going concern.  Wehave experienced net losses in each of the quarterly and annual periods sincethe first quarter of 2003.  We expect tomeet our cash requirements in 2006 using our existing cash and cashequivalents.  Our management hasdeveloped plans to significantly reduce the direct cost of delivering ourservices, reduce our general and administrative overhead, aggressively pursuenew and additional sources of revenues to support our reduced cost structure,and develop and grow our data services business.  There can be no assurance that management’splans will be successful.  In such event,we may attempt to establish borrowing or arrangements or otherwise raise funds inorder to maintain adequate liquidity, although we cannot provide assurance thatfinancing or other funding will be available in amounts or on terms acceptableto us.  If we are unable to execute ouroperations according to our plan or obtain additional financing, we may beforced to cease operations.

 

**Nasdaq listing issues**

 

Our common stock listingwas transferred from the Nasdaq National Market to the Nasdaq Capital Market(formerly the Nasdaq SmallCap Market) on February 22, 2006.  We elected to seek a transfer to the NasdaqCapital Market because we had been unable to regain compliance with the $1.00minimum bid price requirement for continued listing on the Nasdaq NationalMarket.  By transferring to the NasdaqCapital Market, we were afforded an extended grace period and now have untilJuly 17, 2006 in which to satisfy the $1.00 minimum bid price requirement.  We are seeking shareholder approval of areverse stock split to increase the per share price of our common stock at ourannual meeting of shareholders to be held on June 21, 2006.  If we are unable to regain compliance by July17, 2006, our common stock could be delisted from the Nasdaq Capital Market.

 

On October 21, 2005,we received a Nasdaq Staff Deficiency Letter informing us that we no longercomplied with Nasdaq’s independent director and audit committee requirementsfor continued listing.  In April 2006,three new independent members joined our board of directors, two of whom werenamed to the audit committee.  We havereceived notification from Nasdaq that, based on the addition of the newindependent members to the board and audit committee, we are now in complianceand that matter is closed.

 

7

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| **ITEM 2.** | ** ** | **MANAGEMENT’S DISCUSSION  AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|-------------|------------|-------------------------------------------------------------------------------------------------|

 

All statements and trendanalyses contained in this item and elsewhere in this report on Form 10-Qrelative to the future constitute “forward-looking statements” within themeaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements may, but donot necessarily, also include words such as “believes,” “expects,” “anticipates,”“plans,” “estimates,” “may,” “will,” “should,” “could,” “continue” or similarexpressions.  Forward-looking statementsare not guarantees.  They involve knownand unknown business and economic risks, uncertainties and other factors thatmay cause our actual results, performance or achievements to be materiallydifferent from any future results, performance or achievements expressed orimplied by such forward-looking statements. These risks, uncertainties and other factors include the expiration orpricing of customer contracts, the successful execution of our cost reductionefforts and current business strategy, and our ability to generate cash fromoperations, and other risks, including those discussed in our 2005 AnnualReport on Form 10-K filed with the Securities and Exchange Commission (“the SEC”)and those described in our other filings with the SEC, press releases and othercommunications.  Any forward-lookingstatement in this report reflects our expectations at the time of this reportonly.  We undertake no obligation topublicly release any revisions to these forward-looking statements to reflectevents or circumstances after the date hereof or to reflect the occurrence ofunanticipated events.

 

#### **Overview**

#### ** **

We are a provider of Enhanced Directory Assistance® and otherinformation services through operators and electronically.  We contract primarily with wireless carriers,Voice over Internet Protocol (“VoIP”) providers, cable companies, CompetitiveLocal Exchange Carriers (“CLEC”) and prepaid carriers to provide our servicesto their subscribers.

