UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C.  20549
 ___________
 FORM
10-Q
 
 (Mark
      One)
                x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
      OF 1934FOR
      THE PERIOD ENDING MARCH 31, 2010ORo
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
      OF 1934FOR
      THE TRANSITION PERIOD FROM 
      TOCOMMISSION
      FILE NUMBER 0 – 1325
 ___________
 
 
 MULTIBAND
CORPORATION
 
 (Exact
name of registrant as specified in its charter)
 
 MINNESOTA
 
 (State or
other jurisdiction of incorporation or organization)
 
 41 - 1255001
 
 (IRS
Employer Identification No.)
 
 9449
Science Center Drive, New Hope, Minnesota 55428
 
 (Address
of principal executive offices)
 
 Telephone
(763) 504-3000    Fax (763) 504-3060
 
 Internet:          www.multibandusa.com
 
 (Registrant's
telephone number, facsimile number, and Internet address)
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
 
 Yes x      No o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer“ and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
 
 Large
accelerated filer o  Accelerated
filer o
 Non-accelerated
filer x (do not
check if a smaller reporting company)  Smaller reporting company o
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 
 Yes o      No
x
 
 On May
10, 2010, there were 9,970,926 shares outstanding of the registrant's common
stock, no par value, and 509,117 outstanding shares of the registrant's
convertible preferred stock.
  
  PART
I.  FINANCIAL INFORMATION
 
 ITEM
1.  CONSOLIDATED FINANCIAL STATEMENTS
 
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (in
thousands, except per share amounts)
 Three
      Months EndedMarch
      31, 2010(unaudited)
                                            
                                            
                                            March
      31, 2009(unaudited)REVENUES
                                            
                                            $
                                            60,248
                                            
                                            
                                            $
                                            62,158COSTS
      AND EXPENSESCost
      of products and services (exclusive of depreciation and amortization shown
      separately below)
                                            
                                            
                                            43,953
                                            
                                            
                                            
                                            47,316Selling,
      general and administrative
                                            
                                            
                                            13,517
                                            
                                            
                                            
                                            13,740Depreciation
      and amortization
                                            
                                            
                                            2,436
                                            
                                            
                                            
                                            3,285Total
      costs and expenses
                                            
                                            
                                            59,906
                                            
                                            
                                            
                                            64,341INCOME
      (LOSS) FROM OPERATIONS
                                            
                                            
                                            342
                                            
                                            
                                            
                                            (2,183
                                            )OTHER
      EXPENSEInterest
      expense
                                            
                                            
                                            (1,123
                                            )
                                            
                                            
                                            (855
                                            )Interest
      income
                                            
                                            
                                            5
                                            
                                            
                                            
                                            7Other
      income
                                            
                                            12
                                            
                                            
                                            250Total
      other expense
                                            
                                            (1,106
                                            )
                                            
                                            (598)NET
      LOSS BEFORE INCOME TAXES AND NONCONTROLLING INTEREST IN
      SUBSIDIARIES
                                            
                                            
                                            (764
                                            )
                                            
                                            
                                            (2,781
                                            )PROVISION
      FOR INCOME TAXES
                                            
                                            
                                            200
                                            
                                            
                                            
                                            100NET
      LOSS
                                            
                                            
                                            (964
                                            )
                                            
                                            
                                            (2,881
                                            )LESS:
      NET LOSS ATTRIBUTABLE TO THE NONCONTROLLING INTEREST IN
      SUBSIDIARIES
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (296
                                            )NET
      LOSS ATTRIBUTABLE TO MULTIBAND CORPORATION AND
SUBSIDIARIES
                                            
                                            
                                            (964
                                            )
                                            
                                            
                                            (2,585
                                            )Preferred
      stock dividends
                                            
                                            
                                            381
                                            
                                            
                                            
                                            73LOSS
      ATTRIBUTABLE TO COMMON STOCKHOLDERS
                                            
                                            $
                                            (1,345
                                            )
                                            
                                            $
                                            (2,658
                                            )LOSS
      PER COMMON SHARE – BASIC AND DILUTED:LOSS
      ATTRIBUTABLE TO COMMON
                                              STOCKHOLDERS
                                            
                                            $
                                            (0.14
                                            )
                                            
                                            $
                                            (0.28
                                            )Weighted
      average common shares outstanding – basic and diluted
                                            
                                            
                                            9,791
                                            
                                            
                                            
                                            9,650
 
 See
accompanying notes to the unaudited condensed consolidated financial
statements
  Page
2
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 (in
thousands)
 Three
      Months EndedMarch
      31, 2010(unaudited)
                          
                          
                          March
      31, 2009(unaudited)NET
      LOSS
                          
                          $
                          (964
                          )
                          
                          $
                          (2,881
                          )OTHER
      COMPREHENSIVE INCOME (LOSS), NET OF TAX:Unrealized
      gains (losses) on securities:Unrealized
      holding gains (losses) arising during period
                          
                          
                          (1
                          )
                          
                          
                          30COMPREHENSIVE LOSSBEFORE
      NONCONTROLLING INTEREST IN SUBSIDIARIES
                          
                          
                          (965
                          )
                          
                          
                          (2,851
                          )COMPREHENSIVE LOSSATTRIBUTABLE TO THE NONCONTROLLING INTEREST IN
      SUBSIDIARIES
                          
                          
                          -
                          
                          
                          
                          (296
                          )COMPREHENSIVE LOSSATTRIBUTABLE TO MULTIBAND CORPORATION AND
    SUBSIDIARIES
                          
                          $
                          (965
                          )
                          
                          $
                          (2,555
                          )
 
 See
accompanying notes to the unaudited condensed consolidated financial
statements
  Page
3
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
  ASSETS
 (in
thousands)
 
 March
      31, 2010(unaudited)
                                
                                
                                December
      31, 2009(audited)CURRENT
      ASSETSCash
      and cash equivalents
                                
                                $
                                3,747
                                
                                
                                $
                                2,240Securities
      available for sale
                                
                                
                                6
                                
                                
                                
                                7Accounts
      receivable, net
                                
                                
                                13,072
                                
                                
                                
                                14,336Other
      receivable – related party
                                
                                
                                518
                                
                                
                                
                                518Inventories
                                
                                
                                7,707
                                
                                
                                
                                8,561Prepaid
      expenses and other
                                
                                
                                8,629
                                
                                
                                
                                549Current
      portion of notes receivable
                                
                                
                                6
                                
                                
                                
                                6Total
      Current Assets
                                
                                
                                33,685
                                
                                
                                
                                26,217PROPERTY
      AND EQUIPMENT, NET
                                
                                
                                8,326
                                
                                
                                
                                8,546OTHER
      ASSETSGoodwill
                                
                                
                                38,067
                                
                                
                                
                                38,067Intangible
      assets, net
                                
                                
                                20,960
                                
                                
                                
                                22,677Other
      receivable – related party – long term
                                
                                
                                980
                                
                                
                                
                                1,011Notes
      receivable – long-term, net of current portion
                                
                                
                                25
                                
                                
                                
                                25Other
      assets
                                
                                
                                2,889
                                
                                
                                
                                2,988Total
      Other Assets
                                
                                
                                62,921
                                
                                
                                
                                64,768TOTAL
      ASSETS
                                
                                $
                                104,932
                                
                                
                                $
                                99,531
 
 See
accompanying notes to the unaudited condensed consolidated financial
statements
  Page
4
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 
 LIABILITIES
AND STOCKHOLDERS' EQUITY
 (in
thousands, except share and liquidation preference amounts)
 
 March
      31, 2010(unaudited)
                                  
                                  
                                  December
      31, 2009(audited)CURRENT
      LIABILITIESLine
      of credit
                                  
                                  $
                                  49
                                  
                                  
                                  $
                                  49Short
      term debt
                                  
                                  
                                  6,932
                                  
                                  
                                  
                                  66Related
      parties debt – short term
                                  
                                  
                                  1,327
                                  
                                  
                                  
                                  1,345Current
      portion of long-term debt
                                  
                                  
                                  112
                                  
                                  
                                  
                                  228Current
      portion of capital lease obligations
                                  
                                  
                                  428
                                  
                                  
                                  
                                  489Accounts
      payable
                                  
                                  
                                  25,731
                                  
                                  
                                  
                                  28,008Accrued
      liabilities
                                  
                                  
                                  25,150
                                  
                                  
                                  
                                  22,026Deferred
      service obligations and revenue
                                  
                                  
                                  2,591
                                  
                                  
                                  
                                  2,602Total
      Current Liabilities
                                  
                                  
                                  62,320
                                  
                                  
                                  
                                  54,813LONG-TERM
      LIABILITIESAccrued
      liabilities – long term
                                  
                                  
                                  3,404
                                  
                                  
                                  
                                  4,415Long-term
      debt, net of current portion and original issue discount
                                  
                                  
                                  4,878
                                  
                                  
                                  
                                  4,853Related
      parties debt - long-term, net of current portion and original issue
      discount
                                  
                                  
                                  29,778
                                  
                                  
                                  
                                  29,856Capital
      lease obligations, net of current portion
                                  
                                  
                                  408
                                  
                                  
                                  
                                  491Total
      Liabilities
                                  
                                  
                                  100,788
                                  
                                  
                                  
                                  94,428COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITYCumulative
      convertible preferred stock, no par value:8%
      Class A (14,171 shares issued and outstanding, $148,796 liquidation
      preference)
                                  
                                  
                                  213
                                  
                                  
                                  
                                  21310%
      Class B (1,070 and 1,370 shares issued and outstanding, $11,235 and
      $14,385 liquidation preference)
                                  
                                  
                                  11
                                  
                                  
                                  
                                  1410%
      Class C (112,580 and 112,880 shares issued and outstanding, $1,125,800 and
      $1,128,800 liquidation preference)
                                  
                                  
                                  1,461
                                  
                                  
                                  
                                  1,46510%
      Class F (150,000 shares issued and outstanding, $1,500,000 liquidation
      preference)
                                  
                                  
                                  1,500
                                  
                                  
                                  
                                  1,5008%
      Class G (11,595 shares issued and outstanding, $115,950 liquidation
      preference)
                                  
                                  
                                  48
                                  
                                  
                                  
                                  486%
      Class H (1.25 shares issued and outstanding, $125,000 liquidation
      preference)
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -8%
      Class J (100 shares issued and outstanding, $10,000,000 liquidation
      preference)
                                  
                                  
                                  10,000
                                  
                                  
                                  
                                  10,00015%
      Class E cumulative preferred stock, no par value, (220,000 shares issued
      and outstanding, $2,200,000 liquidation preference)
                                  
                                  
                                  2,200
                                  
                                  
                                  
                                  2,200Common
      stock, no par value (9,804,396 and 9,722,924 shares issued and
      outstanding)
                                  
                                  
                                  38,216
                                  
                                  
                                  
                                  38,054Stock
      subscriptions receivable
                                  
                                  
                                  (10
                                  )
                                  
                                  
                                  (26
                                  )Stock-based
      compensation and warrants
                                  
                                  
                                  46,788
                                  
                                  
                                  
                                  46,572Accumulated
      other comprehensive income – unrealized gain on securities available for
      sale
                                  
                                  
                                  6
                                  
                                  
                                  
                                  7Accumulated
      deficit
                                  
                                  
                                  (96,289
                                  )
                                  
                                  
                                  (94,944
                                  )Total
      Stockholders' Equity
                                  
                                  
                                  4,144
                                  
                                  
                                  
                                  5,103TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                  
                                  $
                                  104,932
                                  
                                  
                                  $
                                  99,531
 
 
 See
accompanying notes to the unaudited condensed consolidated financial
statements
  Page
5
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in
thousands)
 THREE
      MONTHS ENDED MARCH 31,2010
                                      
                                      
                                      2009(unaudited)
                                      
                                      
                                      (unaudited)OPERATING
      ACTIVITIESNet
      loss
                                      
                                      $
                                      (964
                                      )
                                      
                                      $
                                      (2,881
                                      )Adjustments
      to reconcile net loss to net cash provided from operating
      activities:Depreciation
      and amortization
                                      
                                      
                                      2,436
                                      
                                      
                                      
                                      3,285Amortization
      of original issue discount
                                      
                                      
                                      24
                                      
                                      
                                      
                                      -Amortization
      of imputed interest discount
                                      
                                      
                                      9
                                      
                                      
                                      
                                      35Interest
      receivable added to note receivable balance
                                      
                                      
                                      3
                                      
                                      
                                      
                                      -Change
      in allowance for doubtful accounts on accounts receivable
                                      
                                      
                                      (14
                                      )
                                      
                                      
                                      (205
                                      )Change
      in reserve for stock subscriptions and interest receivable
                                      
                                      
                                      12
                                      
                                      
                                      
                                      14Expense
      related to repricing of warrants
                                      
                                      
                                      -
                                      
                                      
                                      
                                      29Services
      provided in exchange for reduction of debt
                                      
                                      
                                      (12)
                                      
                                      
                                      
                                      -Stock
      based compensation expense
                                      
                                      
                                      317
                                      
                                      
                                      
                                      91Changes
      in operating assets and liabilities:Accounts
      receivable
                                      
                                      
                                      1,278
                                      
                                      
                                      
                                      (6,348
                                      )Other
      receivables – related party
                                      
                                      
                                      (35
                                      )
                                      
                                      
                                      -Inventories
                                      
                                      
                                      854
                                      
                                      
                                      
                                      (207
                                      )Prepaid
      expenses and other
                                      
                                      
                                      725
                                      
                                      
                                      
                                      (1,076
                                      )Other
      assets
                                      
                                      
                                      90
                                      
                                      
                                      
                                      (30
                                      )Accounts
      payable and accrued liabilities
                                      
                                      
                                      (422
                                      )
                                      
                                      
                                      8,184Deferred
      service obligations and revenue
                                      
                                      
                                      (11
                                      )
                                      
                                      
                                      (45
                                      )Net
      cash flows provided by operating activities
                                      
