**United StatesSecurities and Exchange Commission**

**Washington,D.C.  20549**

**Form 10-Q**

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

**OF THE SECURITIES EXCHANGE ACT OF 1934**

**Forthe Quarterly Period Ended March 31, 2007**

**o  TRANSITION REPORT PURSUANT TO SECTION13 OR 15 (d)**

**OF THE SECURITIES EXCHANGE ACT OF 1934**

**CommissionFile Number 0-27024**

**METRO ONE TELECOMMUNICATIONS, INC.**

(Exact name of registrantas specified in its charter)

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

 

###### **11200 Murray Scholls Place, Beaverton,Oregon  97007**

(Address ofprincipal executive offices) (zip code)

**(503) 643-9500**

(Registrant’stelephone number, including area code)

Indicate by check markwhether the registrant has (1) filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.  Yes  x    No  o

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

| Large accelerated  filer  o |   | Accelerated  filer  o |   | Non-accelerated  filer  x |
|---------------------------------------|--------|---------------------------------|--------|-------------------------------------|

 

Indicate by check mark whether the registrant is a shellcompany (as defined in Rule 12b-2 of the Act).  Yes  o    No  x

Number of shares of common stock outstanding as of May 11, 2007:6,233,326 shares, no par value per share.

 

----

**METRO ONETELECOMMUNICATIONS, INC.**

**INDEX TOFORM 10–Q**
| Part I   |   | Financial Information                                                                                |
|----------|--------|------------------------------------------------------------------------------------------------------|
|     |   |                                                                                                 |
| Item 1.  |   | Financial Statements (Unaudited)                                                                     |
|     |   |                                                                                                 |
|     |   | Condensed  Consolidated Statements of Operations for the three months ended March 31,  2007 and 2006 |
|     |   |                                                                                                 |
|     |   | Condensed  Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006                    |
|     |   |                                                                                                 |
|     |   | Condensed  Consolidated Statements of Cash Flows for the three months ended March 31,  2007 and 2006 |
|     |   |                                                                                                 |
|     |   | 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  Statements of Operations (Unaudited)** |

 
| ** **                            | ** ** | **Three Months Ended  March 31,**                   | ** ** |
|---------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                            | ** ** | **2007**                                                           | ** ** | **2006** | ** ** |
| ** **                            | ** ** | **(In thousands, except per share data)** | ** ** |
|                                  |       |                                                               |       |   |   |
| Revenues                              |       | $                                                                  | 4,902      |   | $ | 15,229 |   |
|                                  |       |                                                               |       |   |   |
| Costs and expenses:                   |       |                                                               |       |   |   |
| Direct operating                      |       | 3,926                                                              |       | 7,765 |   |
| Selling, general  and administrative  |       | 3,762                                                              |       | 7,107 |   |
| Depreciation and  amortization        |       | 614                                                                |       | 1,235 |   |
| Restructuring  charges                |       | 482                                                                |       | 5,016 |   |
|                                  |       | 8,784                                                              |       | 21,123 |   |
|                                  |       |                                                               |       |   |   |
| Loss from operations                  |       | (3,882                                                             | )          | (5,894 | ) |
|                                  |       |                                                               |       |   |   |
| Other income, net                     |       | 165                                                                |       | 187 |   |
|                                  |       |                                                               |       |   |   |
| Loss before income  taxes             |       | (3,717                                                             | )          | (5,707 | ) |
| Income tax (benefit)  expense         |       | (15                                                                | )          | — |   |
|                                  |       |                                                               |       |   |   |
| Net loss                              |       | $                                                                  | (3,702     | ) | $ | (5,707 | ) |
|                                  |       |                                                               |       |   |   |
| Net loss per common  share:           |       |                                                               |       |   |   |
| Basic                                 |       | $                                                                  | (0.59      | ) | $ | (0.92 | ) |
| Diluted                               |       | $                                                                  | (0.59      | ) | $ | (0.92 | ) |
|                                  |       |                                                               |       |   |   |
| Weighted average shares  outstanding: |       |                                                               |       |   |   |
| Basic                                 |       | 6,233                                                              |       | 6,234 |   |
| Diluted                               |       | 6,233                                                              |       | 6,234 |   |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements.

1

----

 
| **Metro One Telecommunications, Inc.**                 |
|--------------------------------------------------------|
| **Condensed Consolidated Balance  Sheets (Unaudited)** |