 

In addition to voice-based services, we also provide Enhanced DirectoryAssistance services in electronic format.  These services are provided to customers whoelectronically issue directory assistance queries and use the returned informationto complete and correct their own data records.  We currently provide electronic directoryassistance services in a number of delivery formats to meet customer needsincluding automated file processing and real-time individual look ups.  We contract with a broad range of companiesthat require electronic directory assistance, including companies in theservice, marketing, and financial sectors.  Our Data Services business represents anemerging business based on infrastructure originally developed to support ourvoice-based call center business.

 

We offer our voice-based services to a carrier’ssubscribers under a brand name selected by the carrier.  The carrier establishes its own fee structurewith its subscribers.  Subscriberstypically pay the carrier’s fees ranging from $1.25 to $1.50 plus airtimecharges for our services.  We chargecarriers directly and, at present, bear no subscriber collection risk.  We charge our customers on a per callbasis.  Competitive pressures have causedour average revenue per call to decrease in the recent past.

 

We currently provide our services to several carriercustomers.  The terms of these contractsare generally similar, with variations in the geographic market to be served,the services and features we are to provide the carriers’ subscribers and theterm.  None of these contracts precludesus from providing services to others.

 

We have expanded our customer base to include dataservices, specialized operator services, such as with Motorola’s VIAMOTOapplication, and directory assistance services to corporations with offices inthe United States and Canada.

 

Competition in thetelecommunications industry, and in the directory assistance market in which weparticipate, has been intense.  Carriersare looking to lower their costs of providing directory assistance and otherservices through, among other ways, outsourcing to low cost domestic oroverseas operators and utilizing automation to reduce costs.  In response to these and other issues, in May2003, we launched Infone, a service that provided enhanced directory andpersonal assistant services directly to consumers.  The initial launch of Infone was accompaniedby a significant nationwide marketing and promotion campaign.  Revenues from Infone were not significant inrelation to total revenues since its inception. Because of our inability to attract a significant number of subscribersto this service, it was discontinued in December 2005.

 

In the recent past,several of our largest customers have transferred their calls away from us fora variety of reasons, primarily in order to obtain lower prices and/or as aresult of consolidation in the wireless industry.  As a result of the

 

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loss of these customersand the associated revenues and operating losses, since the second quarter of2005 we have taken significant actions to restructure our operations to lowerour cost structure.  In addition, we haverefocused our efforts on the wholesale directory assistance and data servicesmarkets to pursue additional revenue sources in the voice-based and electronicdelivery-based directory assistance and information services markets.

 

**Significant Events**

 

In February 2005, weentered into a Master Services Agreement for Directory Assistance Services (the“Services Agreement”) with Nextel Operations, Inc., acting on behalf of certainaffiliates (collectively “Nextel”) of Nextel Communications, Inc.  The Services Agreement superseded our previousservices agreement dated in June 1999.  Underthe Services Agreement, we agreed to provide directory assistance services toNextel’s customers on a non-exclusive basis, and Nextel could transition callvolume away from us on short notice and/or terminate services entirely.

 

In October 2005, wereceived notification from Nextel that it would be terminating the ServicesAgreement effective January 9, 2006.  InFebruary 2006, we entered into a Settlement Agreement and DisentanglementTransition Plan (the “Plan”) with Nextel that resolved certain disputed mattersin connection with the termination of the Services Agreement.  The Plan called for Metro One to continue toprovide services to Nextel callers, as needed, through March 31, 2006, for theresolution of any disputes with respect to the termination by Nextel, and forthe payment by Nextel to Metro One of up to $5.75 million in three installmentsthrough the end of March.  Those paymentsare in addition to $2.5 million previously paid by Nextel in December 2005 inconnection with the transition and in addition to the contractual payments byNextel for normal service provided by Metro One to Nextel callers through thetransition period.  Calls from Nextelwere substantially transitioned away from us by March 31, 2006 and, except forcontractual payments not yet due for normal service, we have received allamounts due from Nextel as of the date of this filing.  Including the $5.75 million received in thefirst quarter of 2006 as part of the settlement payments, Nextel representedapproximately 74% and 72% of our revenues for the first quarter of 2006 and2005, respectively.