                                      
                                      4,290
                                      
                                      
                                      
                                      846INVESTING
      ACTIVITIESPurchases
      of property and equipment
                                      
                                      
                                      (464
                                      )
                                      
                                      
                                      (873
                                      )Checks
      issued in excess of bank balance with the purchase of 80% of outstanding
      stock of DirecTECH operating entities
                                      
                                      
                                      
                                      -
                                      
                                      
                                      (369
                                      )Purchases
      of intangible assets
                                      
                                      
                                      (35
                                      )
                                      
                                      
                                      (26
                                      )Collections
      on notes receivable
                                      
                                      
                                      -
                                      
                                      
                                      
                                      5Net
      cash flows used by investing activities
                                      
                                      
                                      (499
                                      )
                                      
                                      
                                      (1,263
                                      )FINANCING
      ACTIVITIESPayments
      on long-term debt
                                      
                                      
                                      (116
                                      )
                                      
                                      
                                      (43
                                      )Payments
      on related parties debt – short term
                                      
                                      
                                      (18
                                      )
                                      
                                      
                                      -Payments
      on capital lease obligations
                                      
                                      
                                      (144
                                      )
                                      
                                      
                                      (107
                                      )Net
      repayment on line of credit
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (4
                                      )Payment
      on mandatory redeemable preferred stock
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (100
                                      )Payments
      of short-term debt
                                      
                                      
                                      (1,939
                                      )
                                      
                                      
                                      -Redemption
      of preferred stock
                                      
                                      
                                      (6
                                      )
                                      
                                      
                                      (6
                                      )Preferred
      stock dividends
                                      
                                      
                                      (61
                                      )
                                      
                                      
                                      (29
                                      )Net
      cash flows used by financing activities
                                      
                                      
                                      (2,284
                                      )
                                      
                                      
                                      (289
                                      )INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALENTS
                                      
                                      
                                      1,507
                                      
                                      
                                      
                                      (706
                                      )CASH
      AND CASH EQUIVALENTS - Beginning of Period
                                      
                                      
                                      2,240
                                      
                                      
                                      
                                      4,346CASH
      AND CASH EQUIVALENTS - END OF PERIOD
                                      
                                      $
                                      3,747
                                      
                                      
                                      $
                                      3,640
 
 See
accompanying notes to the unaudited condensed consolidated financial
statements
  Page
6
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in
thousands)
 
 THREE
      MONTHS ENDED MARCH 31,2010
                              
                              
                              2009(unaudited)
                              
                              
                              (unaudited)Cash
      paid for interest, net of amortization of OID and interest
      discount
                              
                              $
                              1,143
                              
                              
                              $
                              95Cash
      paid for federal and state income taxes
                              
                              
                              256
                              
                              
                              
                              530Non-cash
      investing and financing transactions:Purchase
      of property and equipment via increase in capital lease
      obligations
                              
                              
                              -
                              
                              
                              
                              107Intrinsic
      value of preferred dividends
                              
                              
                              1
                              
                              
                              
                              1Conversion
      of accrued dividends into common stock
                              
                              
                              62
                              
                              
                              
                              83Increase
      in prepaid expense via short-term debt issued
                              
                              
                              8,805
                              
                              
                              
                              -Increase
      in short term debt via offset to accounts payable
                              
                              
                              -
                              
                              
                              
                              159Purchase
      of 80% of outstanding stock of DirecTECH operating entities via issuance
      of short and long term notes payable
                              
                              
                              -
                              
                              
                              
                              39,900Purchase
      of 80% of outstanding stock of DirecTECH operating entities via issuance
      of accrued contingent consideration
                              
                              
                              -
                              
                              
                              
                              1,608Reduction
      in related party debt by other receivable – related party
                              
                              
                              79
                              
                              
                              
                              -Reduction
      of notes payable via reduction of related party receivable in connection
      with the purchase of outstanding stock of DirecTECH operating
      entities
                              
                              
                              -
                              
                              
                              
                              5,844Reduction
      of notes payable with issuance notes payable in connection with
      acquisition
                              
                              
                              -
                              
                              
                              
                              300Purchase
      of 29% of outstanding stock of NC (formerly MMT) via issuance of short and
      long term notes payable
                              
                              
                              -
                              
                              
                              
                              1,660Purchase
      of 80% of outstanding stock of DirecTECH operating entities via payment to
      escrow in 2008
                              
                              
                              -
                              
                              
                              
                              500
 
 See
accompanying notes to the unaudited condensed consolidated financial
statements
  Page
7
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
 NOTE
      1 - Unaudited Consolidated Financial
Statements
 
 The
information furnished in this report is unaudited and reflects all adjustments
which are normal recurring adjustments and, which in the opinion of management,
are necessary to fairly present the operating results for the interim
periods.  The operating results for the interim periods presented are
not necessarily indicative of the operating results to be expected for the full
fiscal year.  The unaudited consolidated financial statements should
be read in conjunction with the audited consolidated financial statements and
footnotes thereto included in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2009, previously filed with the Securities and Exchange
Commission.
 
 NOTE
      2 - Summary of Significant Accounting
Policies
 
 Nature
of Business
 Multiband
Corporation and subsidiaries (the Company) was incorporated in Minnesota in
September 1975.  The Company provides voice, data and video services
to multi-dwelling unit and single family home customers.  The
Company's products and services are sold to customers located throughout the
United States of America.
 
 The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern that contemplates the realization of
assets and satisfaction of liabilities in the normal course of
business.  For the three months ended March 31, 2010 and 2009, the
Company incurred net losses of $964 and $2,881, respectively.  At
March 31, 2010, the Company had an accumulated deficit of
$96,289.  The Company's ability to continue as a going concern is
dependent on it maintaining profitability and/or raising additional
capital.  Management may sell, if prudent, certain assets on a
strategic basis for prices agreeable to the Company and/or obtain additional
debt or equity capital to meet all of its existing cash obligations and fund
commitments on planned Multiband projects; however, there can be no assurance
that the sources will be available or available on terms favorable to the
Company.  Management anticipates that the impact of the actions listed
below will generate sufficient cash flows to pay current liabilities, long-term
debt and capital and operating lease obligations and fund the Company's
operations for the next twelve months:
 
 1.
              Continue
      to improve mix of jobs (i.e. increase in higher paying installation work
      orders versus non or limited revenue producing service calls) which
      improves gross margins in its Home Service provider (HSP) segment by
      maintaining DirecTV exclusivity in its core markets.2.
              Reduce
      operating expenses by reducing inventory losses, reducing training costs
      through decreased technician turnover, managing professional fees,
      insurance and other general and administrative
expenses.3.
              Evaluate
      factors such as anticipated usage and inventory turnover to maintain
      optimal inventory levels.4.
              Obtain
      senior debt financing with extended terms to refinance the Company’s note
      payable to DirecTECH Holding Company, Inc., which matures on January 1,
      2013.5.
              Expand
      call center support with sales of call center services to both existing
      and future system operators and to buyers of the Company’s video
      subscribers.6.
              Solicit
      additional equity investment in the Company by issuing either preferred or
      common stock.
 
 Principles
of Consolidation
 The 2010
consolidated financial statements include the accounts of Multiband Corporation
(MBCorp) and its wholly owned subsidiaries, Minnesota Digital Universe, Inc.
(MNMDU), Multiband Subscriber Services, Inc. (MBSS), Multiband NC Incorporated
(NC) (formerly Michigan Microtech, Incorporated (MMT), Multiband NE Incorporated
(NE), Multiband SC Incorporated (SC), Multiband EC Incorporated (EC), Multiband
MDU Incorporated (MBMDU), Multiband DV Incorporated (DV) and Multiband Security
Incorporated (Security).
  Page
8
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
  The 2009
consolidated financial statements include the accounts of all wholly-owned
subsidiaries including the newly acquired companies that were purchased,
effective January 2, 2009, when the Company purchased 80% of the issued and
outstanding shares of common stock of all of the DirecTECH Holding Co. (DTHC)
operating subsidiaries (DirecTECH) (an additional 29% of NC, 51% of which was
previously purchased effective March 1, 2008 (see Note 2) and 80% of NE, SC, EC,
MBMDU, DV and Security (see Note 2)).  The noncontrolling interest in
subsidiaries on the consolidated balance sheet and consolidated statement of
operations represents DTHC’s 20% ownership of NE, SC, EC, NC, MBMDU, DV
Incorporated (DV) and Multiband Security from January 2, 2009 to December 17,
2009.  On December 17, 2009, the Company purchased the remaining 20%
of the issued and outstanding shares of common stock of all of the DTHC
operating subsidiaries (DirecTECH) and transferred $5,996 of noncontrolling
interest to Multiband’s controlling interest.  The Company pushes down
applicable overhead, interest expense and amortization expense from the parent
company (MBCorp) to its subsidiaries.  All significant intercompany
transactions and balances have been eliminated in
consolidation.
 
 Revenue
Recognition
 The
Company recognizes revenue in accordance with the Securities Exchange
Commission’s Staff Accounting Bulletin No. 104 “Revenue Recognition” (“SAB
104”), which requires that four basic criteria be met before revenue can be
recognized: (i) persuasive evidence of a customer arrangement exists; (ii) the
price is fixed or determinable; (iii) collectability is reasonably assured; and
(iv) product delivery has occurred or services have been
rendered.  The Company recognizes revenue as services are performed
and completed.
 
 The
Company has two operating segments.  The HSP segment (HSP) (companies
include NE, SC, EC, NC, DV and Security) provides the installation and service
of DirecTV video programming, internet and home security systems for residents
of single family homes. The MDU segment (MDU) (companies include MNMDU, MBSS and
MBMDU) represents results as the master service operator for DirecTV and
provides voice, data and video services to residential multi-dwelling units as
the principal to subscribers.
 
 The
Company earns HSP segment revenue as follows:
 
 ·
              installation
      and service of DirecTV video programming for residents of single family
      homes
 ·
              installation
      of home security systems and internet
services
 
 The
Company has a home services provider agreement with DirecTV which allows the
Company to install and activate DirecTV video programming services for residents
of single family homes.  As a DirecTV HSP, the Company earns revenue
for installing and servicing DirecTV video customers pursuant to predetermined
rates set by DirecTV which may vary from time to time.  Revenue is
recognized upon completion of the delivery and installation of
equipment.  DirecTV reimburses the Company for substantially all
DirecTV equipment used for customer installation related to the HSP
segment.
 
 The
Company earns MDU segment revenue as follows:
 
 1.
              from
      voice, video and data communications products which are sold and
      installed
 2.
              direct
      billing of user charges to multiple dwelling units, through the activation
      of, enhancement of, and residual fees on video programming services
      provided to residents of multiple dwelling
units
 
 MDU
segment user charges are recognized as revenues in the period the related
services are provided.  Any amounts billed prior to services being
provided are reported as deferred service obligations and revenues.
 Page
9
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
 Revenue
generated from activation of video programming services is earned in the month
of activation.  According to Multiband's Master System Operator
agreement with DirecTV, in the event that a customer cancels within the first 12
months of service, DirecTV has the right to chargeback the Company for a portion
of the activation fees received.  The Company has estimated the
potential charge back of commissions received on activation fees during the past
12 months based on historical percentages of customer cancellations and has
included that amount as a reduction of revenue.  Residual income is
earned as services are provided by DirecTV through its system
operators.  As a master system operator for DirecTV, the Company earns
a fixed percentage based on net cash received by DirecTV for recurring monthly
services, a variable amount depending on the number of activations in a given
month, and a variable amount for coordinating improvements of systems used to
deliver enhanced programming services.  The Company’s master system
operator contract with DirecTV also permits the Company to earn revenues through
its control of other system operators who are unable to provide DirecTV video
programming services without the Company’s performance.
 
 The
Company reports the aforementioned MDU voice, data, and video revenues on a
gross basis based on the following factors: the Company has the primary
obligation in the arrangement with its customers; the Company controls the
pricing of its services; the Company performs customer service for the
agreements; the Company approves customers; and the Company assumes the risk of
payment for services provided.  We offer some products and services
that are provided by third party vendors.  We review the relationship
between us, the vendor and the end customer on an individual basis to assess
whether revenue should be reported on a gross or net basis.  As an
example, our resold satellite digital television revenue is reported on a net
basis.
 
 MDU
segment revenue generated by the support center to service third party
subscribers by providing billing and call center support services is recognized
in the period the related services are provided.
 
 Customers
contract for both the purchase and installation of voice and data networking
technology products and certain video technologies products.  Revenue
is recognized when the products are delivered and installed and the customer has
accepted and has the ability to fulfill the terms of the contract.
 
 The
Company’s policy is to present taxes imposed on revenue-producing transactions
on a net basis.
 
 Deferred
Revenue
 The
Company invoices for certain installation upgrade projects upon order of project
equipment.  Revenue is deferred on these projects until the equipment
is installed.
 
 Long-lived
Assets
 The
Company reviews its long-lived assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable or exceeds its fair value.  The carrying amount of a
long-lived asset is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the
asset.  An impairment loss shall be measured as the amount by which
the carrying amount of a long-lived asset exceeds its fair
value.  Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.  There was no impairment
at March 31, 2010 or December 31, 2009.
 Page
10
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
 Goodwill
and Other Intangible Assets
 In
accordance with ASC Topic No. 350, Intangibles-Goodwill and
Other, goodwill and intangible assets without a defined life shall not be
amortized over a defined period, but instead must be tested for impairment at
least annually.  Additionally, goodwill is tested for impairment between
annual tests if an event occurs or circumstances change that would more likely
than not reduce the fair value of an entity below its carrying value.  The
goodwill impairment test is a two-step impairment test.  In the first step,
the Company compares the fair value of each reporting unit to its carrying
value. The Company’s estimates may differ from actual results due to, among
other things, economic conditions, changes to its business models, or changes in
operating performance.  Significant differences between these estimates and
actual results could result in future impairment charges and could materially
affect the Company’s future financial results.  If the fair value of the
reporting unit exceeds the carrying value of the net assets assigned to that
reporting unit, goodwill is not impaired and the Company is not required to
perform further testing.  If the carrying value of the net assets assigned
to the reporting unit exceeds the fair value of the reporting unit, then the
Company must perform the second step in order to determine the implied fair
value of the reporting unit’s goodwill and compare it to the carrying value of
the reporting unit’s goodwill.  The activities in the second step include
valuing the tangible and intangible assets and liabilities of the impaired
reporting unit based on their fair value and determining the fair value of the
impaired reporting unit’s goodwill based upon the residual of the summed
identified tangible and intangible assets and liabilities.
 