 
| ** **                                                                                                                          | ** ** | **March 31,**      | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **                                                                                                                          | ** ** | **2007**                | ** ** | **2006**              | ** ** |
| ** **                                                                                                                          | ** ** | **(In thousands)** | ** ** |
| ** **                                                                                                                          | ** ** | ** **              | ** ** | ** **            | ** ** |
| **Assets**                                                                                                                          |       |                    |       |                  |       |
| ** **                                                                                                                          | ** ** | ** **              | ** ** | ** **            | ** ** |
| Current assets:                                                                                                                     | ** ** | ** **              | ** ** | ** **            | ** ** |
| Cash and cash  equivalents                                                                                                          |       | $                       | 7,248      |                  | $          | 11,965 |   |
| Restricted cash                                                                                                                     |       | 4,741                   |       | 4,741                 |       |
| Accounts  receivable, net                                                                                                           |       | 2,666                   |       | 2,179                 |       |
| Prepaid costs  and other current assets                                                                                             |       | 706                     |       | 961                   |       |
|                                                                                                                                | ** ** | ** **              | ** ** | ** **            | ** ** |
| Total current  assets                                                                                                               |       | 15,361                  |       | 19,846                |       |
|                                                                                                                                | ** ** | ** **              | ** ** | ** **            | ** ** |
| Furniture, fixtures and  equipment, net                                                                                             |       | 2,590                   |       | 3,014                 |       |
| Intangible assets, net                                                                                                              |       | 4,510                   |       | 4,666                 |       |
| Other assets                                                                                                                        |       | 86                      |       | 86                    |       |
|                                                                                                                                | ** ** | ** **              | ** ** | ** **            | ** ** |
| Total assets                                                                                                                        |       | $                       | 22,547     |                  | $          | 27,612 |   |
|                                                                                                                                | ** ** | ** **              | ** ** | ** **            | ** ** |
| **Liabilities and Shareholders’  Equity**                                                                                      |       |                    |       |                  |       |
|                                                                                                                                |       |                    |       |                  |       |
| Current liabilities:                                                                                                                | ** ** | ** **              | ** ** | ** **            | ** ** |
| Accounts payable                                                                                                                    |       | $                       | 352        |                  | $          | 983 |   |
| Accrued  liabilities                                                                                                                |       | 1,801                   |       | 1,685                 |       |
| Accrued payroll  and related costs                                                                                                  |       | 3,082                   |       | 3,898                 |       |
|                                                                                                                                | ** ** | ** **              | ** ** | ** **            | ** ** |
| Total current  liabilities                                                                                                          |       | 5,235                   |       | 6,566                 |       |
|                                                                                                                                | ** ** | ** **              | ** ** | ** **            | ** ** |
| Other long-term  liabilities                                                                                                        |       | 438                     |       | 470                   |       |
|                                                                                                                                | ** ** | ** **              | ** ** | ** **            | ** ** |
| Total liabilities                                                                                                                   |       | 5,673                   |       | 7,036                 |       |
|                                                                                                                                | ** ** | ** **              | ** ** | ** **            | ** ** |
| 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, 6,233 shares issued and outstanding at  March 31, 2007 and December 31, 2006 | ** ** | 120,067                 |       | 120,067               | ** ** |
| Deficit                                                                                                                             |       | (103,193                | )          | (99,491               | )          |
|                                                                                                                                | ** ** | ** **              | ** ** | ** **            | ** ** |
| Total shareholders’  equity                                                                                                    |       | 16,874                  |       | 20,576                |       |
|                                                                                                                                | ** ** | ** **              | ** ** | ** **            | ** ** |
| Total liabilities and shareholders’ equity                                                                                     |       | $                       | 22,547     |                  | $          | 27,612 |   |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements.

2

----

 
| **Metro One Telecommunications, Inc.**                           |
|------------------------------------------------------------------|
| **Condensed Consolidated  Statements of Cash Flows (Unaudited)** |

 
| ** **                                                                                 | ** ** | **Three Months Ended March 31,** | ** ** |
|--------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                                 | ** ** | **2007**                                             | ** ** | **2006** | ** ** |
| ** **                                                                                 | ** ** | **(In thousands)**                              | ** ** |
| ** **                                                                                 | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| Cash flows from  operating activities:                                                     | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| Net loss                                                                                   |       | $                                                    | (3,702     | ) | $ | (5,707 | ) |
| Adjustments to  reconcile net loss to net cash (used in) provided by operating activities: | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| Depreciation and  amortization                                                             |       | 614                                                  |       | 1,235 |   |
| Loss on disposal  of fixed assets                                                          |       | 11                                                   |       | 185 |   |
| Deferred rent                                                                              |       | (33                                                  | )          | (161 | ) |
| Changes in  certain assets and liabilities:                                                | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| Accounts  receivable                                                                       |       | (487                                                 | )          | 6,634 |   |
| Prepaid costs  and other assets                                                            |       | 271                                                  |       | 474 |   |
| Accounts payable  and other liabilities                                                    |       | (1,331                                               | )          | (1,403 | ) |
|                                                                                       | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| Net cash (used  in) provided by operating activities                                       |       | (4,657                                               | )          | 1,257 |   |
|                                                                                       | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| Cash flows from  investing activities:                                                     | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| Capital  expenditures                                                                      |       | (61                                                  | )          | (138 | ) |
| Proceeds from  sale of assets                                                              |       | 1                                                    |       | 177 |   |
|                                                                                       | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| Net cash (used  in) provided by investing activities                                       |       | (60                                                  | )          | 39 |   |
|                                                                                       | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| Net (decrease) increase  in cash and cash equivalents                                      |       | (4,717                                               | )          | 1,296 |   |
|                                                                                       | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| Cash and cash  equivalents, beginning of period                                            |       | 11,965                                               |       | 17,769 |   |
|                                                                                       | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| Cash and cash  equivalents, end of period                                                  |       | $                                                    | 7,248      |   | $ | 19,065 |   |
|                                                                                       |       |                                                 |       |   |   |
| Supplemental disclosure  of cash flow information:                                         | ** ** | ** **                                           | ** ** | ** ** | ** ** |
| Cash paid for  income taxes, net                                                           |       | $                                                    | 12         |   | $ | 42 |   |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements.

3

----

| **Metro One Telecommunications, Inc.**                                |
|-----------------------------------------------------------------------|
| **Notes to Condensed Consolidated  Financial Statements (Unaudited)** |

 

**1.     Summary of Significant Accounting Policies**

**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, 2006.  The results ofoperations for the interim periods shown in this report are not necessarily indicativeof 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.

On July 6, 2006,we effected a one-for-four reverse split of our common stock.  All share and per share data presented in theaccompanying financial statements and notes thereto have been restated for thereverse stock split.

**Cash, Cash Equivalents, and Restricted Cash**

Cash and cashequivalents include cash deposits in banks and highly liquid investments withmaturity dates of three months or less at the date of acquisition.  Restricted cash consists of cash restrictedto secure a letter of credit related to our workers’ compensation program andis invested in a bank certificate of deposit.