 

Termination of the ServicesAgreement has had, and will continue to have, a significant adverse impact onour results of operations and cash flows and raises doubt as to whether we cancontinue to operate as a going concern. We have experienced net losses in each of the quarterly and annualperiods since the first quarter of 2003. We expect to meet our cash requirements in 2006 using our existing cashand cash equivalents.  Our management hasdeveloped plans to significantly reduce the direct cost of delivering ourservices, reduce our general and administrative overhead, aggressively pursuenew and additional sources of revenues to support our reduced cost structure,and develop and grow our data services business.  There can be no assurance that management’splans will be successful.  In such event,we may attempt to establish borrowing or arrangements or otherwise raise fundsin order to maintain adequate liquidity, although we cannot provide assurancethat financing or other funding will be available in amounts or on termsacceptable to us.  If we are unable toexecute our operations according to our plan or obtain additional financing, wemay be forced to cease operations.

 

As a result of thetermination of the Services Agreement, we have consolidated and reduced ouroperations significantly and may continue to close call centers and reduce thenumber of employees both in call centers and in corporate and administrativestaff now that the transition of calls from Nextel has been completed.

 

Primarily during thesecond and third quarters of 2005, as part of our ongoing efforts to cut costsand align expenses with reduced revenues, we closed and consolidated theoperations of 12 of our call centers.  Mostsignificant costs associated with closing those call centers were accrued andpaid in 2005.  At December 31, 2005, wehad approximately $498,000 of accrued restructuring costs, primarily related toremaining lease obligations of those closed facilities.

 

In the first quarter of2006, we undertook additional restructuring activities, due primarily to thedeparture of call volume from Nextel that resulted in the closure of anadditional 13 call centers with call volumes transferred into the remaining sixcall centers.  These closures and otherrestructuring activities resulted in the reduction of approximately 1,350 callcenter employees, the payment of approximately $1.8 million of termination benefits,and payment of approximately $700,000 of other costs, primarily legal andadvisory services and dismantling costs, related to our restructuring efforts.  We have significant remaining costs associatedwith ongoing lease obligations of the closed call centers.  We expect to pay out the lease terms, subleasethe properties, buy out or otherwise dispose of these leases during theremainder of 2006.  In the first quarterwe have recorded approximately $2.5 million for our estimate of the costsassociated with those activities.  Additionally,we have plans to reduce headcount at our corporate headquarters in the secondand third quarters of 2006.  We expect toincur approximately $280,000 of

 

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severance costs relatedto these reductions during those periods.  In addition, we may undertake additionalrestructuring and/or consolidation efforts in the future that would cause us toincur additional restructuring charges.

 

Our common stock listing was transferred from the Nasdaq NationalMarket to the Nasdaq Capital Market (formerly the Nasdaq SmallCap Market) onFebruary 22, 2006.  We elected to seek atransfer to the Nasdaq Capital Market because we had been unable to regaincompliance with the $1.00 minimum bid price requirement for continued listingon the Nasdaq National Market.  Bytransferring to the Nasdaq Capital Market, we were afforded an extended graceperiod and now have until July 17, 2006 in which to satisfy the $1.00 minimumbid price requirement.  We are seekingshareholder approval of a reverse stock split to increase the per share priceof our common stock at our annual meeting of shareholders to be held on June21, 2006.  If we are unable to regaincompliance by July 17, 2006, our common stock could be delisted from the NasdaqCapital Market.

 

On October 21, 2005, we received a Nasdaq Staff Deficiency Letterinforming us that we no longer complied with Nasdaq’s independent director andaudit committee requirements for continued listing.  In April 2006, three new independent members joinedour board of directors, two of whom were named to the audit committee.  We have received notification from Nasdaqthat, based on the addition of the new independent members to the board andaudit committee, we are now in compliance and that matter is closed.