 At March
31, 2010, the Company determined that there was no event which occurred or
circumstance changes that would more likely than not reduce the fair value of an
entity below its carrying value.  Goodwill was $38,067 at March 31,
2010 and December 31, 2009, and is recorded as part of our MDU and HSP
segments.
 
 Goodwill
by business segment consists of the following:
 MBCorp.
                                        
                                        
                                        MDU
                                        
                                        
                                        HSP
                                        
                                        
                                        TotalBalance,
      December 31, 2009
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        381
                                        
                                        
                                        $
                                        37,686
                                        
                                        
                                        $
                                        38,067Acquisitions/impairment
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Balance,
      March 31, 2010
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        381
                                        
                                        
                                        $
                                        37,686
                                        
                                        
                                        $
                                        38,067
 Components of intangible assets are as
follows:
 March
      31, 2010
                          
                          
                          December
      31, 2009Gross
                            Carrying
                          
                          
                          Accumulated
                          
                          
                          Gross
                            Carrying
                          
                          
                          AccumulatedAmount
                          
                          
                          Amortization
                          
                          
                          Amount
                          
                          
                          AmortizationIntangible
      assets subject to amortizationRight
      of entry contracts
                          
                          $
                          2,613
                          
                          
                          $
                          1,385
                          
                          
                          $
                          2,577
                          
                          
                          $
                          1,228Contracts
      with DirecTV
                          
                          
                          36,902
                          
                          
                          
                          17,170
                          
                          
                          
                          36,902
                          
                          
                          
                          15,574Customer
      contracts
                          
                          
                          102
                          
                          
                          
                          102
                          
                          
                          
                          102
                          
                          
                          
                          102Total
                          
                          
                          39,617
                          
                          
                          
                          18,657
                          
                          
                          
                          39,581
                          
                          
                          
                          16,904Impairment
      of intangibles
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Total
      including impairment
                          
                          $
                          39,617
                          
                          
                          $
                          18,657
                          
                          
                          $
                          39,581
                          
                          
                          $
                          16,904
 
 Amortization
of intangible assets was $1,753 and $2,654 for the three months ended March 31,
2010 and 2009, respectively.  Estimated amortization expense of
intangible assets for the remainder of the year ending December 31, 2010 and for
the years ending December 31, 2011, 2012, 2013, 2014, 2015 and thereafter is
$3,977, $5,109, $5,064, $4,966, $1,718, $54 and $59,
respectively.  Right of entry contracts contain $13 of contracts that
have not been placed in service, therefore no amortization expense has been
recorded.  The weighted average remaining life of the intangibles is
4.09 years with right of entry average life of 4.59 years and contracts with
DirecTV of 4.06 years as of March 31, 2010.
 
 The
Company amortizes the right of entry contracts, contracts with DirecTV, and
customer contracts, over their estimated useful lives ranging from 3.5 to 120
months.
 Page
11
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
 Group
Health and Workers’ Compensation Insurance Coverage
 The
Company uses a combination of self-insurance and third-party carrier insurance
with predetermined deductibles that cover certain insurable risks. The Company’s
share of its workers compensation plan are recorded for the aggregate
liabilities for claims reported, based on historical experience. The Company
also estimates the cost of health care claims that have been incurred but not
reported, based on historical experience.
 
 Insurance
and claims accruals reflect the estimated cost for group health and workers’
compensation claims not covered by insurance.  The insurance and
claims accruals are recorded at the estimated ultimate payment
amounts.  Such insurance and claims accruals are based upon individual
case estimates and estimates of incurred-but-not-reported losses using loss
development factors based upon past experience.
 
 During
2009, in certain states, the Company was self-insured for workers’ compensation
liability claims up to $100, plus administrative expenses, for each occurrence
involving workers’ compensation claims since February 1,
2009.  Effective January 1, 2010, the Company is self-insured for
workers compensation claims up to $250 plus administrative expenses, for each
occurrence involving workers compensation claims since that date.
 
 The
Company is self-insured for health insurance covering the range of liability
under which management expects most claims to occur.  If any liability
claims are substantially in excess of coverage amounts, such claims are covered
under premium-based policies issued by insurance companies to coverage levels
that management considers adequate.
 
 Stock-Based
Compensation
 The
Company measures and recognizes compensation expense for all stock-based
payments at fair value.  The financial statements for the three months
ended March 31, 2010 and 2009 recognize compensation cost for the portion of
outstanding awards which have vested during the periods.  The Company
recognizes stock-based compensation costs on a straight-line basis over the
requisite service period of the award, which is generally the option vesting
term.  For the three months ended March 31, 2010 and 2009 total
share-based compensation expense of $174 ($.02 per share) and $91 ($.01 per
share), respectively, was included in selling, general and administrative
expenses.  As of March 31, 2010, there was $267 of total unrecognized
compensation cost related to nonvested share-based compensation arrangements
granted under the Plan.  That cost is expected to be recognized over a
weighted-average period of 3.13 years.  This is an estimate based on
options currently outstanding and therefore this projected expense could be more
in the future.
 
 The
Company’s determination of fair value of share-based payment awards on the date
of grant using an option-pricing model is affected by the Company’s stock price
as well as assumptions regarding a number of variables.  These
variables include, but are not limited to the Company’s expected stock price
volatility, and actual and projected stock option exercise behaviors and
forfeitures.  An option's expected term is the estimated period
between the grant date and the exercise date of the option.  As the
expected-term period increases, the fair value of the option and the
compensation cost will also increase.  The expected-term assumption is
generally calculated using historical stock option exercise data.  The
Company does not have historical exercise data to develop such an
assumption.  In cases where companies do not have historical data and
where the options meet certain criteria, the use of a simplified expected-term
calculation is allowed.  Accordingly, the Company calculated the
expected terms using the simplified method.
 
 The
Company calculates expected volatility for stock options and awards using
historical volatility, as the Company believes the expected volatility will
approximate historical volatility.  The starting point for the
historical period used is July 1, 2001.  The Company estimates the
forfeiture rate for stock options using 5% for all employees.
 
 The
risk-free rates for the expected terms of the stock options and awards and the
employee stock purchase plan is based on the U.S. Treasury yield curve in effect
at the time of grant.
 Page
12
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
 In
determining the compensation cost of the options granted during the three months
ended March 31, 2010 and 2009, the fair value of each option grant has been
estimated on the date of grant using the Black-Scholes option pricing model and
the weighted average assumptions used in these calculations are as
follows:
 
 Three
      months endedMarch 31, 2010
                    
                    
                    March 31, 2009Risk-free
      interest rate
                    
                    
                    1.89%
                    
                    
                    
                    1.43%Expected
      life of options granted
                    
                    4.37
      Years
                    
                    
                    5.0
      YearsExpected
      volatility range
                    
                    
                    103.6%
                    
                    
                    
                    95%Expected
      dividend yield
                    
                    
                    0%
                    
                    
                    
                    0%
 
 In
January 2010, the Company issued 50,000 shares of stock options with a
Black-Scholes valuation of $70 to four directors of the
Company.  These seven-year stock options were immediately vested and
were issued as long-term incentive compensation pursuant to the Company’s 2000
Non-employee Directors Stock Compensation Plan.
 
 In
January 2010, the Company issued 84,375 shares of stock options with a
Black-Scholes valuation of $128 to an officer of the Company.  These
seven-year stock options vest over four years and were issued as long-term
incentive compensation pursuant to the Company’s 1999 Stock Compensation
Plan.
 
 In
February 2010, the Company issued 59,211 shares of stock options with a
Black-Scholes valuation of $79 to an officer of the Company.  These
seven-year stock options vest immediately and were issued as long-term incentive
compensation pursuant to the Company’s 1999 Stock Compensation
Plan.
 
 During
the three months ended March 31, 2010, there were 7,967 options forfeited or
canceled.
 
 Restricted
Stock
 The
Company awards restricted common shares to selected
employees.  Recipients are not required to provide any consideration
other than services.  Company share awards are subject to certain
restrictions on transfer, and all or part of the shares awarded may be subject
to forfeiture upon the occurrence of certain events, including employment
termination.  The restricted stock is valued at the grant date fair
value of the common stock and expensed over the requisite service period or
vesting term of the awards.  As of March 31, 2010 and March 31, 2009,
the Company recognized stock-based compensation expense of $143 and $0,
respectively.  At March 31, 2010 and December 31, 2009, there was
approximately $354 and $0, respectively, of unrecognized stock-based
compensation expense associated with the non-vested restricted stock
granted.  Stock-based compensation expense relating to these
restricted shares is being recognized over a weighted-average period of 2.5
years.  The total fair value of shares vested during the three months
ended March 31, 2010 was $100.
 
 The
following table sets forth a summary of restricted stock activity for the three
months ended March 31, 2010:
 Number
      ofRestricted Shares atMarch 31, 2010
                        
                        
                        Weighted-AverageGrant
      Date Fair ValueOutstanding
      and not vested at January 1, 2010
                        
                        
                        -
                        
                        
                        $
                        -Granted
                        
                        
                        254,375
                        
                        
                        $
                        1.95Vested
                        
                        
                        (50,000
                        )
                        
                        $
                        2.00Outstanding
      and not vested at March 31, 2010
                        
                        
                        204,375
                        
                        
                        $
                        1.94
 
 In
January 2010, the Company awarded 50,000 shares of restricted stock in the
amount of $100 to four directors of the Company.  The value of the
restricted stock was established by the market price on the date of
grant.  These restricted shares were immediately vested and were
awarded as performance bonuses pursuant to the Company’s 2000 Non-employee
Directors Stock Compensation Plan.
 Page
13
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
 In
January 2010, the Company awarded 84,375 shares of restricted stock in the
amount of $169 to an officer of the Company.  The value of the
restricted stock was established by the market price on the date of
grant.  These restricted shares vest over three years and are to be
awarded as performance bonuses pursuant to the Company’s 1999 Stock Compensation
Plan.
 
 In
January 2010, the Company awarded 120,000 shares of restricted stock in the
amount of $228 to an officer of the Company.  The value of the
restricted stock was established by the market price on the date of
grant.  These restricted shares vest over two years and are to be
awarded as performance bonuses pursuant to the Company’s 1999 Stock Compensation
Plan.
 
 Net
Loss per Common Share
 Basic net
loss per common share is computed by dividing the loss attributable to common
stockholders by the weighted average number of common shares outstanding for the
reporting period.  Diluted loss per common share is computed by
dividing loss attributable to common stockholders by the sum of the weighted
average number of common shares outstanding plus all additional common stock
that would have been outstanding if potentially dilutive common shares related
to common share equivalents (stock options, stock warrants, convertible
preferred shares, and issued but not outstanding restricted stock) had been
issued.  All options, warrants, convertible preferred shares, and
restricted stock outstanding during the three months ended March 31, 2010 and
2009 were excluded from the calculation of diluted loss per share as their
effects were anti-dilutive due to the Company’s net losses for the
periods.
 
 Segment
Reporting
 A
business segment is a distinguishable component of an enterprise that is engaged
in providing an individual product or service or a group of related products or
services and that is subject to risks and returns that are different from those
of other business segments.  Management believes that the Company has
two operating segments, HSP, where the Company receives net cash payments for
the installation and service of DirecTV video programming for residents of
single family homes, and MDU, where the Company acts as a master service
operator for DirecTV, receives net cash payments for managing video subscribers
through its network of system operators who are billed by DirecTV and also
directly bills voice, data and video subscribers as a principal.
 
 Income
Taxes
 The
Company accounts for deferred tax assets and liabilities under the liability
method.  Deferred tax liabilities are recognized for temporary
differences that will result in taxable amounts in future
years.  Deferred tax assets are recognized for deductible temporary
differences and tax operating loss and tax credit
carryforwards.  Deferred tax assets and liabilities are measured using
the enacted tax rates expected to apply to taxable income in the periods in
which the deferred tax asset or liability is expected to be realized or
settled.  We assess the likelihood that our deferred tax assets will
be recovered from future taxable income and record a valuation allowance to
reduce our deferred tax assets to the amounts we believe to be
realizable.  We concluded that a full valuation allowance against our
U.S. deferred tax assets was appropriate as of March 31, 2010 and December 31,
2009.
 
 NOTE
      3 – Business Acquisitions
 
 Effective
December 17, 2009, the Company purchased the remainder of the issued and
outstanding shares of common stock of all of the DTHC operating subsidiaries
(DirecTECH) (an additional 20% of NC (formerly MMT), 29% of which was
previously purchased effective January 2, 2009 and 51% purchased effective March
1, 2008 and 20% of NE, SC, EC, MBMDU, DV and Security, 80% of which was
previously purchased effective January 2, 2009).  DTHC, a fulfillment
agent for a national satellite television company, DirecTV, specialized in the
providing of satellite TV to single family homes.  The purpose of this
acquisition was to increase the Company’s business of installing video services
in single family homes (HSP segment).  The Company issued 100 shares
of Multiband Series J Preferred Stock with a fair value of $10,000 to purchase
the remaining 20% interest.  Because the Company already had a
controlling interest in these entities the purchase transaction is accounted for
as an equity transaction only.
 Page
14
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
 The
carrying amount of the noncontrolling interest at December 17, 2009 was adjusted
to reflect the 100% ownership in the subsidiaries by reducing the accumulated
deficit. The difference between the amount of noncontrolling interest at
December 17, 2009 and the fair value of the preferred shares issued of $10,000
was also recorded as a reduction of accumulated deficit. The net effect to
equity was zero. No increase to goodwill or intangibles was recorded as part of
this acquisition.
 