**Stock-Based Compensation**

EffectiveJanuary 1, 2006, we adopted the fair value recognition provisions ofStatement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-BasedPayment,” under which compensation expense is recognized in the condensedconsolidated statement of operations for the fair value of employee stock-basedcompensation.  We elected the modified-prospectivetransition method as permitted by SFAS No. 123R and accordingly, priorperiods have not been restated to reflect the effect of SFASNo. 123R.  The modified-prospectivetransition method requires that stock-based compensation expense recognized inthe Condensed Consolidated Statement of Operations include (1) quarterlyamortization of all stock-based compensation granted prior to, but not vestedas of January 1, 2006, based on the grant date fair value estimated inaccordance with the original provisions of SFAS No. 123 and(2) quarterly amortization of all stock-based payments granted subsequentto January 1, 2006, based on the grant date fair value estimated inaccordance with the provisions of SFAS No. 123R.  In addition, pursuant to SFAS No. 123R,we estimate forfeitures when calculating stock-based compensation expense,rather than accounting for forfeitures as incurred, which was our previousmethod.  Compensation expense isrecognized over the requisite service (vesting) period using the straight-lineattribution method.

Compensationexpense related to the effects of SFAS No. 123R was not material to ourconsolidated financial statements for the first quarter of 2007 or 2006.

Optionsto purchase our common stock are granted at prices equal to or greater than thefair market value on the date of grant. Options granted to directors generally vest immediately while optionsgranted to employees generally vest and become exercisable quarterly over afour year period.  All options generallyexpire ten years from the date of the grant.

Weestimate the fair value of stock options using the Black-Scholes option pricingmodel.  Key input assumptions used toestimate the fair value of stock options include the exercise price of theaward, the expected option term, the expected volatility of our stock over theoption’s expected term, and the risk-free interest rate over the option’sexpected term and the Company’s expected annual dividend yield.  The expected option term represents the 

4

----

estimatedtime until exercise and is based on our historical experience with similarawards, taking into consideration contractual terms, vesting schedules andexpected employee behavior.  The expectedstock price volatility is based on the historical volatility of our stock overthe most recent period equal to the expected term of the option, adjusted foractivity that is not expected to occur in the future.  The risk-free interest rate is based on theU.S. Treasury yield curve in effect at the time of grant for periods correspondingwith the expected term of the option.  Wehave not yet paid a dividend, and thus the dividend yield is 0.0%.  Prospectively, the assumptions will beevaluated and revised as necessary to reflect changes in market conditions andour experience.

Estimatesof fair value are not intended to predict actual future events or the valueultimately realized by people who receive equity awards.

**2.     Restructuring Charges and Exit Activities**

In the firstquarter of 2007, we have continued to focus on efforts to reduce our operatingcosts and to establish long-term viability and stability for the Company.  To that end, we incurred approximately$482,000 of restructuring expenses during the quarter primarily associated withone-time termination benefits related to head-count reductions and other costsprimarily associated with efforts to select and retain a strategic advisor topursue operational, strategic, and financial alternatives.

In the firstquarter of 2006, we undertook significant restructuring activities, dueprimarily to the departure of call volume from Nextel that resulted in the closureof 13 call centers with call volumes transferred into the remaining callcenters.  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.

Costs incurred inrestructuring activities during the three months ended March 31, 2007 and 2006are as follows:
| ** **                     | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------|------------|----------|------------|----------|------------|
| Major cost type                |       |     |       |     |       |
|                           |       |     |       |     |       |
| One-time termination  benefits |       | $        | 113        |     | $          | 1,764 |   |
| Lease termination costs        |       | 24       |       | 2,514    |       |
| Other                          |       | 345      |       | 738      |       |
|                           |       | $        | 482        |     | $          | 5,016 |   |

 

The followingsummarizes the provisions, payments, adjustments and liability for costsassociated with our restructuring efforts for the period shown (in thousands):
| ** **                  | ** ** | **One-time**              | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------|------------|---------------------------|------------|-----------------------------------|------------|------------|------------|------------|------------|
| ** **                  | ** ** | **termination  benefits** | ** ** | **Lease  termination costs** | ** ** | **Other**  | ** ** | **Total**  | ** ** |
|                        |       |                      |       |                              |       |       |       |       |       |
| Balance at January 1,  2007 |       | $                         | 520        |                              | $          | 192        |       | $          | —     |   | $ | 712 |   |
| Provisions                  |       | 113                       |       | 24                                |       | 345        |       | 482        |       |
| Payments                    |       | (633                      | )          | (74                               | )          | (345       | )          | (1,052     | )          |
| Adjustments                 |       | —                    |       | —                            |       | —     |       | —     |       |
| Balance at March 31, 2007   |       | $                         | —     |                              | $          | 142        |       | $          | —     |   | $ | 142 |   |

 

5

----

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

**3.     NetLoss Per Share**

Basic net loss per share is based on the weighted average number ofcommon shares outstanding.  Diluted netloss per share reflects the potential dilution that could occur if outstandingoptions to purchase common stock were exercised or converted into commonstock.  There were no adjustments to netloss for the calculation of both basic and diluted net loss per share for allperiods.  For all periods presented inthese financial statements, the calculation of weighted-average outstandingshares is the same on both a basic and diluted basis because inclusion ofpotential common shares would be anti-dilutive.

Options to purchase approximately 536,000 and 646,000 shares of commonstock were outstanding at March 31,  2007and 2006, respectively, but were not included in the computation of diluted netloss per share because their effect would be anti-dilutive.

**4.     Commitmentsand Contingencies**

We are party tovarious legal actions and administrative proceedings arising in the ordinarycourse of business. We believe the disposition of these matters will not have amaterial adverse effect on our financial position, results of operations orcash flows.