 

**Results of Operations**

 

This table shows selecteditems from our statements of operations expressed as a percentage of revenues:

 
| ** **                                | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| ** **                                | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Revenues                                  |       | 100.0                                            | %          | 100.0 | % |
| Direct operating costs                    |       | 51.0                                             |       | 93.7 |   |
| Selling, general and administrative costs |       | 54.8                                             |       | 80.7 |   |
| Restructuring charges                     |       | 32.9                                             |       | — |   |
| Loss from operations                      |       | (38.7                                            | )          | (74.4 | ) |
| Other income, net                         |       | 1.2                                              |       | 1.6 |   |
| Loss before income taxes                  |       | (37.5                                            | )          | (72.8 | ) |
| Income tax benefit                        |       | —                                           |       | (0.2 | ) |
| Net loss                                  |       | (37.5                                            | )%         | (72.6 | )% |

 

*Comparison of first quarter 2006to first quarter 2005*

* *

Total revenues decreased 17.1% to $15.2 million from $18.4 million.  Excluding the one-time settlement paymentsfrom Nextel of $5.75 million noted above, operating revenue decreased 48.4% to$9.5 million.  Call volume decreased toapproximately 28 million calls from approximately 57 million calls.  These decreases resulted primarily from lowercall volume from Nextel due to early termination of the Services Agreement.  Excluding the one-time settlement payments, ouraverage revenue per call was approximately $0.32 in the first quarter of both 2006and 2005.

 

Direct operating costsconsist of salaries, wages, benefits and taxes relating to call centerpersonnel and costs of listings data and content acquisition.  These costs decreased 54.9% to $7.8 millionfrom $17.2 million.  This decrease wasprimarily due to lower personnel and data costs associated with servicing lowercall volumes.  As a percentage ofrevenues, excluding the one-time settlement payments from revenue, directoperating costs decreased to 81.9% from 93.7%, due primarily to improved callhandling efficiencies in the call centers.

 

Selling, general andadministrative costs decreased 43.8% to $8.3 million from $14.8 million.  This decrease resulted primarily fromreductions in facilities-related costs of approximately $2.7 million, personneland associated costs of approximately $1.6 million, marketing and promotioncosts of approximately $1.1 million and reductions in other general andadministrative expenses of approximately $1.1 million resulting from ourongoing corporate-wide program to reduce costs. As a percentage of revenues, selling, general and administrative costsdecreased to 54.8% from 80.7% primarily due to lower corporate-wide operatingcosts.

 

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Depreciation andamortization expense, a component of selling, general and administrative costs,decreased 23.4% to $1.2 million from $1.6 million and decreased to 8.0% from8.8% of revenue.  The decrease indepreciation and amortization was due primarily to the overall reduction inacquisition of fixed assets in the last several years as operations have beenreduced.

 

Restructuring charges inthe quarter ended March 31, 2006 consisted primarily of one-time terminationbenefits paid to employees of approximately $1.8 million and lease terminationcosts of approximately $2.5 million, primarily related to the 13 call centersclosed during the first quarter of 2006. In addition, we incurred approximately $700,000 of other costs,primarily legal and advisory services, related to our restructuring effortsduring the quarter.  Restructuringcharges of approximately $2.4 million, primarily related to continuing leaseobligations on closed facilities, have been accrued but not paid at March 31,2006.

 

Other income was $187,000and $295,000 in the first quarter of 2006 and 2005, respectively, and consistedprimarily of interest income earned on cash and cash equivalents.

 

Because of our operatinglosses in the first quarter of 2006 and 2005, we recorded no federal income taxexpense.  We have a valuation allowanceagainst deferred tax assets associated with operating losses in this and prior quartersand other deferred tax assets because it is deemed more likely than not thatthese assets will not be realized. Accordingly, no federal income tax benefit has been recorded withrespect to these deferred tax assets.  Inthe first quarter of 2005, we recorded a state income tax benefit of $31,000 toadjust prior estimates of state income taxes payable to actual income taxespaid.