 On
January 2, 2009, the Company purchased 80% of NE, SC, EC, MBMDU, DV and
Security.  The purchase price totaled $40,400 plus other consideration
valued at $1,608 as of the acquisition date.  The $40,400 consists of
three parts: 1) $500 in cash which was paid at the initial closing date of
January 2, 2009 and in escrow as a deposit at December 31, 2008; 2) a
non-interest bearing note of $500 payable without interest as follows: $250
on demand on or after April 1, 2009 and $250 after the Company’s retention of
senior financing, as defined, no later than August 31, 2009 which amount has not
been paid as of December 31, 2009; 3) a promissory note in the amount of
$39,400, due January 1, 2013, bearing interest at an annual rate of 8.25%
(subject to adjustment in the event of a default), plus the remaining $800 note
payable from the purchase of 51% of NC.  Subsequent to the closing,
the Company and DTHC mutually agreed to offset the $40,200 promissory note by
the amount of $6,344, for an offsetting receivable on Multiband’s books as of
December 31, 2008.  This reduced the amount of this promissory note to
$33,856.  As of December 31, 2009, the Company has offset an
additional $4,000 of receivables from DirecTECH related to legal claims
discussed below, which brings the remaining balance of the note to
$29,856.
 
 The
Company evaluates the purchase price allocation based on the fair value of the
assets acquired and liabilities assumed.  The Company recognizes
pre-acquisition contingencies at fair value, if fair value can be reasonably
determined.  If fair value cannot be reasonably determined, the
Company records the contingencies at its best estimate.
 
 Because
the Company had previously gained control of NC with its purchase of 51% of NC
in March 2008, Multiband recognized the acquisition of the additional 29%
ownership interest in NC on January 2, 2009 as an equity
transaction.  The purchase price of $1,660 increased the accumulated
deficit and the transfer of $2,054 of noncontrolling interest to controlling
interest decreased the accumulated deficit.  No increase to goodwill
or intangibles was recorded as part of this acquisition.
 
 In the
January 2, 2009 transaction to purchase the other DTHC operating subsidiaries,
the Company recognized the assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree at the acquisition date, measured at
their fair values as of that date, with certain exceptions.  The
assets and liabilities purchased are all measured on a nonrecurring basis at
fair value.  The Company recognized goodwill as of the acquisition
date, measured using an income, market or cost approach, which in most types of
business combinations will result in measuring goodwill as the excess of the
fair value of consideration transferred plus the fair value of any
noncontrolling interest in the acquiree at the acquisition date over the fair
value of the identifiable net assets acquired or assumed.  A
qualitative and quantitative analysis of factors that make up recognized
goodwill, such as DirecTECH’s assets, liabilities and other contingent
considerations, such as leases and other off-balance sheet commitments,
follows.
 Page
15
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
 A summary
of the transaction is as follows:
 
 Cash
      paid
                      
                      $
                      500Short-term
      debt
                      
                      
                      500Promissory
      note
                      
                      
                      39,400Total
      consideration
                      
                      
                      40,400Less
      consideration for 29% of NC (recorded separately as an equity
      transaction)
                      
                      
                      (1,660
                      )Consideration
      for 80% of outstanding stock of EC, NE, SC, MBMDU, DV, and
      Security
                      
                      $
                      38,740Assets
                      
                      $
                      33,444Intangible
      assets
                      
                      
                      27,634Goodwill
                      
                      
                      36,972Accounts
      payable and accrued liabilities
                      
                      
                      (53,004
                      )Noncontrolling
      interest
                      
                      
                      (6,306
                      )$
                      38,740
 
 The fair
value of the intangible assets of $27,634 and noncontrolling interest of $6,306
was obtained by management, using a fair value measurement which included
applying discount rates of 15%, a terminal value of $28,200, as well as a
noncontrolling discount of 30%.
 
 As part
of the acquisition, the Company preliminarily assessed a $5,040 contingent legal
accrual related to an existing litigation.  In connection with the
purchase of the operating subsidiaries of DTHC, the Company has the right to
offset half of certain claims against the note to DTHC once those claims are
ultimately resolved, and therefore also allocated a note receivable – related
party of $2,290 which represented an estimate of the amount that could be
recovered from DTHC based on the preliminary legal contingency
accrual.  During the year ended December 31, 2009, the Company
increased the contingent legal accrual to $8,706 based on new information
received about facts and circumstances that existed as of the acquisition date
related to certain legal matters.  On December 31, 2009 the Company
settled in principal the majority of these claims, and recorded the settlement
of $6,729, net of imputed interest of $575 (see Note 9).  The
remaining contingent liability at December 31, 2009 was an estimated $1,977
related to this litigation.  At the time the settlement was recorded,
the Company also offset $3,904 of the note receivable – related party against
the note payable – related party to DTHC.  The remaining balance on
the note receivable of $1,011 at December 31, 2009 represented an estimate of
the amount that will be recovered from DTHC based on the preliminary legal
estimate.  The receivable is classified as long-term since management
intends to offset the receivable with any balance remaining on the note payable
to DTHC.
 
 The
Company acquired $25,400 of intangible assets relating to contracts with DirecTV
as well as right of entry contracts of $2,234.  At the time of the
acquisition, the weighted average remaining life of the intangibles acquired was
2.57 years based on terms without renewals, with an average life for right of
entry contracts of 5.44 years and contracts with DirecTV of 2.33
years.  The weighted average remaining life of the intangibles
acquired was 3.49 years assuming one year term renewals, with right of entry
contracts average life of 5.44 years and contracts with DirecTV of 3.33
years.  In May 2009, the Company signed a new contract with DirecTV
(see Note 9).  The Company capitalizes material costs incurred to
renew or extend terms of intangible assets.  No costs have been
incurred to renew or extend the terms of intangible assets during the year ended
December 31, 2009.  Goodwill and intangible assets acquired are not
expected to be deductible for tax purposes.
 Page
16
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
 At June
30, 2009, the Company revised the fair value of the contingent consideration
from $1,608 to zero.  The Company determined that the significant
level 3 inputs previously used to determine the contingent consideration were
incomplete.  After further review, the Company determined that it was
appropriate to define this change as a measurement period adjustment to the
purchase price.  At December 31, 2009, the Company adjusted the
contingencies estimated as a result of improved information regarding
circumstances that existed as of the acquisition date which increased the
liability by $1,090 and goodwill and receivables by $545.  At December
31, 2009, the Company adjusted the majority of the contingencies due to an
actual settlement in principle of certain litigation (See Note 9).  In
the fourth quarter, within the one-year measurement period the Company, also
increased accrued liabilities by $1,200 to reflect the assumption of an
insurance premium obligation.
 
 NOTE
      4 – Noncontrolling Interest
 Equity
      of noncontrolling interest in subsidiaries:March
      31, 2010
                  
                  
                  December
      31, 2009Noncontrolling
      interest in subsidiaries, beginning balance
                  
                  $
                  -
                  
                  
                  $
                  3,471Purchase
      of 51% of NC
                  
                  
                  -
                  
                  
                  
                  -Purchase
      of 80% of NE, SC, EC, MBMDU, DV & Security
                  
                  
                  -
                  
                  
                  
                  6,306Purchase
      of 29% of NC from noncontrolling interest
                  
                  
                  -
                  
                  
                  
                  (2,054
                  )Net
      income(loss) attributable to the noncontrolling interest in
      subsidiaries
                  
                  
                  -
                  
                  
                  
                  (1,727
                  )Purchase
      remaining 20% of NC, NE, SC, EC MBMDU, DV & Security from
      noncontrolling interest
                  
                  
                  -
                  
                  
                  
                  (5,996
                  )Noncontrolling
      interest in subsidiaries, ending balance
                  
                  $
                  -
                  
                  
                  $
                  -
 
 NOTE
      5 – Inventories
 
 Inventories
      consisted of the following:March
      31, 2010
                        
                        
                        December
      31, 2009DirecTV
      – serialized
                        
                        $
                        2,702
                        
                        
                        $
                        2,948DirecTV
      – nonserialized
                        
                        
                        3,044
                        
                        
                        
                        3,455Other
                        
                        
                        1,961
                        
                        
                        
                        2,158Total
                        
                        $
                        7,707
                        
                        
                        $
                        8,561
 
 The
Company’s inventories are segregated into three major
categories.  Serialized DirecTV inventories consist primarily of
satellite receivers and similar devices.  Non-serialized DirecTV
inventories consist primarily of satellite dishes, poles and similar devices
which are supplied by DirecTV.  Other inventory consists primarily of
cable, switches and various small parts used in the installation of DirecTV
satellite dishes.
 Page
17
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
 NOTE
      6 – Securities Available for
Sale
 
 As of
December 31, 2007, Multiband had the voting rights for and was holding in trust
58,161 common shares of Western Capital Resources, Inc. (WCRS) (previously URON,
a former subsidiary) for various contingent rights holders whose rights were
tied to potential future warrant exercises or preferred stock
conversions.  The Company values these shares at fair
value.  Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.  In determining fair value, the
Company values and records all investment securities transactions on a trade
date basis.  Securities listed on a national or regional securities
exchange are valued at their last reported sales price on the last business day
of the period.  Securities which are not traded on a major exchange or
for which no sale was reported on that date are valued at the average of their
last quoted "bid" price and "asked" price.  Short positions are valued
at the last quoted "asked" price.  Inputs used in the valuation
methods can be either readily observable, market corroborated, or generally
unobservable inputs.  Whenever possible the Company attempts to
utilize valuation methods that maximize the use of observable inputs and
minimizes the use of unobservable inputs.  The Company’s investments
in available-for-sale securities was determined based on quoted market prices in
active markets for identical assets and liabilities (level 1).  As of
February 4, 2008, certain aforementioned contingent rights were not exercised by
the various holders; therefore Multiband owns 37,994 shares of
WCRS.  As a result, Multiband recorded the fair value of WCRS shares
based on quoted market prices as an unrealized gain.  At March 31,
2010 and December 31, 2009 the balance in securities available for sale was $6
and $7, respectively.
  Securities
      available for sale consisted of the following at December
    31:March
      31, 2010
                                  
                                  
                                  December
      31, 2009Beginning
      balance
                                  
                                  $
                                  7
                                  
                                  
                                  $
                                  46Initial
      investment
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Current
      period unrealized loss
                                  
                                  
                                  (1
                                  )
                                  
                                  
                                  (39
                                  )Ending
      balance
                                  
                                  $
                                  6
                                  
                                  
                                  $
                                  7
 
 Fair
      value of securities available for sale consisted of the
      following:March
      31, 2010
                        
                        
                        December
      31, 2009Cost
                        
                        $
                        -
                        
                        
                        $
                        -Unrealized
      gain
                        
                        $
                        6
                        
                        
                        $
                        7Fair
      value at period end
                        
                        $
                        6
                        
                        
                        $
                        7
 Page
18
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
 NOTE
      7 – Accrued Liabilities
 
 Accrued
liabilities consisted of the following:
 
 March
      31, 2010
                          
                          
                          December
      31, 2009Payroll
      and related taxes
                          
                          $
                          8,446
                          
                          
                          $
                          6,971Accrued
      worker compensation claims
                          
                          
                          1,561
                          
                          
                          
                          -Accrued
      incurred but not reported health insurance claims
                          
                          
                          1,126
                          
                          
                          
                          -Accrued
      legal settlements, fees and contingencies (see Note 9)
                          
                          
                          5,745
                          
                          
                          
                          5,684Accrued
      preferred stock dividends
                          
                          
                          884
                          
                          
                          
                          626Accrued
      liability – vendor chargeback
                          
                          
                          40
                          
                          
                          
                          40Accrued
      contract labor
                          
                          
                          2,862
                          
                          
                          
                          2,002Accrued
      income taxes
                          
                          
                          235
                          
                          
                          
                          296Other
      – short term
                          
                          
                          4,251
                          
                          
                          
                          6,407Accrued
      liabilities – short term
                          
                          
                          25,150
                          
                          
                          
                          22,026Accrued
      legal settlement long term, 21 equal monthly installments remaining and
      multi-year  insurance premium obligations (see Note
      9)
                          
                          
                          3,404
                          
                          
                          
                          4,415Total
      accrued liabilities
                          
                          $
                          28,554
                          
                          
                          $
                          26,441
 
 NOTE
      8 - Business Segments
 
 The
Company has three reporting segments.  Multiband Corp. segment
(MBCorp) includes corporate expenses (e.g. corporate administrative costs),
interest income, interest expense, depreciation and amortization.  The
MDU segment (MNMDU, MBSS, and MBMDU) represents results as the master service
operator for DirecTV and provides voice, data and video services to residential
multi-dwelling units as the principal to subscribers.  The HSP segment
(NE, SC, EC, NC, DV and Security) provides the installation and service of
DirecTV (DTV) video programming, internet and home security systems for
residents of single family homes.  Segment disclosures by entity are
provided to the extent practicable under the Company's accounting
system.
 