From time to time,in the normal course of our business, we issue standby letters of credit andbank guarantees.  At March 31, 2007, wehad one letter of credit outstanding in the amount of $4,741,000 related to ourworkers’ compensation program.  Theletter of credit is secured by a certificate of deposit for the same amountthat is recorded as restricted cash. This commitment was renewed on April 1, 2007.

**5.     Significant Events**

**Termination of contract**

In February 2005,we entered into a Master Services Agreement for Directory Assistance Services(the “Services Agreement”) with Nextel Operations, Inc., acting on behalf ofcertain affiliates (collectively “Nextel”) of Nextel Communications, Inc.  Under the Services Agreement, we agreed toprovide directory assistance services to Nextel’s customers on a non-exclusivebasis, and Nextel could transition call volume away from us on short noticeand/or terminate services entirely.

In October 2005,we received 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.  Under the Plan, we continued to provideservices to Nextel callers through March 31, 2006 in return for the payment byNextel of approximately $5.75 million. Those payments were in addition to $2.5 million previously paid byNextel in December 2005 in connection with the transition and in addition tothe contractual payments by Nextel for normal service provided by us to Nextelcallers through the transition period. Calls from Nextel were substantially transitioned away from us by March31, 2006, and we have received all amounts due from Nextel.  Including the $5.75 million received in thefirst quarter of 2006 as part of the settlement payments, Nextel representedapproximately 74% of our revenues in the first quarter of 2006.

As a result oftermination of this and other contracts, the Company has experiencedsignificant financial losses and reduction of cash flows over the last severalyears.  It is likely that additionallosses will be incurred during parts or all of 2007.  Such customer losses have had, and willcontinue to have, a significant adverse impact on our results of operations andcash flows and these events and issues raise doubt as to whether we cancontinue to operate as a going concern. We have experienced net losses in each of the quarterly and annual periodssince the first quarter of 2003.  Ourmanagement is aggressively pursuing new and additional sources of revenues andis working to grow our 

6

----

voice and dataservices businesses. Over the past two years we have significantly reduced thedirect cost of delivering our services as well as significantly reduced ourgeneral and administrative overhead.  Inaddition, our management and board of directors are actively pursuing strategicalternatives for the Company to improve operations, improve liquidity andcapital resources, and provide stability to the Company’s financialposition.  There can be no assurance thatour plans will be successful.  Ourexisting cash and cash equivalents will likely not be sufficient to fund ouroperations for the remainder of 2007 or beyond. In order to continue as a going concern, we will need to significantlyincrease our revenues and/or further reduce our costs and/or obtain additionalfinancing.  There can be no assurancethat our efforts in these areas will be successful.  In such event, we may attempt to establishborrowing arrangements in order to maintain adequate liquidity, although wecannot provide assurance that financing will be available in amounts or onterms acceptable to us.  If we are unableto execute our operations according to our plans or obtain additionalfinancing, we may be forced to cease operations.

**Significantnew contract.**

In August 2006, weentered into a Telecom Information Services Agreement (the “Agreement”) withJingle Networks, Inc. (“Jingle”).  Underthe Agreement, we are a preferred directory assistance provider for “1-800-FREE411”.  In addition to per call charges, theAgreement includes financial commitments from Jingle based on call volumeexpansion and other financial incentives. The Agreement is for three years and will automatically renew annuallyfor up to two additional years unless either party provides notice oftermination at least 60 days prior to the commencement of such renewalperiod.  Under the Agreement, as apreferred directory provider we will be allocated no fewer calls than any othervendor providing similar services.  TheAgreement provides that our status as a preferred provider may be terminated byJingle but, in such event, the warrants described below will beterminated.  Jingle accounted forapproximately 35% of our revenue in the first quarter of 2007.

In connection withthe Agreement, we issued to Jingle two warrants to purchase shares of ourcommon stock.  The first warrant was forthe purchase of up to 623,250 shares of common stock at an exercise price of$2.60 per share.  The warrant wasexercisable under the condition that Jingle meet certain revenue and paymentthresholds through February 28, 2007. The revenue targets were not met, thus, the first warrant terminated onFebruary 28, 2007.

The second warrantis for the purchase of up to 870,075 shares of our common stock; provided,however, that shares represented by the sum of the first and second warrants,if exercised, cannot exceed 19.98% of our total shares outstanding after thewarrants are exercised.  The exerciseprice for the second warrant will equal 115% of the average closing price pershare of our common stock over the 20 consecutive trading days ending the lasttrading day prior to July 1, 2007.  Thesecond warrant will not be exercisable unless and until certain revenue andpayment thresholds are achieved by Jingle during specified time periods asoutlined in the Agreement.  The secondwarrant terminates on July 1, 2009.

**Recent Accounting Pronouncements.**

In July 2006, the Financial Accounting Standards Board(“FASB”) issued Interpretation No. 48 (“FIN 48”), “Accounting forUncertainty in Income Taxes — an interpretation of FASB Statement No. 109.”  FIN 48 prescribes a recognition threshold andmeasurement attribute for financial statement recognition and measurement of atax position taken or expected to be taken in a tax return.  FIN 48 also provides guidance onderecognition, classification, interest and penalties, accounting in interimperiods, disclosure, and transition.  FIN48 is effective for our fiscal year beginning January 1, 2007.  We are evaluating the impact that theadoption of FIN 48 will have on our consolidated financial position and resultsof operations.

In September 2006, the FASB issued Statement ofFinancial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements,”which establishes a framework for measuring the fair value of assets andliabilities.  This framework is intendedto increase consistency in how fair value determinations are made under variousexisting accounting standards that permit, or in some cases require, estimatesof fair market value.  SFAS No. 157also expands financial statement disclosure requirements about a company’s useof fair value measurements, including the effect of such measures onearnings.  SFAS No. 157 is effectivefor fiscal years beginning after November 15, 2007, and interim periodswithin those fiscal years.  We do notexpect the adoption of this statement to have a material effect on ourconsolidated financial position or results of operations.