 

#### **Liquidity and Capital Resources**

#### ** **

Cash and cash equivalents and restricted cash arerecorded at cost which approximates their fair market value.  As of March 31, 2006, we hadapproximately $25.9 million in cash and cash equivalents and restricted cash(including $6.9 million of restricted cash) compared to approximately $24.6million (including $6.9 million of restricted cash) at December 31, 2005.  The net increase of $1.3 million resultedprimarily from receipt of the settlement payments from Nextel as discussedabove offset by net operating losses.  Wehave no outstanding debt.

 

Working capital was $22.5 million at March 31, 2006,compared to $26.6 million at December 31, 2005.  This change was primarily due to net operatinglosses in the quarter.

 

*Cash flow from operations.  *Net cash provided byoperations was $1.3 million in the first quarter of 2006 compared to net cash usedin operations of $7.6 million in the first quarter of 2005.  This difference of approximately $8.9 millionresulted primarily from net decreases in cash paid to or on behalf ofemployees, cash paid to suppliers, and cash paid for advertising.  These net decreases in cash outflows were partiallyoffset by cash paid for restructuring activities and a decrease in cashreceived from customers.  Cash paid to oron behalf of employees decreased by $7.6 million, cash paid to suppliersdecreased by $4.4 million, and cash paid for advertising decreased by $1.1million.  Cash paid for restructuring was$3.1 million and cash received from customers decreased by $1.7 million.

 

*Cash flow from investing activities.  *Cash provided by investingactivities was $39,000 in the first quarter of 2006, primarily resulting fromreceipt of proceeds from the sale of assets partially offset by cash used forcapital purchases.  Cash used ininvesting activities was $943,000 in the first quarter of 2005 resultingprimarily from capital expenditures for equipment purchased for maintenance ofour corporate-wide infrastructure, including expenditures intended to increaseefficiency in routing calls, and for equipment used in product developmentactivities.

 

*Cash flow from financing activities*. Cash flow from financing activities wasnot significant in the first quarter of 2006 or 2005.

 

*Future capital needs and resources.  *The primary uses of ourcapital in the near future are expected to be primarily for working capital.  We expect to adjust personnel, call centersand network capacities in order to address varying business circumstances,including changes in volume and pricing and other provisions of customercontracts.

 

Although cash on hand (including restricted cash) andshort-term investments at March 31, 2006 was approximately $25.9 million, ouroperations and future activities, including additional restructuring efforts,will likely reduce available cash.

 

We have experienced net losses in each of thequarterly and annual periods since the first quarter of 2003.  Our independent registered public accountingfirm included a going concern explanatory paragraph in its report our

 

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consolidated financial statements as of and for theyear ended December 31, 2005.  We, however,expect to meet our cash requirements in 2006 using our existing cash and cashequivalents.  Our management hasdeveloped plans to significantly reduce the direct cost of delivering ourservices, reduce our general and administrative overhead, aggressively pursuenew and additional sources of revenues to support our reduced cost structure,and develop and grow our data services business.  There can be no assurance that management’splans will be successful.  In such event,we may attempt to establish borrowing arrangements or otherwise raise funds inorder to maintain adequate liquidity, although we cannot provide assurance thatfinancing or other funding will be available in amounts or on terms acceptableto us.  If we are unable to execute ouroperations according to the plan or obtain additional financing, we may beforced to cease operations.

 

#### **Critical Accounting Policies**

#### ** **

We prepare our financial statements in conformity withaccounting principles generally accepted in the United States of America.  As such, we are required to make certainestimates, judgments and assumptions that we believe are reasonable based uponthe information available.  Theseestimates and assumptions affect the reported amounts of assets and liabilitiesat the date of the financial statements and the reported amounts of revenuesand expenses during the periods presented.  Management believes that of our significantaccounting policies (see Note 1 to the financial statements), those governingaccounts receivable, the lives and recoverability of the carrying amount ofequipment and other long-lived assets, such as existing intangibles andgoodwill, estimates involving the levels of our contingent liabilities forworkers’ compensation and medical self-insurance and estimates of current anddeferred taxes owed may involve a higher degree of judgment, estimation anduncertainty.