 Segment
disclosures are as follows:
 
 Three
      months ended March 31, 2010:
                          
                          MBCorp
                          
                          
                          MDU
                          
                          
                          HSP
                          
                          
                          TotalRevenues
                          
                          $
                          -
                          
                          
                          $
                          5,521
                          
                          
                          $
                          54,727
                          
                          
                          $
                          60,248Income
      (loss) from operations
                          
                          
                          (1,503
                          )
                          
                          
                          (679
                          )
                          
                          
                          2,524
                          
                          
                          
                          342Identifiable
      assets
                          
                          
                          10,684
                          
                          
                          
                          11,998
                          
                          
                          
                          82,250
                          
                          
                          
                          104,932Depreciation
      and amortization
                          
                          
                          148
                          
                          
                          
                          1,034
                          
                          
                          
                          1,254
                          
                          
                          
                          2,436Capital
      expenditures
                          
                          
                          47
                          
                          
                          
                          384
                          
                          
                          
                          -
                          
                          
                          
                          431Three
      months ended March 31, 2009
                          
                          MBCorp
                          
                          
                          MDU
                          
                          
                          
                          HSP
                          
                          
                          TotalRevenues
                          
                          $
                          -
                          
                          
                          $
                          5,325
                          
                          
                          $
                          56,833
                          
                          
                          $
                          62,158Loss
      from operations
                          
                          
                          (977
                          )
                          
                          
                          (257
                          )
                          
                          
                          (949
                          )
                          
                          
                          (2,183
                          )Identifiable
      assets
                          
                          
                          4,122
                          
                          
                          
                          14,362
                          
                          
                          
                          96,123
                          
                          
                          
                          114,607Depreciation
      and amortization
                          
                          
                          83
                          
                          
                          
                          1,033
                          
                          
                          
                          2,169
                          
                          
                          
                          3,285Capital
      expenditures
                          
                          
                          81
                          
                          
                          
                          792
                          
                          
                          
                          -
                          
                          
                          
                          873
 Page
19
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
 NOTE
      9 – Commitments and
Contingencies
 
 Legal
proceedings
 The
Company is subject to claims, regulatory processes and lawsuits that arise in
the ordinary course of business.  The Company accrues for such matters
when a loss is considered probable and the amount of such loss, or a range of
loss, can be reasonably estimated. The Company’s defense costs are expensed as
incurred.  The Company has recorded $8,549 and $9,299 of accrued
liabilities as of March 31, 2010 and December 31, 2009, for claims and known and
potential settlements and legal fees associated with existing
litigation.  The majority of the accrual relates to claims for back
overtime wages alleged in a number of cases filed between 2006 to 2008 entitled
Lachiev v. JBM (S.D. Ohio); Davis v. JBM (S.D. Ohio); Gruchy v. DirecTech
Northeast (D. Mass); Stephen v. Michigan Microtech (E.D. Mich); and In re
DirecTECH Southwest, Inc. (E.D. La).  Effective December 31, 2009, the
Company settled in principal the majority of these claims.  While the
Company and its predecessors denied the allegations underlying the lawsuits, it
agreed to a settlement to avoid significant legal fees, the uncertainty of a
jury trial, and other expenses and management time that would have to be devoted
to protracted litigation.  The Company recorded the settlement of
$6,729, net of imputed interest of $575 and including administration fees and
estimated payroll taxes.  The aforementioned settlement is being paid
in equal installments of $291 over a 24 month period beginning January 15,
2010.  The balance of the settlement as of March 31, 2010 is
$5,983.
 
 In
connection with the purchase of the operating subsidiaries of DTHC, the Company
has the right to offset a portion of certain claims against the note to
DTHC.  In relation to the settlement noted above, the Company offset
$79 during the three months ended March 31, 2010.  The Company has recorded
a receivable of $980 as of March 31, 2010 which represents an estimate of the
amount that will be recovered from DTHC including legal fees for the remaining
litigation.
 
 In
December 2009, the US Department of Labor (DOL) sued various individuals that
are either shareholders, directors, trustees and/or advisors to DirecTECH
Holding Company (DTHC) and its Employee Stock Ownership Plan
(ESOP).  Multiband Corporation was not named in this
complaint.  Various defendants in this matter have made requests to
Multiband for advancement or reimbursement of legal fees to defend the
case.  The basis for these requests are certain corporate
indemnification agreements that were entered into by the former DTHC operating
subsidiaries and Multiband itself.  To date, Multiband has denied all
requests for indemnification of legal fees in this matter for, in part, the
following reasons: 1) Similar indemnification agreements as the ones in question
here were declared illegal under Federal law by a California federal appeals
court; 2) The Company believes the primary remedy the DOL is seeking from the
defendants is one of “disgorgement” from the individual DTHC shareholders; 3)
Multiband has no obligation to indemnify DTHC individual shareholder
conduct.  Notwithstanding the above, the outcome of the matter is
uncertain at present and Multiband cannot definitively predict based on the
current facts known to it, whether it ultimately will have any material expense
in the matter.
 
 Additionally,
the Company is subject to pending claims, regulatory processes and lawsuits for
which losses are not probable and amounts cannot be reasonably
estimated.  Those losses could ultimately be material to the Company’s
financial position, results of operations and cash flows.
 
 Significant
relationship
 The
Company is a master agent for DirecTV pursuant to a system operator agreement
with DirecTV dated August 2005.  Under that agreement the Company is
required to ensure that its system operators meet minimum technical DirecTV
system standards so that the system operator subscribers may properly receive
DirecTV programming services.  The initial term of the agreement is
for three years and provides for two additional two-year renewals if the Company
has a minimum number of paying video subscribers in its system operator
network.  The Company has met the requirements and has entered into
the first two year automatic renewal period.
 Page
20
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
 The
Company also has a separate home service provider agreement with DirecTV ending
May 1, 2013.  The term of this agreement with DirecTV will
automatically renew as of May 1, 2013 for additional one year periods unless
either the Company or DirecTV gives written notice of termination at least 90
days in advance of expiration of the then current term.  Termination
of the Company's DirecTV agreements would have a material adverse impact on the
Company's on-going operations.  Revenues generated from DirecTV
amounted to 98.3% and 99.2% of total revenue for the three months ended March
31, 2010 and 2009, respectively.  Accounts receivable from this
customer were 88.6% and 88.5% of total accounts receivable as of March 31, 2010
and December 31, 2009, respectively.  The Company purchases a
substantial portion of its inventory from DirecTV.  DirecTV is the
only supplier of the major components (i.e., dishes and receivers) used in HSP
segment installations.  The total accounts payable to DirecTV, related
to inventory supplied by DirecTV, was $13,912 and $14,886 at March 31, 2010 and
December 31, 2009, respectively.
 
 Line
of credit
 The
Company has a line of credit agreement with a bank that provides borrowings up
to $50, due on demand.  Amounts outstanding under this line of credit
carry an interest rate defined as the prime rate plus 3.0% (6.25% as of March
31, 2010).  As of March 31, 2010 and December 31, 2009, the amount
outstanding was $49.  This line of credit is guaranteed by J. Basil
Mattingly, Vice President of Business Development of the Company.
 
 Short-term
financing
 The
Company has entered into a short-term financing agreement with First Insurance
Funding Corporation in the amount of $8,806 for workers compensation, business
and auto insurance.  This financing agreement carries an interest rate
of 6.12% and requires monthly payments of principal and interest of $1,004
through October 2010.  As of March 31, 2010, the amount outstanding
under the agreement was $6,884.
 
 Operating
leases – vehicles
 The
Company leases substantially all of its fleet vehicles under operating leases
from one lessor.  Each lease commences upon the in-service date of the
vehicle and requires scheduled lease payments to be paid monthly for one
year.  After one year, the Company has the option to renew the lease
as open ended or surrender the leased vehicle to the lessor to be
sold.  If the net proceeds of such sale exceed the vehicle’s then
depreciated value, the lessee receives the benefit of such excess.  If
there is a deficiency upon such sale, then lessee is required to pay the
deficiency as additional rent to lessor.  For the three months ended
March 31, 2010 and 2009, the Company recognized a loss on the sale of vehicles
of approximately $63 and $3, respectively.  For the three months ended
March 31, 2010 and 2009, the Company’s operating lease expense under the lease
totaled approximately $2,030 and $1,882, respectively.  In addition,
the Company has a security deposit with the lessor in the amount of
approximately $1,701 which is included in other assets in the accompanying
consolidated balance sheets as of March 31, 2010 and December 31, 2009,
respectively.  Outstanding leases at March 31, 2010 have in service
dates ranging from 2006 through 2010 and therefore are currently open ended
leases and could be terminated at will.
 
 Bulk
Subsidy Reserve
 Bulk
subsidy revenue is generated when bulk subscriber counts are greater than the
benchmark set by DirecTV.  The Company reviews the subscriber counts
associated with bulk properties on a periodic basis to determine bulk subscriber
counts over the total units at the property.  Based on its review, the
Company estimates that the result of this analysis will be a reduction to the
subscriber count of approximately 375 active bulk subscribers at March 31, 2010
and December 31, 2009, respectively.  The Company has recorded a bulk
subsidy reserve of $75 at March 31, 2010 and December 31, 2009,
respectively.  This reserve is netted against DirecTV estimated
receivables on the consolidated balance sheets and is netted against revenues in
the consolidated statement of operations for the three months ended March 31,
2010 and 2009.
 Page
21
 MULTIBAND
CORPORATION AND SUBSIDIARIES
 NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010 AND 2009
 (in
thousands, except for share and per share amounts)
 NOTE
      10 – Income Taxes
 
 The
Company has federal and state net operating losses of approximately $67,000 and
$50,000, respectively, which, if not used, will begin to expire in
2018.  Changes in the stock ownership of the Company may place
limitations on the use of these net operating loss carryforwards
(NOLs).  During 2009, the Company performed an IRC 382 study and
determined that an ownership change had occurred.  As a result of the
ownership change, $41,613 of the Company’s NOLs are limited, consisting of
annual federal limitations of $6,294 for the next five years and $634 for each
year thereafter.  The Company has determined there are also
limitations on the state net operating loss carryforwards, but has not completed
the analysis to determine the limitation.  For the three months ended
March 31, 2010 and 2009, the Company has recorded income tax expense of $200 and
$100, respectively, related to federal and state taxes.
 
 The
Company assesses the uncertainty in the income taxes recognized in its financial
statements caused by the noncomparability in reporting tax assets and
liabilities by; (a) a consistent recognition threshold and (b) a measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return, and provides related
guidance on derecognition, classification, interest and penalties, accounting
interim periods, disclosure and transition.  To the extent interest
and penalties would be assessed by taxing authorities on any underpayment of
income taxes, such amounts would be accrued and classified as a component of
income tax expenses on the consolidated statement of operations  The
Company’s federal and state tax returns are potentially open to examinations for
years 2006-2008.  The Company has no significant unrecognized tax
benefits as of March 31, 2010 and December 31, 2009 that would reasonably be
expected to affect our effective tax rate during the next twelve
months.
 
 NOTE
      11 – Related Party
Transactions
 
 On
September 1, 2009, the Company entered into an unsecured short term promissory
note in the amount of $800 with J. Basil Mattingly, Vice President of Business
Development of the Company.  The balance at March 31, 2010 and
December 31, 2009 is $728 and $745, respectively.  The note carries an
interest rate of 4% per annum and is due June 2010.
 
 On
January 2, 2009, the Company entered into a promissory note in the amount of
$40,200 with DTHC, due January 1, 2013, bearing interest at an annual rate of
8.25% (subject to adjustment in the event of a default).  The note was
subsequently adjusted by $6,344 for an offsetting receivable which was on
Multiband’s books as of December 31, 2008.  This reduced the amount of
this promissory note to $33,856.  The Company has the right to offset
a portion of certain claims against the note to DTHC once those claims are
resolved.  As of December 31, 2009, the Company offset $4,000 of its
claims against the outstanding balance.  The balance as of March 31,
2010 and December 31, 2009 was $29,778 and $29,856, respectively (see Note 2 and
9).  The note is secured by the stock and assets of all of the DTHC
operating entities.
 
 Proceeds
for the acquisition of US Install Inc. by the Company completed in February,
2008 were obtained via an unsecured promissory note in the amount of $100
between Multiband and Bas Mattingly Master, LLC, a trust controlled by J. Basil
Mattingly, Vice President of Business Development of the Company.  The
note carries an interest rate of 7% per annum and was due April 1,
2010.
 
 James
Mandel, CEO of Multiband, loaned DTHC $100 in a short-term unsecured
subordinated note, paying simple interest monthly at 10% and is due October
2008.  The loan was repaid in full in March 2010.
 
 The
Company had a note receivable due from a non-affiliated entity that was 50%
owned by a shareholder.  The carrying value of this note receivable
was $0 and $34 at March 31, 2010 and December 31, 2009,
respectively.
 
 NOTE
      12 – Subsequent Event
 
 On April
1, 2010, the Company purchased right of entry agreements for 16 markets for $168
of which $144 is payable in various monthly installments throughout the
remainder of 2010, subject to adjustment should the markets not meet minimum
cash flow criteria as well as 12,000 shares of restricted common stock valued at
$2.00 per share which was issued April 30, 2010.
 Page
22
 FORWARD-LOOKING STATEMENTS
 
 From time
to time, the Company may publish forward-looking statements relating to such
matters as anticipated financial performance, business prospects, technological
developments, new products, and similar matters.  The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements including those made in this document.  In
order to comply with the terms of the Private Securities Litigation Reform Act,
the Company notes that a variety of factors could cause the Company's actual
results and experience to differ materially from the anticipated results or
other expectations expressed in the Company's forward-looking
statements.
 
 The risks
and uncertainties that may affect the operations, performance, developments and
results of the Company's business include the following: national and regional
economic conditions; pending and future legislation affecting the IT and
telecommunications industry; market acceptance of the Company's products and
services; the Company's continued ability to provide integrated communication
solutions for customers in a dynamic industry; the Company’s ability to raise
additional financing and other competitive factors.  Because these and
other factors could affect the Company's operating results, past financial
performance should not necessarily be considered as a reliable indicator of
future performance, and investors should not use historical trends to anticipate
future period results.
 
 Because
these and other factors could affect the Company's operating results, past
financial performance should not necessarily be considered as a reliable
indicator of future performance and anticipated future period
results.
 