7

----

#### **ITEM 2.****                             MANAGEMENT’SDISCUSSION 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 most recentAnnual Report on Form 10-K filed with the Securities and Exchange Commission (“theSEC”) and those described in our other filings with the SEC, press releases andother communications.  Anyforward-looking statement in this report reflects our expectations at the timeof this report only.  We undertake noobligation to publicly release any revisions to these forward-lookingstatements to reflect events or circumstances after the date hereof or toreflect the occurrence of unanticipated events.

#### **Overview**

We are a provider ofEnhanced Directory Assistance® and other information services delivered throughlive operators and by electronic means. We contract primarily with wireless carriers, Voice over InternetProtocol (“VoIP”) providers, cable companies, Competitive Local ExchangeCarriers (“CLEC”), free directory assistance providers, prepaid carriers, andpayphone operators to provide our services to their subscribers and users.  Our proprietary Enhanced Directory Assistanceplatform provides comprehensive directory assistance listings and otherinformational content and services. Other non-directory assistance services and content include access topersonal contacts and calendars, reservation services, movie listings and avariety of other unique services.  Ourspecial return-to-operator features, StarBack® and AutoBack®, make thetelephone easier to use and are offered exclusively by Metro One.  All of our services are provided by operatorslocated only in the United States, or electronically.  Many of our features or aspects thereof arethe subject of patents or pending patent applications.  Revenues are derived principally through feescharged to telecommunications carriers and other customers.

In addition tovoice-based services, we also provide Enhanced Directory Assistance services inelectronic format.  These services areprovided to customers who electronically issue directory assistance queries anduse the returned information to 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 an emerging business based oninfrastructure originally developed to support our voice-based call centerbusiness.

Under a typical wholesalecontract, a carrier agrees to route some or all of their directory assistancecalls to us.  We offer our services tomultiple carriers within the same market. When a carrier’s subscribers dial a typical directory assistance number,such as “411,” “555-1212” or “00,” the calls are routed to and answered by ouroperators identifying the service by that carrier’s brand name.

Each carrier customerestablishes its own directory assistance fee structure for itssubscribers.  Wireless subscriberstypically pay fees ranging from $1.25 to $1.79 plus airtime charges for ourservices.  We bear no subscribercollection risk with respect to carrier subscribers; however, there may becollection risk to the extent growth and profitability in the telecommunicationsindustry decreases and to the extent we provide services to other types ofcustomers.

We charge our carriercustomers on a per call basis.  Pricesfor services provided to other types of customers, including businesses,governmental units or customers who receive our services in electronic form,may vary based on the nature of the service, volume and other circumstances.

As discussed furtherunder “Significant Events” below, as a result of the termination of contractswith significant customers, the Company has experienced significant financiallosses and reduction of cash flows over the last several 

8

----

years.  It is likely that additional losses will beincurred during parts or all of 2007. Such customer losses have had, and will continue to have, a significantadverse impact on our results of operations and cash flows and these events andissues raise doubt as to whether we can continue to operate as a goingconcern.  We have experienced net lossesin each of the quarterly and annual periods since the first quarter of2003.  Our management is aggressivelypursuing new and additional sources of revenues and is working to grow ourvoice and data services businesses.  Overthe past two years we have significantly reduced the direct cost of deliveringour services as well as significantly reduced our general and administrativeoverhead.  In addition, our managementand board of directors are actively pursuing strategic alternatives for theCompany to improve operations, improve liquidity and capital resources, andprovide stability to the Company’s financial position.  There can be no assurance that our plans willbe successful.  Our existing cash andcash equivalents will likely not be sufficient to fund our operations for theremainder of 2007 or beyond.  In order tocontinue as a going concern, we will need to significantly increase ourrevenues and/or further reduce our costs and/or obtain additionalfinancing.  There can be no assurancethat our efforts in these areas will be successful.  In such event, we may attempt to establishborrowing arrangements in order to maintain adequate liquidity, although wecannot provide assurance that financing will be available in amounts or onterms acceptable to us.  If we are unableto execute our operations according to our plans or obtain additionalfinancing, we may be forced to cease operations.

**SignificantEvents**

**Termination of contract**

In February 2005, we entered into a Master ServicesAgreement for Directory Assistance Services (the “Services Agreement”) withNextel Operations, Inc., acting on behalf of certain affiliates (collectively “Nextel”)of Nextel Communications, Inc.  Under theServices 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, we received notification from Nextelthat it would be terminating the Services Agreement effective January 9,2006.  In February 2006, we entered intoa Settlement Agreement and Disentanglement Transition Plan (the “Plan”) withNextel that resolved certain disputed matters in connection with thetermination of the Services Agreement. Under the Plan, we continued to provide services to Nextel callersthrough March 31, 2006 in return for the payment by Nextel of approximately$5.75 million.  Those payments were inaddition 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 us to Nextel callers through thetransition period.  Calls from Nextelwere substantially transitioned away from us by March 31, 2006, and we havereceived all amounts due from Nextel. Including the $5.75 million received in the first quarter of 2006 aspart of the settlement payments, Nextel represented approximately 76% of ourrevenues in the first quarter of 2006.

**Restructuringactivities**

In the firstquarter of 2007, we have continued to focus on efforts to reduce our operatingcosts and to establish long-term viability and stability for the Company as aresult of the termination of our contracts with Nextel and othercustomers.  To that end, we incurredapproximately $482,000 of restructuring expenses during the quarter primarilyassociated with one-time termination benefits related to head-count reductionsand other costs primarily associated with efforts to select and retain astrategic advisor to pursue operational, strategic, and financial alternatives.