 

*Accountsreceivable.*Our wholesale customer base has primarilyconsisted of large wireless telephone carriers in the United States.  As such, we have had minimal risk ofuncollectibility, at any point in time, related to outstanding accountsreceivable with these customers.  We havenot experienced significant collection issues or write-offs related to thesecustomers.  Since our accounts receivableare concentrated in relatively few of these wholesale customers, a significantchange in the liquidity or financial position of any one of them couldadversely impact collection of our accounts receivable and therefore have amaterial adverse effect on our financial position and future operating results. In addition, our emerging data servicesbusiness is expected to generate receivables from customers that may not be asfinancially stable as our large carrier customers which may expose us togreater risk of uncollectible receivables than we have experienced in the past.

 

*Long-livedassets, goodwill and intangibles.  *Weevaluate the remaining life and recoverability of equipment and other assets,including patents and trademarks and internally developed software, wheneverevents or changes in circumstances indicate that the carrying amount of theassets may not be recoverable.  At suchtime, we estimate the future cash flows expected from use of such assets andtheir eventual disposition and, if lower than the carrying amounts, adjust thecarrying amount of the assets to their estimated fair value.  Because of our changing business conditions,including lower wholesale prices and dependence on a relatively small number ofcustomers for a significant portion of our revenues, our estimates of futurecash flows to be generated from our operations could change materially,resulting in the need for us to record additional impairment charges.  In addition, as a result of our changingbusiness conditions, we expect to adjust personnel, call centers and networkcapacities.  If any of these activitiesresult in certain of our assets no longer being used in operations, we may needto record an additional impairment charge.  As a result of certain of the circumstancesnoted above, we evaluated our fixed assets for impairment in accordance withSFAS No. 144, “Accounting for theImpairment or Disposal of Long-Lived Assets,” as of December 31, 2004.  We determined that the value of our fixedassets was impaired, thus, in the fourth quarter of 2004, we recorded a $32.2million write-down of those assets to their estimated fair market value.  As a result of the decision by Nextel toterminate its contract with us, as discussed under Significant Events above, weevaluated our fixed assets and intangibles as of December 31, 2005 forimpairment in accordance with SFAS No. 144 and SFAS No. 142.  Our evaluation determined that the assets werenot impaired as of December 31, 2005.

 

*Self-insurancereserves.  *Weself-insure a portion of our workers’ compensation and employee medicalinsurance programs.  We purchase stop loss coverage at varying levels inorder to mitigate our potential future losses.  The nature of theseliabilities, which may not fully manifest themselves for several years, requiressignificant judgment.  We evaluate pending workers’ compensation andmedical claims periodically to determine the reasonableness of the reserves wehave recorded for such claims.  Ourevaluation includes estimates of potential incurred-but-unreported claims aswell as factors that may cause original estimates of such claims to increaseover time, such as available claims data and historical trends and experience,as well as future projections of ultimate losses, expenses, premiums andadministrative costs.  We adjust these reserves if events or changes incircumstances indicate that ultimate

 

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payments related to theclaims will be more than the recorded reserves.  At March 31, 2006, we have reserved approximately$3.5 million and $860,000 related to our workers’ compensation and medicalprograms, respectively.  While we believethat the amounts reserved for these obligations are sufficient, any significantincrease in the number of claims and costs associated with claims made underthese plans could have a material adverse effect on our financial position,results of operations or cash flows.

 

*Incometaxe*s.  Accounting for income taxes requires us toestimate our income taxes in each jurisdiction in which we operate.  Dueto differences in the recognition of items included in income for accountingand tax purposes, temporary differences arise which are recorded as deferredtax assets or liabilities.  We estimate the likelihood of recovery of theseassets, which is dependent on future levels of profitability and enacted taxrates.  Should any amounts be determined not to be recoverable, orassumptions change, we would be required to take a charge to establish avaluation allowance against such deferred tax assets, which could have amaterial effect on our financial position, results of operations or cash flows. At March 31, 2006, a valuation allowancereduced net deferred tax assets to zero.