 ITEM
2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (in thousands)
 
 OUR
COMPANY
 
 Multiband
Corporation (the Company), is a Minnesota corporation formed in
September 1975.  The Company has two operating segments: 1) Home
Service Provider (HSP), which primarily installs video services for residents of
single family homes and 2) Multi-Dwelling Unit (MDU), which sells voice, data
and video services to residents of multiple dwelling units.  Both
segments encompass a variety of different corporate entities.
 
 The
Company completed an initial public offering in June 1984.  In
November 1992, the Company became a non-reporting company under the Securities
Exchange Act of 1934.  In July 2000, the Company regained its
reporting company status.  In December 2000, the Company stock began
trading on the NASDAQ stock exchange under the symbol VICM.  In July
2004, the symbol was changed to MBND concurrent with the Company’s name change
from Vicom, Incorporated to Multiband Corporation.
 
 The
Company’s website is located at: www.multibandusa.com.
 
 From its
inception until December 31, 1998, the Company operated as a telephone
interconnect company only.  Effective December 31, 1998, the Company
acquired the assets of the Midwest region of Enstar Networking Corporation
(ENC), a data cabling and networking company. In late 1999, in the context of a
forward triangular merger, the Company, to expand its range of computer products
and related services, purchased the stock of Ekman, Inc. d/b/a Corporate
Technologies, and merged Ekman, Inc. into the newly formed surviving
corporation, Corporate Technologies USA, Inc. (MBS).  MBS provided
voice, data and video systems and services to business and
government.  The MBS business segment was sold effective April 1,
2005.  The Company’s MDU segment (formally known as MCS) began in
February 2000.  MDU provides voice, data and video services to
multiple dwelling units, including apartment buildings, condominiums and time
share resorts.  During 2004, the Company purchased video subscribers
in a number of separate transactions, the largest one being Rainbow Satellite
Group, LLC.  During 2004, the Company also purchased the stock of
Minnesota Digital Universe, Inc. (MNMDU), which made the Company the largest
master service operator in MDU’s for DirecTV satellite television in the United
States.  During 2006 and 2007, the Company strategically sold certain
assets at multiple dwelling properties where only video services were primarily
deployed.  The Company continues to operate properties where multiple
services were deployed.  To remain competitive, the Company intends to
continue to own and operate properties at locations where multiple services can
be deployed and manage properties where one or more services are
deployed.  Consistent with that strategy, beginning in 2006 and
continuing to the present, the Company expanded its servicing of third party
clients (other system operators) through its call center.  At April
30, 2010, the Company had approximately 121,000 owned and managed subscriptions,
with an additional 48,000 subscriptions supported by the call
center.
 
 During
2008, the Company became involved in the business of installing video services
in single family homes by acquiring 51% of the outstanding stock of Multiband NC
Incorporated (NC) (formerly Michigan Microtech, Incorporated (MMT a former
subsidiary of Directech Holding Company Inc. (DTHC))), a fulfillment agent for a
national satellite television company, DirecTV, which specializes in the
providing of satellite TV to single family homes. This acquisition was followed
by the acquisition of an 80% interest in a group of companies which were the
former operating subsidiaries of DTHC, (Multiband NE Incorporated (NE),
Multiband SC Incorporated (SC), Multiband EC Incorporated (EC), Multiband DV
Incorporated (DV), Multiband MDU (MBMDU) and Multiband Security Incorporated
(Security)).  The Company also purchased an additional 29% ownership
interest in Multiband NC Incorporated, of which it previously owned 51%,
effective on January 2, 2009.  The remaining 20% of those operating
entities were purchased in December 2009.
 
 Page
23
 The
Company has operations in 16 states with 32 field offices. The Company employs
approximately 2,800 people.  Multiband is the second largest
independent DirecTV field services provider in the United States.
 SELECTED
CONSOLIDATED FINANCIAL DATA
 DOLLAR
      AMOUNTS AS A PERCENTAGE OF REVENUESTHREE
      MONTHS ENDEDMarch 31, 2010
                                                                          (unaudited)
                                                                        
                                                                        
                                                                        March 31, 2009
                                                                          (unaudited)REVENUES
                                                                        
                                                                        
                                                                        100
                                                                        %
                                                                        
                                                                        
                                                                        100
                                                                        %COST
      OF PRODUCTS & SERVICES (Exclusive of depreciation and amortization
      shown below)
                                                                        
                                                                        
                                                                        73.0
                                                                        %
                                                                        
                                                                        
                                                                        76.1
                                                                        %SELLING,
      GENERAL & ADMINISTRATIVE
                                                                        
                                                                        
                                                                        22.4
                                                                        %
                                                                        
                                                                        
                                                                        22.1
                                                                        %DEPRECIATION
      & AMORTIZATION
                                                                        
                                                                        
                                                                        4.0
                                                                        %
                                                                        
                                                                        
                                                                        5.3
                                                                        %INCOME
      (LOSS) FROM OPERATIONS
                                                                        
                                                                        
                                                                        .6
                                                                        %
                                                                        
                                                                        
                                                                        -3.5
                                                                        %INTEREST
      EXPENSE & OTHER, NET
                                                                        
                                                                        
                                                                        -1.9
                                                                        %
                                                                        
                                                                        
                                                                        -1.0
                                                                        %LOSS
      BEFORE INCOME TAXES AND NONCONTROLLING INTEREST IN
      SUBSIDIARIES
                                                                        
                                                                        
                                                                        -1.3
                                                                        %
                                                                        
                                                                        
                                                                        -4.5
                                                                        %PROVISION
      FOR INCOME TAXES
                                                                        
                                                                        
                                                                        .3
                                                                        %
                                                                        
                                                                        
                                                                        .2
                                                                        %NET
      LOSS
                                                                        
                                                                        
                                                                        -1.6
                                                                        %
                                                                        
                                                                        
                                                                        -4.7
                                                                        %LESS:
      NET LOSS ATTRIBUTABLE TO THE NONCONTROLLING INTEREST IN
      SUBSIDIARIES
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -.5
                                                                        %NET
      LOSS ATTRIBUTABLE TO THE MULTIBAND CORPORATION AND
      SUBSIDIARIES
                                                                        
                                                                        
                                                                        -1.6
                                                                        %
                                                                        
                                                                        
                                                                        -4.2
                                                                        %
  Page
24
 RESULTS
OF OPERATIONS
 
 Revenues
 Total
revenues decreased 3.1% to $60,248 for the quarter ended March 31, 2010 as
compared to $62,158 for the quarter ended March 31, 2009.
 
 HSP
segment revenues for the three months ended March 31, 2010, were $54,727 in
comparison to $56,833 for the same period in 2009, a decrease of
3.7%.  This decrease is due to fewer new DirecTV subscriber
installations partially offset by an increase in earned incentive
revenue.  The Company expects revenues in the HSP segment to improve
during the second and third quarters followed by a normal seasonal decrease in
the fourth quarter.
 
 Revenues
in the first quarter of 2010 for the MDU segment increased 3.7% to $5,521 as
compared to $5,325 in the first quarter of 2009.  This increase is
primarily due to a larger subscriber base and increased activity from the call
center.  The Company believes it can ultimately increase revenues by
selling its support center services to its network of system operators and by
providing ancillary programs for voice and data services to that same
network.  However, due to other factors such as more stringent DirecTV
credit standards and anticipated weakness in the economy, the Company does not
expect significant growth in the MDU segment in 2010.
 
 Cost
of Products and Services (exclusive of depreciation and
amortization)
 The
Company's cost of products and services decreased by 7.1% to $43,953 for the
quarter ended March 31, 2010, as compared to $47,316 for the same quarter last
year.  This reduction is attributable to the HSP segment.
 
 Cost of
products and services decreased by 7.7% for the HSP segment for the three months
ended March 31, 2010 and were $40,370 for the HSP segment, compared to the
$43,731 in the prior year quarter.  This decrease is the result of
reduced costs due to the reduction in volume and improvements in inventory
controls.  In addition, in the first quarter of 2009, the Company
incurred significant upfront costs due to the substantial increase in the number
of technicians employed by the Company.  Since these new technicians
go through a six to eight week training period prior to working on revenue
producing jobs, this created additional expense without any offsetting
revenue.  In the quarter ended March 31, 2010, the Company’s
technician’s levels were adequate to meet the job volume.  During
2010, the Company expects HSP cost of products and services to remain steady
relative to revenue.
 
 Cost of
products and services for the MDU segment for the current quarter were $3,583
compared to $3,585 in the same quarter last year.  In 2010, the
Company expects MDU cost of products and services to be relatively
constant.
 
 Selling,
General and Administrative Expenses
 Selling,
general and administrative expenses decreased 1.6% to $13,517 in the quarter
ended March 31, 2010, compared to $13,740 in the prior year’s
quarter.  Selling, general and administrative expenses were, as a
percentage of revenues, 22.4% for the quarter ended March 31, 2010 and 22.1% for
the same period a year ago.  The Company anticipates that for the
remainder of 2010, selling, general and administrative expenses will remain
consistent with first quarter levels.
 
 Depreciation
and Amortization
 Depreciation
and amortization expense decreased 25.8% to $2,436 for the quarter ended March
31, 2010 compared to $3,285 in the prior year’s quarter.  In May 2009,
the Company signed a new contract with DirecTV (see Note 3).  Due to
the new contract, the amortization period of the intangibles was increased from
40 months to 60 months.  Depreciation and amortization expense is
expected to remain comparable to the first quarter amount through the remainder
of 2010.
 
 Income
(Loss) from Operations
 The
Company, in the first quarter of 2010, earned income from operations of $342
versus incurring a loss from operations of $2,183 during the prior year’s
comparable period.  For the first quarter of 2010, the HSP segment
earned income from operations of $2,524, compared to a loss of $949 in the same
period last year.  This improvement is primarily due to increased
incentive revenue, improved inventory control and reduced tech training
expense.  The MDU segment showed a loss from operations of $679 for
the three months ended March 31, 2010 compared to a loss of $257 for the three
months ended March 31, 2009.  The MBCorp segment, which has no
revenues, showed a loss from operations of $1,503 for the three months ended
March 31, 2010 compared to a loss of $977 for the same period last
year.  The MBCorp segment loss is expected to continue in future
periods as corporate overhead is expected to remain consistent with current
levels.  The HSP segment is expected to improve its profitability
throughout the balance of 2010 due to seasonal increases in revenues. The
Company plans to mitigate its loss in the MDU segment in future periods by
growing its subscriber base at existing properties since the on-going selling,
general and administrative expenses to service those subscribers is more fixed
than variable.
  Page
25
  Interest
Expense
 Interest
expense was $1,123 for the quarter ended March 31, 2010, versus $855 for the
same period a year ago, primarily reflecting an increase due to interest expense
incurred on the Convergent debt and interest expense related to a legal
settlement (see Note 9).
 
 Noncontrolling
Interest
 The
noncontrolling interest in subsidiaries was $0 on March 31, 2010 and December
31, 2009, after the Company purchased the remaining 20% of the issued and
outstanding shares of common stock of all of the DTHC operating subsidiaries
(DirecTECH) and reclassified $5,996 of noncontrolling interest to Multiband’s
controlling interest on December 17, 2009.  The net loss attributable
to the noncontrolling interest in subsidiaries for the year ended March 31, 2010
and 2009 was $0 and $296, respectively.
 
 Income
taxes
 The
Company has federal and state net operating losses of approximately $67,000 and
$50,000, respectively, which, if not used, will begin to expire in
2018.  Changes in the stock ownership of the Company may place
limitations on the use of these net operating loss carryforwards
(NOLs).  During 2009, the Company performed an IRC 382 study and
determined that an ownership change had occurred.  As a result of the
ownership change, $41,613 of the Company’s NOLs are limited, consisting of
annual federal limitations of $6,294 for the next five years and $634 for each
year thereafter.  The Company has determined there are also
limitations on the state net operating loss carryforwards, but has not completed
the analysis to determine the limitation.  For the three months ended
March 31, 2010 and 2009, the Company has recorded income tax expense of $200 and
$100, respectively, related to federal and state taxes.
 
 The state
tax expense reported is due to some of the subsidiaries having taxable income in
states where the state requires filing separate company income tax returns
instead of filing on a consolidated basis with members of the consolidated
group.  Other state tax expense is associated with the tax liability
being calculated on gross receipts, capital, or some other non-income method of
calculation.
 
 Net
Loss
 In the
first quarter of fiscal 2010 and 2009, the Company incurred net losses of $964
and $2,881, respectively.
 
 Liquidity
and Capital Resources
 During
the three months ended March 31, 2010 and 2009, the Company incurred net losses
of $964 and $2,881, respectively.  Net cash provided by operations
during the three months ended March 31, 2010 was $4,258, compared to the three
months ended March 31, 2009 of $846.  Principal payments on current
long-term debt, short-term debt to a related party and capital lease obligations
over the next 12 months are expected to total $1,368.
 
 In May
2009, the Company paid off its then existing loan with Convergent Capital
Partners I, L.P., and entered into a new five million dollar loan facility with
a different lender due in December 2012. That new facility has a rolling
quarterly positive EBITDA covenant which the Company was in compliance with as
of March 31, 2010.
 
 The
Company, in lieu of a one-time payment for its business insurance, has entered
into a short-term financing agreement with First Insurance Funding Corporation
in the amount of $8,806 for workers compensation, business and auto
insurance.  This financing agreement carries an interest rate of 6.12%
and requires monthly payments of principal and interest of $1,004 through
October 2010.  As of March 31, 2010, the amount outstanding under the
agreement was $6,884.
 
 Cash and
cash equivalents totaled $3,747 at March 31, 2010 versus $2,240 at December 31,
2009.  Working capital deficit at March 31, 2010 was $28,635, compared
to $28,596 at December 31, 2009.  Net cash used by investing
activities totaled $467 for the period ended March 31, 2010, compared to $1,263
for the period ended March 31, 2009.
 