In the firstquarter of 2006, we undertook significant restructuring activities, dueprimarily to the departure of call volume from Nextel that resulted in theclosure of 13 call centers with call volumes transferred into the remainingcall 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.

**Significantnew contract**

In August 2006, weentered into a Telecom Information Services Agreement (the “Agreement”) withJingle Networks, Inc. (“Jingle”).  Underthe Agreement, we will be a preferred directory assistance provider for “1-800-FREE411”.  In addition to per call charges, theAgreement includes financial commitments from Jingle based on call volumeexpansion and other financial incentives. The Agreement is for three years and will automatically renew annuallyfor up to two additional years unless either party provides notice oftermination at least 60 days prior to the commencement of such renewalperiod.  Under the Agreement, as apreferred directory provider we will be allocated

9

----

no fewer callsthan any other vendor providing similar services.  The Agreement provides that our status as apreferred provider may be terminated by Jingle but, in such event, the warrantsdescribed below will be terminated. Jingle accounted for approximately 35% of our revenue in the firstquarter of 2007.

In connection withthe Agreement, we issued to Jingle two warrants to purchase shares of ourcommon stock.  The first warrant was forthe purchase of up to 623,250 shares of common stock at an exercise price of$2.60 per share.  The warrant wasexercisable under the condition that Jingle meet certain revenue and paymentthresholds through February 28, 2007. The revenue targets were not met, thus, the first warrant terminated onFebruary 28, 2007.

The second warrantis for the purchase of up to 870,075 shares of our common stock; provided,however, that shares represented by the sum of the first and second warrants,if exercised, cannot exceed 19.98% of our total shares outstanding after thewarrants are exercised.  The exerciseprice for the second warrant will equal 115% of the average closing price pershare of our common stock over the 20 consecutive trading days ending the lasttrading day prior to July 1, 2007.  Thesecond warrant will not be exercisable unless and until certain revenue andpayment thresholds are achieved by Jingle during specified time periods asoutlined in the Agreement.  The secondwarrant terminates on July 1, 2009.

**Resultsof Operations**

Thistable shows selected items from our statements of operations expressed as apercentage of revenues:

|                                            | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                 | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
| Revenues                                   |       | 100.0                                            | %          | 100.0 | % |
| Direct operating costs                     |       | 80.1                                             |       | 51.0 |   |
| Selling, general and  administrative costs |       | 76.8                                             |       | 46.7 |   |
| Depreciation and  amortization             |       | 12.5                                             |       | 8.1 |   |
| Restructuring charges                      |       | 9.8                                              |       | 32.9 |   |
| Loss from operations                       |       | (79.2                                            | )          | (38.7 | ) |
| Other income, net                          |       | 3.4                                              |       | 1.2 |   |
| Loss before income  taxes                  |       | (75.8                                            | )          | (37.5 | ) |
| Income tax benefit                         |       | (0.3                                             | )          | — |   |
| Net loss                                   |       | (75.5                                            | )%         | (37.5 | )% |

 

*Comparison of first quarter 2007 to first quarter2006*

Total revenuesdecreased 67.8% to $4.9 million from $15.2 million and call volume decreasedfrom 21.3% from 28.2 million calls to 22.2 million calls, primarily as a resultof the termination of our services agreement with Nextel as noted above.  Excluding revenue and call volume of $11.3million and 17.2 million, respectively, from Nextel in the first quarter of2006, total revenues in the first quarter of 2007 increased 26.1% to $4.9million from $3.9 million and total call volume increased 101.4% to 22.2million from 11.0 million.  Theseincreases resulted from increased call volumes from continuing customers inaddition to call volume from new customers acquired during 2006 and the firstquarter of 2007, partially offset by a decrease in our average revenue percall. Our average revenue per call in the first quarter of 2007 wasapproximately $0.20 compared to approximately $0.32 in the first quarter of2006, excluding the one-time settlement payments noted above.  The decrease in revenue per call was dueprimarily to industry-wide pricing pressures and rapid growth in shorterduration calls for which price points are typically lower.

Direct operating costs consist of salaries, wages,benefits and taxes relating to call center personnel and costs of listings dataand content acquisition.  These costsdecreased 49.4% to $3.9 million from $7.8 million.  This decrease was primarily due to lowerpersonnel and data costs associated with servicing lower call volumes, loweraverage labor rates, and improved operating efficiencies.  As a percentage of revenues, direct operatingcosts decreased to 80.1 % from 81.9%, excluding the one-time settlementpayments from Nextel in the first quarter of 2006.  This was primarily due to lower labor costsand improved operating efficiencies in the call centers in the first quarter of2007 compared to the first quarter of 2006.

Selling, general and administrative costs decreased47.1% to $3.8 million from $7.1 million. This decrease resulted primarily from reductions in personnel andassociated costs of approximately $1.1 million, facilities-related costs ofapproximately $800,000, voice and data network costs of approximately $800,000and reductions in other general 

10

----

and administrative expenses of approximately $600,000resulting from our restructuring efforts. As a percentage of revenues, selling, general and administrative costsincreased to 76.7% from 54.8% primarily due to lower revenues.

Depreciation andamortization expense, a component of selling, general and administrative costs,decreased 50.3% to $614,000 from $1.2 million but increased to 12.5% from 8.0%of revenue.  The decrease in depreciationand amortization was due primarily to the overall reduction in acquisition offixed assets in the last several years as operations have been reduced whilethe increase as a percentage of revenue was primarily due to lower revenues.