 

### **Recent AccountingPronouncements**

### ** **

In December 2004,the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(Revised 2004), “Share-Based Payment” (“SFAS No. 123R”) an amendment of SFASNo. 123, “Accounting for Stock-Based Compensation” and SFAS No. 95, “Statementof Cash Flows,” which requires companies to recognize in their statements ofoperations the grant-date fair value of stock options and other equity-basedcompensation issued to employees.  We adoptedSFAS No. 123R in the first quarter of 2006.  The effects of the adoption of this statement werenot material to our consolidated financial statements for the first quarter of2006.

 
| **ITEM 3.** | ** ** | **QUANTITATIVE AND  QUALITATIVE DISCLOSURES ABOUT MARKET RISK** |
|-------------|------------|-----------------------------------------------------------------|

 

Substantially all of our liquid resources are invested in money marketinstruments and short-term debt securities, and therefore, the fair marketvalue of these investments is affected by changes in market interest rates.  However, these funds were invested inovernight money market instruments or debt securities with short-term effectivematurities at March 31, 2006 and were redeemable on a daily or monthly basis.  All of the underlying investments in the moneymarket fund had maturities of three months or less.  A hypothetical 1% fluctuation in interestrates would not have a material adverse effect on our financial position,results of operations or cash flows.

 
| **ITEM 4.** | ** ** | **CONTROLS AND PROCEDURES** |
|-------------|------------|-----------------------------|

 

Under the supervision and with the participation of our management,including our Chief Executive Officer and Chief Financial Officer, we conductedan evaluation of our disclosure controls and procedures (as such term isdefined under Rule 13a-15(e) promulgated under the Securities Exchange Act of1934, as amended (the “Exchange Act”)) at the end of the period covered by thisquarterly report.  Based upon that evaluation,our Chief Executive Officer and Chief Financial Officer concluded that ourdisclosure controls and procedures were effective as of the end of the periodcovered by this quarterly report.

 

There has not been any change in our internal control over financialreporting, that occurred during the fiscal quarter covered by this report, thathas materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

 

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| **PART II.** | ** ** | **OTHER INFORMATION** |
|--------------|------------|-----------------------|
| ** **   | ** ** | ** **            |
| **ITEM 6.**  | ** ** | **EXHIBITS**          |

 
| (a)        | Exhibits   |
|------------|------------|
|       |       |   |
| ** ** | **10.1**   | **Settlement Agreement and  Disentanglement Plan, by and between Metro One Telecommunications, Inc. and  Nextel Operations, Inc., dated as of February 10, 2006.** |
| ** ** | ** ** | ** ** |
| ** ** | **31.1**   | **Certification of Principal  Executive Officer pursuant to Securities and Exchange Commission Rule  13a-14(a).** |
| ** ** | ** ** | ** ** |
| ** ** | **31.2**   | **Certification of Principal  Financial Officer pursuant to Securities and Exchange Commission Rule  13a-14(a).** |
| ** ** | ** ** | ** ** |
| ** ** | **32.1**   | **Certification of Principal  Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C.  Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act Of  2002.** |

 

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SIGNATURES

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|   | Date:    May  15, 2006 |                                          |
|--------|--------------------------------------------|-----------------------------------------------|
|   |                                       | METRO ONE  TELECOMMUNICATIONS, INC.           |
|   |                                       |                                          |
|   |                                       | By:                                           | /s/ Duane C. Fromhart |   |
|   |                                       | Duane C. Fromhart                             |
|   |                                       | Senior Vice President,                        |
|   |                                       | Chief Financial Officer                       |
|   |                                       | (Principal Financial  and Accounting Officer) |

 

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