 For the
balance of 2010, the Company intends to focus on maintaining gross margins in
its HSP business segment.  With regards to its MDU business segment,
the Company, for the balance of 2010, believes it can modestly grow both owned
and managed subscriber revenues through increased marketing and customer
penetrations of previously built out properties.  The Company believes
it can increase managed subscriber revenues by selling its support center
services to its network of system operators and by providing ancillary programs
for voice and data services to that same network.
  Page
26
 The
Company used $431 for capital expenditures during the three months ended March
31, 2010, compared to $873 in the same period last year.  Capital
expenditures consisted of property build-outs and equipment acquired for
internal use.  This decrease was related to an expansion of company
funded video and internet service build outs to MDU properties made during
2009.  Throughout the remainder of 2010, the Company estimates that it
will have approximately $1,500 of additional capital expenditures which the
Company intends to fund through leasing and/or cash on hand.
 
 Management
anticipates that the impact of the actions listed below will generate sufficient
cash flows to pay current liabilities, long-term debt and capital and operating
lease obligations and fund the Company's operations for the next twelve
months:
 
 1.
              Continue
      to improve mix of jobs (i.e. increase in higher paying installation work
      orders versus non or limited revenue producing service calls) which
      improves gross margins in its home service provider (HSP) segment by
      maintaining DirecTV exclusivity in its core markets.2.
              Reduce
      operating expenses by reducing inventory losses, reducing training costs
      through decreased technician turnover, managing professional fees,
      insurance and other general and administrative
expenses.3.
              Evaluate
      factors such as anticipated usage and inventory turnover to maintain
      optimal inventory levels.4.
              Obtain
      senior debt financing with extended terms to refinance the Company’s note
      payable to DirecTECH Holding Company, Inc., which matures on January 1,
      2013.5.
              Expand
      call center support with sales of call center services to both existing
      and future system operators and to buyers of the Company’s video
      subscribers.6.
              Solicit
      additional equity investment in the Company by issuing either preferred or
      common stock.
 The
Company, as of March 31, 2010, needs to improve its working capital ratio over
the next few quarters to adequately manage the size of its expanded
operations.  Since the Company acquired significant assets in its
purchase of 100% of the outstanding stock of the former DTHC operating entities,
Multiband believes it has the capacity to leverage certain of those
assets.  Management believes that through a combination of leveraging
assets, its cash on hand, greater expense control, recent positive operating
income, and potential sales of common and/or preferred stock, it can meet its
anticipated liquidity and capital resource requirements for the next twelve
months.
 
 CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
 
 Inventories
 The
Company’s inventories are segregated into three major
categories.  Serialized DirecTV inventories consist primarily of
satellite receivers and similar devices.  Non-serialized DirecTV
inventories consist primarily of satellite dishes, poles and similar devices
which are supplied by DirecTV.  Other inventory consists primarily of
cable, switches and various small parts used in the installation of DirecTV
satellite dishes.  Inventory is costed using a standard cost, which
approximates actual costs, determined on a first-in first-out
basis.
 
 Impairment
of Long-Lived Assets
 The
Company's long-lived assets include property, equipment, leasehold improvements
and intangibles, subject to amortization.  At March 31, 2010, the
Company had net property and equipment of $8,326 which represents approximately
7.9% of the Company's total assets.  At March 31, 2010, the Company
had net intangibles of $20,960 which represented approximately 20.0% of the
Company’s total assets (see Note 1).  The Company reviews its
long-lived assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable or exceeds its fair
value.  The carrying amount of a long-lived asset is not recoverable
if it exceeds the sum of the undiscounted cash flows expected to result from the
use and eventual disposition of the asset.  An impairment loss shall
be measured as the amount by which the carrying amount of a long-lived asset
exceeds its fair value.  Fair value is defined as the price that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
  Page
27
 Impairment
of Goodwill
 In
accordance with ASC Topic No. 350, Intangibles-Goodwill and
Other, goodwill and intangible assets without a defined life shall not be
amortized over a defined period, but instead must be tested for impairment at
least annually.  Additionally, goodwill is tested for impairment
between annual tests if an event occurs or circumstances change that would more
likely than not reduce the fair value of an entity below its carrying
value.  The goodwill impairment test is a two-step impairment
test.  In the first step, the Company compares the fair value of each
reporting unit to its carrying value. The Company’s estimates may differ from
actual results due to, among other things, economic conditions, changes to its
business models, or changes in operating performance.  Significant
differences between these estimates and actual results could result in future
impairment charges and could materially affect the Company’s future financial
results.  If the fair value of the reporting unit exceeds the carrying
value of the net assets assigned to that reporting unit, goodwill is not
impaired and the Company is not required to perform further
testing.  If the carrying value of the net assets assigned to the
reporting unit exceeds the fair value of the reporting unit, then the Company
must perform the second step in order to determine the implied fair value of the
reporting unit’s goodwill and compare it to the carrying value of the reporting
unit’s goodwill.  The activities in the second step include valuing
the tangible and intangible assets and liabilities of the impaired reporting
unit based on their fair value and determining the fair value of the impaired
reporting unit’s goodwill based upon the residual of the summed identified
tangible and intangible assets and liabilities.  Future events could
cause us to conclude that impairment indicators exist and that goodwill
associated with our acquired businesses, which amounts to $38,067 as of March
31, 2010, may be impaired. Any resulting impairment loss could have a material
adverse impact on our financial condition and results of
operations.  During the three months ended March 31, 2010 and 2009,
the Company did not record any impairment related to goodwill.
 
 Group
Health and Workers’ Compensation Insurance Coverage
 The
Company uses a combination of self-insurance and third-party carrier insurance
with predetermined deductibles that cover certain insurable risks. The Company’s
share of its workers compensation plan are recorded for the aggregate
liabilities for claims reported, based on historical experience. The Company
also estimates the cost of health care claims that have been incurred but not
reported, based on historical experience.
 
 Insurance
and claims accruals reflect the estimated cost for group health and workers’
compensation claims not covered by insurance.  The insurance and
claims accruals are recorded at the estimated ultimate payment
amounts.  Such insurance and claims accruals are based upon individual
case estimates and estimates of incurred-but-not-reported losses using loss
development factors based upon past experience.
 
 During
2009, in certain states, the Company is self-insured for workers’ compensation
liability claims up to $100, plus administrative expenses, for each occurrence
involving workers’ compensation claims since February 1,
2009.  Effective January 1, 2010, the Company is self-insured for
workers compensation claims up to $250 plus administrative expenses, for each
occurrence involving workers compensation claims since that date.
 
 The
Company is self-insured for health insurance covering the range of liability
under which management expects most claims to occur.  If any liability
claims are substantially in excess of coverage amounts, such claims are covered
under premium-based policies issued by insurance companies to coverage levels
that management considers adequate.
 
 Stock-Based
Compensation
 The
Company accounts for its stock options using fair value for the measurement and
recognition of compensation expense for all share-based payment awards made to
employees and directors.  The Company’s determination of fair value of
share-based payment awards on the date of grant using an option-pricing model is
affected by the Company’s stock price as well as assumptions regarding a number
of variables.  These variables include, but are not limited to the
Company’s expected stock price volatility, and actual and projected stock option
exercise behaviors and forfeitures.
 
 Income
Taxes
 The
Company accounts for deferred tax assets and liabilities under the liability
method.  Deferred tax liabilities are recognized for temporary
differences that will result in taxable amounts in future
years.  Deferred tax assets are recognized for deductible temporary
differences and tax operating loss and tax credit
carryforwards.  Deferred tax assets and liabilities are measured using
the enacted tax rates expected to apply to taxable income in the periods in
which the deferred tax asset or liability is expected to be realized or
settled.  We assess the likelihood that our deferred tax assets will
be recovered from future taxable income and record a valuation allowance to
reduce our deferred tax assets to the amounts we believe to be
realizable.  We concluded that a full valuation allowance against our
U.S. deferred tax assets was appropriate as of March 31, 2010 and December 31,
2009.
  Page
28
 Revenue
Recognition
 The
Company recognizes revenue in accordance with the Securities Exchange
Commission’s Staff Accounting Bulletin No. 104 “Revenue Recognition” (“SAB
104”), which requires that four basic criteria be met before revenue can be
recognized: (i) persuasive evidence of a customer arrangement exists; (ii) the
price is fixed or determinable; (iii) collectability is reasonably assured; and
(iv) product delivery has occurred or services have been
rendered.  The Company recognizes revenue as services are performed
and completed.
 
 The
Company has two operating segments.  The HSP segment (HSP) (companies
include NE, SC, EC, NC, DV and Security) provides the installation and service
of DirecTV video programming, internet and home security systems for residents
of single family homes.  The MDU segment (MDU) (companies include
MNMDU, MBSS, and MBMDU) represents results as the master service operator for
DirecTV and provides voice, data and video services to residential
multi-dwelling units as the principal to subscribers.
 
 The
Company earns HSP segment revenue as follows:
 
 1.      installation
and service of DirecTV video programming for residents of single family
homes
 2.      installation
of home security systems and internet services
 
 The
Company has a home services provider agreement with DirecTV which allows the
Company to install and activate DirecTV video programming services for residents
of single family homes.  As a DirecTV HSP, the Company earns revenue
for installing and servicing DirecTV video customers pursuant to predetermined
rates set by DirecTV which may vary from time to time.  Revenue is
recognized upon completion of the delivery and installation of
equipment.  DirecTV reimburses the Company for substantially all
DirecTV equipment used for customer installation related to the HSP
segment.
 
 The
Company earns MDU segment revenue as follows:
 
 1.      from
voice, video and data communications products which are sold and
installed
 2.      direct
billing of user charges to multiple dwelling units, through the activation of,
enhancement of, and residual fees on video programming services provided to
residents of multiple dwelling units
 
 MDU
segment user charges are recognized as revenues in the period the related
services are provided.  Any amounts billed prior to services being
provided are reported as deferred service obligations and revenues.
 
 Revenue
generated from activation of video programming services is earned in the month
of activation.  According to Multiband's Master System Operator
agreement with DirecTV, in the event that a customer cancels within the first 12
months of service, DirecTV has the right to chargeback the Company for a portion
of the activation fees received.  The Company has estimated the
potential charge back of commissions received on activation fees during the past
12 months based on historical percentages of customer cancellations and has
included that amount as a reduction of revenue.  Residual income is
earned as services are provided by DirecTV through its system
operators.  As a master system operator for DirecTV, the Company earns
a fixed percentage based on net cash received by DirecTV for recurring monthly
services, a variable amount depending on the number of activations in a given
month, and a variable amount for coordinating improvements of systems used to
deliver enhanced programming services.  The Company’s master system
operator contract with DirecTV also permits the Company to earn revenues through
its control of other system operators who are unable to provide DirecTV video
programming services without the Company’s performance.
 
 The
Company reports the aforementioned MDU voice, data, and video revenues on a
gross basis based on the following factors: the Company has the primary
obligation in the arrangement with its customers; the Company controls the
pricing of its services; the Company performs customer service for the
agreements; the Company approves customers; and the Company assumes the risk of
payment for services provided. We offer some products and services that are
provided by third party vendors.  We review the relationship between
us, the vendor and the end customer on an individual basis to assess whether
revenue should be reported on a gross or net basis.  As an example,
our resold satellite digital television revenue is reported on a net
basis.
 
 MDU
segment revenue generated by the support center to service third party
subscribers by providing billing and call center support services is recognized
in the period the related services are provided.
  Page
29
 Customers
contract for both the purchase and installation of voice and data networking
technology products and certain video technologies products.  Revenue
is recognized when the products are delivered and installed and the customer has
accepted and has the ability to fulfill the terms of the contract.
 
 The
Company’s policy is to present taxes imposed on revenue-producing transactions
on a net basis.
 
 Deferred
Revenue
 The
Company invoices for certain installation upgrade projects upon order of project
equipment.  Revenue is deferred on these projects until the equipment
is installed.
 
 ITEM
3.  QUANTITIVE AND QUALITIVE DISCLOSURE ABOUT MARKET RISK
 
 None.
 
 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 conducted an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the
period covered by this report (the “Evaluation Date”).  Because of its
inherent limitations, our disclosure controls and procedures may not prevent or
detect misstatements.  A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met.  Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issued and instances of fraud, if any, have
been detected.
 
 Based on
this evaluation, our chief executive officer and chief financial officer
concluded that as of March 31, 2010, our disclosure controls and procedures were
effective to ensure that information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in SEC rules and forms, and that
such information is accumulated and communicated to management, including the
chief executive officer and chief financial officer, to allow timely decisions
regarding required disclosure.
 
 Changes
in Internal Controls
 There
were no changes in our internal control over financial reporting during the
quarter ended March 31, 2010 that have materially affected, or are reasonable
likely to materially affect, our internal control over financial
reporting.
 
 PART
II.  OTHER INFORMATION
 
 ITEM
1.  LEGAL PROCEEDINGS
 
 The
Company is subject to claims, regulatory processes and lawsuits that arise in
the ordinary course of business.  The Company accrues for such matters
when a loss is considered probable and the amount of such loss, or a range of
loss, can be reasonably estimated. The Company’s defense costs are expensed as
incurred.  The Company has recorded $8,549 and $9,299 of accrued
liabilities as of March 31, 2010 and December 31, 2009, for claims and
known and potential settlements and legal fees associated with existing
litigation.  The majority of the accrual relates to claims for back
overtime wages alleged in a number of cases filed between 2006 to 2008 entitled
Lachiev v. JBM (S.D. Ohio); Davis v. JBM (S.D. Ohio); Gruchy v. DirecTech
Northeast (D. Mass); Stephen v. Michigan Microtech (E.D. Mich); and In re
DirecTECH Southwest, Inc. (E.D. La).  Effective December 31, 2009, the
Company settled in principal the majority of these claims.  While the
Company and its predecessors denied the allegations underlying the lawsuits, it
agreed to a settlement to avoid significant legal fees, the uncertainty of a
jury trial, and other expenses and management time that would have to be devoted
to protracted litigation.  The Company recorded the settlement of
$6,729, net of imputed interest of $575 and including administration fees and
estimated payroll taxes.  The aforementioned settlement is being paid
in equal installments of $291 over a 24 month period beginning January 15,
2010.  The balance of the settlement as of March 31, 2010 is
$5,983.
 