Restructuringcharges in the first quarter of 2007 consisted primarily of costs associatedwith the selection and retention of a strategic advisory firm of $345,000,one-time termination benefits paid to employees of $113,000 and $24,000 ofother miscellaneous costs associated with efforts to restructure ouroperations.  Restructuring charges ofapproximately $142,000, primarily related to continuing lease obligations onclosed facilities, have been accrued but not paid at March 31, 2007.  In the first quarter of 2006, restructuringcosts consisted primarily of one-time termination benefits paid to employees ofapproximately $1.8 million and lease termination costs of approximately $2.5million, primarily related to the closure of call centers.  In addition, we incurred approximately$700,000 of other costs, primarily legal and advisory services, related to ourrestructuring efforts during the first quarter of 2006.

Other income was$165,000 and $187,000 in the first quarter of 2007 and 2006, respectively, andconsisted primarily of interest income earned on cash and cash equivalents inboth periods.

Because of ouroperating losses in the first quarter of 2007 and 2006, we recorded no federalincome tax expense.  We have a valuationallowance against deferred tax assets associated with operating losses in thisand prior quarters and other deferred tax assets because it is deemed morelikely than not that these assets will not be realized.  Accordingly, no federal income tax benefithas been recorded with respect to these deferred tax assets.  In the first quarter of 2007, we recorded astate income tax benefit of $15,000 to adjust prior estimates of state incometaxes payable to actual income taxes paid.

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

Cash and cashequivalents, short-term investments and restricted cash are recorded at costwhich approximates their fair market value. As of March 31, 2007, we had approximately $12.0 million in cashand cash equivalents, short-term investments and restricted cash (including$4.7 million of restricted cash) compared to approximately $16.7 million(including $4.7 million of restricted cash) at December 31, 2006.  The net decrease of $4.7 million resultedprimarily from net operating losses.  Wehave no outstanding debt.

Working capitalwas $10.1 million at March 31, 2007, compared to $13.3 million at December 31,2006.  This change was primarily due tonet operating losses.

*Cash flowfrom operations.*Net cash used in operations in the firstquarter of 2007 was $4.7 million compared to net cash provided by operations of$1.3 million in the first quarter of 2006. Accordingly, we used approximately $5.9 million more cash in operationsin the first quarter of 2007 as compared to the first quarter of 2006.  The increase in cash used was primarilybecause we received $17.4 million less cash from customers in the first quarterof 2007 than in the first quarter of 2006 primarily due to the termination ofour contract with Nextel.  Partially offsettingthis decrease in cash received from customers was the fact that we paid $6.9million less to or on behalf of employees and we paid $4.5 million less forrestructuring costs in the first quarter of 2007 compared to the first quarterof 2006.

*Cash flowfrom investing activities.*Cash used in investing activitieswas $60,000 in the first quarter of 2007, primarily resulting from cashexpended for capital purchases.  Cashprovided by investing activities was a net of $39,000 in the first quarter of2007 primarily resulting from proceeds received from the sale of excessequipment and other assets, partially offset by cash expended for capitalpurchases.  In the first quarter of 2007and 2006, capital expenditures were primarily for equipment to upgrade existingcall centers and corporate networks and infrastructure.

*Cash flowfrom financing activities*. Cash used in financing activitieswas not significant in the first quarter of 2007 or 2006.

11

----

*Futurecapital needs and resources.*The primary uses of our capitalin the near future are expected to be primarily for working capital and evaluatingand implementing our strategic plans.  Weexpect to adjust personnel, call centers and network capacities in order toaddress varying business circumstances, including changes in volume and pricingand other provisions of customer contracts.

Although cash onhand (including restricted cash) and short-term investments at March 31, 2007was approximately $12.0 million, our operations and future activities,including additional restructuring efforts, will reduce available cash.

Our existing cashand cash equivalents will likely not be sufficient to fund our operations forthe remainder of 2007 or beyond.  Ourmanagement is aggressively pursuing new and additional sources of revenues andis working to grow our voice and data services businesses.  Over the past two years, we havesignificantly reduced the direct cost of delivering our services as well assignificantly reduced our general and administrative overhead; however, inorder to continue as a going concern, we will need to significantly increaseour revenues and/or further reduce our costs and/or obtain additionalfinancing.  In addition, our managementand board of directors are actively pursuing strategic alternatives for theCompany to improve operations, improve liquidity and capital resources, andprovide stability to the Company’s financial position.  There can be no assurance that management’sefforts in these areas will be successful. In such event, we may attempt to establish borrowing arrangements inorder to maintain adequate liquidity, although we cannot provide assurance thatfinancing will be available in amounts or on terms acceptable to us.  If we are unable to execute our operationsaccording to our plans or obtain additional financing, we may be forced tocease 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 significant accounting policies (seeNote 1 to the financial statements), those governing accounts receivable, thelives and recoverability of the carrying amount of equipment and otherlong-lived assets, such as existing intangible assets, estimates involving thelevels of our contingent liabilities for workers’ compensation and medicalself-insurance and estimates of current taxes owed may involve a higher degreeof judgment, estimation and uncertainty.

*Accounts receivable.*Ourwholesale customer base has primarily consisted of large wireless telephonecarriers in the United States.  As such,we have had minimal risk of uncollectibility, at any point in time, related tooutstanding accounts receivable with these customers.  We have not experienced significantcollection issues or write-offs related to these customers.  Since our accounts receivable areconcentrated 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 operatingresults.  In addition, our data servicesbusiness is generating receivables from customers that may not be asfinancially stable as our large carrier customers which to date has not but mayin the future expose us to greater risk of uncollectible receivables than wehave experienced in the past.