 In
connection with the purchase of the operating subsidiaries of DTHC, the Company
has the right to offset a portion of certain claims against the note to
DTHC.  In relation to the settlement noted above, the Company offset
$79 during the three months ended March 31, 2010.  The Company has
recorded a receivable of $980 as of March 31, 2010 which represents an estimate
of the amount that will be recovered from DTHC including legal fees for the
remaining litigation.
  Page
30
 In
December 2009, the US Department of Labor (DOL) sued various individuals that
are either shareholders, directors, trustees and/or advisors to DirecTECH
Holding Company (DTHC) and its Employee Stock Ownership Plan
(ESOP).  The Company was not named in this
complaint.  Various defendants in this matter have made requests to
the Company for advancement or reimbursement of legal fees to defend the
case.  The basis for these requests are certain corporate
indemnification agreements that were entered into by the former DTHC operating
subsidiaries and the Company itself.  To date, the Company has denied
all requests for indemnification of legal fees in this matter for, in part, the
following reasons: 1) Similar indemnification agreements as the ones in question
here were declared illegal under Federal law by a California federal appeals
court; 2) The Company believes the primary remedy the DOL is seeking from the
defendants is one of “disgorgement” from the individual DTHC shareholders; 3)
Multiband has no obligation to indemnify DTHC individual shareholder
conduct.  Notwithstanding the above, the outcome of the matter is
uncertain at present and the Company cannot definitively predict based on the
current facts known to it, whether it ultimately will have any material expense
in the matter.
 
 Additionally,
the Company is subject to pending claims, regulatory processes and lawsuits for
which losses are not probable and amounts cannot be reasonably
estimated.  Those losses could ultimately be material to the Company’s
financial position, results of operations and cash flows.
 
 ITEM
1A.  RISK FACTORS
 
 Our
operations and our securities are subject to a number of risks, including but
not limited to those described below.  If any of the following risks
actually occur, the business, financial condition or operating results of the
Company and the trading price or value of our common stock could be materially
adversely affected.
 
 General
 The
Company, as noted earlier herein, since 1998, has taken several significant
steps to reinvent and reposition itself to take advantage of opportunities
presented by a shifting economy and industry environment.
 
 Recognizing
that voice, data and video technologies in the late twentieth century were
beginning to systematically integrate as industry manufacturers were evolving
technological standards from "closed" proprietary networking architectures to a
more "open" flexible and integrated approach, the Company, between 1998 and
2001, purchased three competitors which, in the aggregate, possessed expertise
in data networking, voice and data cabling and video distribution
technologies.
 
 In early
2000, the Company created its MDU division, employing the aforementioned
expertise, to provide communications and entertainment services (local dial
tone, long distance, high-speed internet and expanded satellite television
services) to residents in MDUs on one billing platform, which the Company
developed internally.  In 2004, the Company added its master system
operator agreement and in 2008, its HSP segment.
 
 The
specific risk factors, as detailed below, should be analyzed in the context of
the Company's evolving business model.
 
 Net
Income (Losses)
 The
Company had a net loss of $964 for the quarter ended March 31, 2010, a net loss
of $11,377 for the year ended December 31, 2009 and net income of $1,597 for the
year ended December 31, 2008.  The Company may never be consistently
profitable.
 
 The
prolonged effects of generating losses without additional funding may restrict
our ability to pursue our business strategy. Unless our business plan is
successful, an investment in our common stock may result in a complete loss of
an investor's capital.
 
 If we
cannot achieve profitability from operating activities, we may not be able to
meet:
 o           our
capital expenditure objectives;
 o           our
debt service obligations; or
 o           our
working capital needs.
 
 Working
Capital
 The
Company had a working capital deficit of $28,635 at March 31, 2010, compared to
positive working capital in the amount of $28,596 at December 31, 2009 due to
the acquisition of DirecTECH.
  Page
31
 Long-lived
Assets
 The
Company reviews its long-lived assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable or exceeds its fair value.  The carrying amount of a
long-lived asset is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the
asset.  An impairment loss shall be measured as the amount by which
the carrying amount of a long-lived asset exceeds its fair
value.  Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.  There was no impairment
at March 31, 2010 or December 31, 2009.
 
 Goodwill
and Intangible Assets
 Annually,
the Company tests for impairment its goodwill and intangible assets without a
defined life.  We tested impairment for the HSP and MDU segments which
had goodwill at December 31, 2009 using standard fair value measurement
techniques.  The Company concluded there was no goodwill impairment as
of December 31, 2009.  However, should the Company in future periods
experience a significant decline in profitability and/or should the business
climate for satellite providers deteriorate, some impairment to its goodwill
could occur.  If an impairment occurs it could be materially adverse
to the Company’s results of operations in those future periods.  As of
March 31, 2010, the Company had goodwill of $38,067 and intangibles of $20,960
primarily related to the purchase of DirecTECH.  At March 31, 2010,
the Company did not note any indications of impairment related to goodwill or
its intangible assets.
 
 Group
Health and Workers’ Compensation Insurance Coverage
 The
Company uses a combination of self-insurance and third-party carrier insurance
with predetermined deductibles that cover certain insurable risks. The Company’s
share of its workers compensation plan are recorded for the aggregate
liabilities for claims reported, based on historical experience. The Company
also estimates the cost of health care claims that have been incurred but not
reported, based on historical experience.
 
 Insurance
and claims accruals reflect the estimated cost for group health and workers’
compensation claims not covered by insurance.  The insurance and
claims accruals are recorded at the estimated ultimate payment
amounts.  Such insurance and claims accruals are based upon individual
case estimates and estimates of incurred-but-not-reported losses using loss
development factors based upon past experience.
 
 During
2009, in certain states, the Company is self-insured for workers’ compensation
liability claims up to $100, plus administrative expenses, for each occurrence
involving workers’ compensation claims since February 1,
2009.  Effective January 1, 2010, the Company is self-insured for
workers compensation claims up to $250 plus administrative expenses, for each
occurrence involving workers compensation claims since that date.
 
 The
Company is self-insured for health insurance covering the range of liability
under which management expects most claims to occur.  If any liability
claims are substantially in excess of coverage amounts, such claims are covered
under premium-based policies issued by insurance companies to coverage levels
that management considers adequate.
 
 Debt
 The
Company has related party debt of approximately $30,000 which will be due in
January 2013.  We will need to seek additional financing to pay this
debt if there is not adequate cash flow from operations.  Sources of
additional financing, if needed in future, may include further debt financing or
the sale of equity (including the issuance of preferred stock) or other
securities.  We cannot assure you that any additional sources of
financing or new capital will be available to us, available on acceptable terms,
or permitted by the terms of our current debt.  In addition, if we
sell additional equity to raise funds, all outstanding shares of common stock
will be diluted.
 
 Deregulation
 Several
regulatory and judicial proceedings have recently concluded, are underway or may
soon be commenced that address issues affecting our operations and those of our
competitors, which may cause significant changes to our industry.  We
cannot predict the outcome of these developments, nor can we assure you that
these changes will not have a material adverse effect on
us.  Historically, we have been a reseller of products and services,
not a manufacturer or carrier requiring regulation of its
activities.  Pursuant to Minnesota statutes, our activity is
specifically exempt from the need to tariff our services in
MDU's.  However, the Telecommunications Act of 1996 provides for
significant deregulation of the telecommunications industry, including the local
telecommunications and long-distance industries.  This federal statute
and the related regulations remain subject to judicial review and additional
rule-makings of the Federal Communications Commission, making it difficult to
predict what effect the legislation will have on us, our operations, and our
competitors.
  Page
32
 Dependence
on Strategic Alliances
 Several
suppliers or potential suppliers of the Company, such as McLeod, WorldCom, WS
Net, XO Communications and others have filed for bankruptcy in recent
years.  While the financial distress of its suppliers or potential
suppliers could have a material adverse effect on the Company's business, The
Company believes that enough alternate suppliers exist to allow the Company to
execute its business plans.  The Company is also highly dependent on
its Master System Operator agreement with DirecTV.  The initial term
of the agreement expired in August 2008, and provided for two additional
two-year renewals if the Company had a minimum number of paying video
subscribers in its system operator network.  The Company did meet the
requirements and has entered into the first two year automatic renewal
period.  The Company also has a home service provider agreement with
DirecTV ending May 1, 2013.  The term of this agreement with DirecTV
will automatically renew for additional one year periods unless either the
Company or DirecTV gives written notice of termination at least 90 days in
advance of expiration of the then current term.  Although an alternate
provider of satellite television services, Echostar, exists, the termination of
any or all of its HSP dealer agreements with DirecTV would have a material
adverse effect on the Company’s business.
 
 Changes
in Technology
 A portion
of our projected future revenue is dependent on public acceptance of broadband
and expanded satellite television services.  Acceptance of these
services is partially dependent on the infrastructure of the internet and
satellite television which is beyond the Company's control.  In
addition, newer technologies, such as video-on-demand, are being developed which
could have a material adverse effect on the Company's competitiveness in the
marketplace if the Company is unable to adopt or deploy such
technologies.
 
 Attraction
and Retention of Employees
 The
Company's success depends on the continued employment of certain key personnel,
including executive officers. If the Company were unable to continue to attract
and retain a sufficient number of qualified key personnel, its business,
operating results and financial condition could be materially and adversely
affected. In addition, the Company's success depends on its ability to attract,
develop, motivate and retain highly skilled and educated professionals with a
wide variety of management, marketing, selling and technical capabilities.
Competition for such personnel is intense and is expected to increase in the
future.
 
 Intellectual
Property Rights
 The
Company relies on a combination of trade secret, copyright and trademark laws,
license agreements, and contractual arrangements with certain key employees to
protect its proprietary rights and the proprietary rights of third parties from
which the Company licenses intellectual property.  The Company also
relies on agreements with owners of multi-dwelling units which grant the Company
rights of access for a specific period to the premises whereby The Comapny is
allowed to offer its voice, data, and video services to individual residents of
the property.  If it was determined that the Company infringed the
intellectual property rights of others, it could be required to pay substantial
damages or stop selling products and services that contain the infringing
intellectual property, which could have a material adverse effect on the
Company's business, financial condition and results of
operations.  Also, there can be no assurance that the company would be
able to develop non-infringing technology or that it could obtain a license on
commercially reasonable terms, or at all. The Company's success depends in part
on its ability to protect the proprietary and confidential aspects of its
technology and the products and services it sells.  There can be no
assurance that the legal protections afforded to the company or the steps taken
by the Company will be adequate to prevent misappropriation of the Company's
intellectual property.
 
 Variability
of Quarterly Operating Results
 Variations
in the Company's revenues and operating results occur from quarter to quarter as
a result of a number of factors, including customer engagements commenced and
completed during a quarter, the number of business days in a quarter, employee
hiring and utilization rates, the ability of customers to terminate engagements
without penalty, the size and scope of assignments and general economic
conditions.  Because a significant portion of the Company's expenses
are relatively fixed, a variation in the number of customer projects or the
timing of the initiation or completion of projects could cause significant
fluctuations in operating results from quarter to quarter.
 
 Certain
Anti-Takeover Effects
 The
Company is subject to Minnesota statutes regulating business combinations and
restricting voting rights of certain persons acquiring shares of
Multiband.  These anti-takeover statutes may render more difficult or
tend to discourage a merger, tender offer or proxy contest, the assumption of
control by a holder of a large block of the Company's securities, or the removal
of incumbent management.
  Page
33
 Volatility of Multiband's Common Stock
 The
trading price of our common stock has been and is likely to continue to be
volatile.  The stock market has experienced extreme volatility, and
this volatility has often been unrelated to the operating performance of
particular companies.  Prices for our common stock are determined in
the marketplace and may be influenced by many factors, including variations in
our financial results, changes in earnings estimates by industry research
analysts, investors' perceptions of us and general economic, industry and market
conditions.
 
 Future
Sales of Our Common Stock May Lower Our Stock Price
 If our
existing shareholders sell a large number of shares of our common stock, the
market price of the common stock could decline significantly.  The
perception in the public market that our existing shareholders might sell shares
of common stock could depress our market price.
 
 National
Market for Stock
 There is
no assurance that the Company’s common stock will continue to trade on the
Nasdaq Stock Market or other national stock exchange due to ongoing listing
criteria for such exchanges.
 
 Competition
 We face
competition from others who are competing for a share of the HSP and MDU
markets, including other satellite companies, cable companies and telephone
companies.  Some of these companies have significantly greater assets
and resources than we do.
 
 Uncertain
Effects of the Acquisition
 During
2009, the Company completed its acquisition of the former operating subsidiaries
of DTHC (see Note 2).  The DTHC operating entity business as merged
into the Multiband business may not achieve the operating results and growth
anticipated by management in structuring the transaction.
 
 General
Economic Conditions
 As of
this writing, the United States is experiencing overall adverse economic
conditions.  While we believe this environment may actually assist the
Company in that consumers may stay home more for entertainment, there is no
guarantee that consumers will continue to purchase the Company’s services at a
constant level if the country’s recession  Continues.
 
 Page
34
 
 ITEM
6.  EXHIBITS
 
 (a)
              Exhibits
 
 31.1
                Certification
      of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the
      Exchange Act.
 
 31.2
                Certification
      of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of the
      Exchange Act.
 
 32.1
                Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section
    1350.
 32.2
                Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section
    1350.
 
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 MULTIBAND
      CORPORATION
                  RegistrantDate:  May
      13, 2010
                By:
                /s/
      James L. Mandel
                  Chief
      Executive OfficerDate:  May
      13, 2010
                By:
                /s/
      Steven M. Bell
                  Chief
      Financial Officer
                  (Principal
      Financial and Accounting
Officer)
  Page
35