*Long-lived assets and intangibles.* We evaluate the remaining life andrecoverability of equipment and other assets, including patents and trademarksand internally developed software, whenever events or changes in circumstancesindicate that the carrying amount of the assets may not be recoverable.  At such time, we estimate the future cashflows expected from use of such assets and their eventual disposition and, iflower than the carrying amounts, adjust the carrying amount of the assets totheir estimated fair value.  Because ofour changing business conditions, including lower wholesale prices anddependence on a relatively small number of customers for a significant portionof our revenues, our estimates of future cash flows to be generated from ouroperations could change materially, resulting in the need for us to recordadditional impairment charges.  Inaddition, as a result of our changing business conditions, we expect to adjustpersonnel, call centers and network capacities. If any of these activities result in certain of our assets no longerbeing used in operations, we may need to record an additional impairmentcharge.  As a result of the decision byNextel to terminate its contract with us, as discussed under Significant Eventsabove, and because of continuing operating losses, we evaluated our fixedassets and intangibles as of December 31, 2006 for impairment in accordancewith SFAS No. 144.  Our evaluation determinedthat the assets were not impaired as of December 31, 2006.

12

----

*Self-insurance reserves. *In the past, we haveself-insured a portion of our workers’ compensation and employee medicalinsurance programs.  In some periods we purchased stop loss coverage atvarying levels in order to mitigate our potential future losses.  Thenature of the liabilities associated with these self-insurance programs, whichmay not fully manifest themselves for several years, requires significantjudgment.  We evaluate open workers’ compensation and medical claims underthese policies 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 payments related to the claims will bemore than the recorded reserves.  AtMarch 31, 2007, we have reserved approximately $1.7 million and $160,000 relatedto these self-insured workers’ compensation and medical programs, respectively.  While we believe that the amounts reservedfor these obligations are sufficient, any significant change in the status ofopen claims or costs associated with claims made under these plans could have amaterial adverse effect on our financial position, results of operations orcash flows.

*Income taxe*s.  Accountingfor income taxes requires us to estimate our income taxes in each jurisdictionin which we operate.  Due to differences in the recognition of itemsincluded in income for accounting and tax purposes, temporary differences arisewhich are recorded as deferred tax assets or liabilities.  We estimate thelikelihood of recovery of these assets, which is dependent on future levels ofprofitability and enacted tax rates.  Should any amounts be determined notto be recoverable, or assumptions change, we would be required to take a chargeto establish a valuation allowance against such deferred tax assets, whichcould have a material effect on our financial position, results of operationsor cash flows.  At March 31, 2007 and2006, a valuation allowance reduced net deferred tax assets to zero.

### **RecentAccounting Pronouncements**

In July 2006, the Financial Accounting Standards Board(“FASB”) issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertaintyin Income Taxes — an interpretation of FASB Statement No. 109.”  FIN 48 prescribes a recognition threshold andmeasurement attribute for financial statement recognition and measurement of atax position taken or expected to be taken in a tax return.  FIN 48 also provides guidance onderecognition, classification, interest and penalties, accounting in interimperiods, disclosure, and transition.  FIN48 is effective for our fiscal year beginning January 1, 2007.  We are evaluating the impact that the adoptionof FIN 48 will have on our consolidated financial position and results ofoperations.

In September 2006, the FASB issued Statement ofFinancial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements,”which establishes a framework for measuring the fair value of assets andliabilities.  This framework is intendedto increase consistency in how fair value determinations are made under variousexisting accounting standards that permit, or in some cases require, estimatesof fair market value.  SFAS No. 157also expands financial statement disclosure requirements about a company’s useof fair value measurements, including the effect of such measures onearnings.  SFAS No. 157 is effectivefor fiscal years beginning after November 15, 2007, and interim periodswithin those fiscal years.  We do notexpect the adoption of this statement to have a material effect on ourconsolidated financial position or results of operations.

#### **ITEM 3.****                             QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

Substantially all of ourliquid resources are invested in money market instruments and short-term debtsecurities.  However, these funds wereinvested in overnight money market instruments or debt securities withshort-term effective maturities at March 31, 2007 and were redeemable on adaily or monthly basis.  Therefore, thefair market value of these investments is not materially affected by changes inmarket interest rates.  All of theunderlying investments in the money market fund had maturities of three monthsor less.  A hypothetical 1% fluctuationin interest rates would not have a material adverse effect on our financialposition, results of operations or cash flows.

#### **ITEM 4.****                             CONTROLSAND PROCEDURES**

Under the supervision andwith the participation of our management, including our Chief ExecutiveOfficer, we conducted an evaluation of our disclosure controls and procedures(as such term is defined under Rule 13a-15(e) 

13

----

promulgated under theSecurities Exchange Act of 1934, as amended (the “Exchange Act”)) at the end ofthe period covered by this quarterly report. Based upon that evaluation, our Chief Executive Officer concluded thatour disclosure controls and procedures were effective as of the end of theperiod covered by this quarterly report.

There has not beenany change in our internal control over financial reporting, that occurredduring the fiscal quarter covered by this report, that has materially affected,or is reasonably likely to materially affect, our internal control overfinancial reporting.

14

----

#### **PART II.****                        OTHERINFORMATION**

#### **ITEM 6.****                             EXHIBITS**

(a)          Exhibits

**31.1**                           Certification of Principal Executive Officer and Principal FinancialOfficer pursuant to Securities and Exchange Commission Rule 13a-14(a).

**32.1**                           Certification of Principal Executive Officer and Principal FinancialOfficer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906of the Sarbanes-Oxley Act Of 2002.

15

----

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, 2007 |                                                      |
|--------------------------------|-----------------------------------------------------------|
|                           | METRO ONE TELECOMMUNICATIONS, INC.                        |
|                           |                                                      |
|                           | By:                                                       |  /s/ Gary E.  Henry |
|                           | President, Chief Executive Officer                        |
|                           | (Principal Executive, Financial, and Accounting  Officer) |

 

16

----