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 SEPTEMBER 30, 2006ORo
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
                ACT
                OF 1934FOR
                THE TRANSITION PERIOD FROM ____________TO ____________COMMISSION
                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, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act:




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




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
      November 7, 2006 there were 35,049,887 shares outstanding of the registrant's
      common stock, no par value, and 404,355 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**




Three
                Months Ended
            
            Nine
                Months EndedSeptember
                30,
              2006
            
            September
                30,
              2005
            
            September
                30,
              2006
            
            September
                30,
              2005(unaudited)
            
            (unaudited)
            
            (unaudited)
            
            (unaudited)REVENUES
            
            $
            4,524,885
            
            $
            4,257,660
            
            $
            13,430,666
            
            $
            12,148,142COSTS
                AND EXPENSESCost
                of products and services (exclusive of depreciation and amortization
                shown
                separately below)
            
            
            2,087,643
            
            
            2,303,357
            
            
            6,082,068
            
            
            5,886,382Selling,
                general and administrative
            
            
            2,915,463
            
            
            2,453,410
            
            
            8,796,724
            
            
            6,977,897Depreciation
                and amortization
            
            
            1,404,855
            
            
            1,255,188
            
            
            4,015,925
            
            
            3,622,922Total
                Costs and Expenses
            
            
            6,412,961
            
            
            6,011,955
            
            
            18,894,717
            
            
            16,487,201LOSS
                FROM OPERATIONS
            
            
            (1,883,076
            )
            
            (1,754,295
            )
            
            (5,464,051
            )
            
            (4,339,059
            )OTHER
                EXPENSEInterest
                expense
            
            
            (306,672
            )
            
            (536,000
            )
            
            (936,876
            )
            
            (1,594,714
            )Other
                income
            
            
            27,220
            
            
            77,737
            
            
            104,606
            
            
            160,029Total
                Other Expense
            
            
            (279,452
            )
            
            (458,263
            )
            
            (832,270
            )
            
            (1,434,685
            )LOSS
                FROM CONTINUING OPERATIONS
            
            
            (2,162,528
            )
            
            (2,212,558
            )
            
            (6,296,321
            )
            
            (5,773,744
            )INCOME
                (LOSS) FROM DISCONTINUED OPERATIONS
            
            
            -
            
            
            248,249
            
            
            2,200
            
            
            (70,127
            )NET
                LOSS
            
            
            (2,162,528
            )
            
            (1,964,309
            )
            
            (6,294,121
            )
            
            (5,843,871
            )Preferred
                Stock Dividends
            
            
            (302,990
            )
            
            (1,364,180
            )
            
            (3,088,438
            )
            
            (2,964,898
            )LOSS
                ATTRIBUTABLE TO COMMON STOCKHOLDERS
            
            $
            (2,465,518
            )
            $
            (3,328,489
            )
            $
            (9,382,559
            )
            $
            (8,808,769
            )BASIC
                AND DILUTED - LOSS PER COMMON SHARELoss
                from continuing operations
            
            
            (.06
            )
            
            (.08
            )
            
            (.19
            )
            
            (.21
            )Income
                (loss) from discontinued operations
            
            
            .00
            
            
            .01
            
            
            .00
            
            
            (.00
            )Net
                Loss
            
            
            (.06
            )
            
            (.07
            )
            
            (.19
            )
            
            (.21
            )LOSS
                ATTRIBUTABLE TO COMMON STOCKHOLDERS
            
            
            (.07
            )
            
            (.11
            )
            
            (.28
            )
            
            (.31
            )WEIGHTED
                AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED
            
            
            34,468,510
            
            
            29,352,257
            
            
            33,388,382
            
            
            28,408,934





See
      notes
      to condensed consolidated financial statements





2




**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**




September
                30, 2006
            
            December
                31, 2005(unaudited)
            
            (audited)***ASSETS*****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            822,962
            
            $
            3,100,427Accounts
                receivable, net
            
            
            1,997,999
            
            
            2,367,864Inventories
            
            
            223,019
            
            
            241,015Prepaid
                expenses and other
            
            
            512,949
            
            
            216,885Current
                portion of notes receivable
            
            
            6,092
            
            
            11,316Total
                Current Assets
            
            
            3,563,021
            
            
            5,937,507**PROPERTY
                AND EQUIPMENT, NET**
            
            
            5,081,420
            
            
            5,247,240**OTHER
                ASSETS**Goodwill
            
            
            926,551
            
            
            954,871Intangible
                assets, net
            
            
            11,608,922
            
            
            13,923,542Notes
                receivable - long-term, net
            
            
            65,175
            
            
            61,341Other
                assets
            
            
            112,416
            
            
            146,904Total
                Other Assets
            
            
            12,713,064
            
            
            15,086,658**TOTAL
                ASSETS**
            
            $
            21,357,505
            
            $
            26,271,405


***LIABILITIES
                AND STOCKHOLDERS' EQUITY*****CURRENT
                LIABILITIES**Checks
                issued in excess of cash in bank
            
            $
            212,736
            
            $
            93,005Current
                portion of long-term debt
            
            
            522,975
            
            
            616,260Current
                portion of note payable - stockholder
            
            
            29,000
            
            
            32,837Current
                portion of capital lease obligations
            
            
            434,262
            
            
            179,932Accounts
                payable
            
            
            2,228,727
            
            
            1,761,249Accrued
                liabilities
            
            
            2,618,692
            
            
            2,741,054Customer
                deposits
            
            
            61,707
            
            
            64,161Current
                liabilities of discontinued operations
            
            
            250,000
            
            
            500,000Deferred
                service obligations and revenue
            
            
            901,349
            
            
            587,093Mandatory
                redeemable preferred stock,
              and
                33,334 Class F preferred shares
            
            
            280,000
            
            
            333,334Total
                Current Liabilities
            
            
            7,539,448
            
            
            6,908,925**LONG-TERM
                LIABILITIES**Long-term
                debt, net
            
            
            3,846,779
            
            
            3,816,536Capital
                lease obligations, net of current portion
            
            
            495,740
            
            
            452,649Long-term
                liabilities of discontinued operations
            
            
            -
            
            
            125,000Total
                Liabilities
            
            
            11,881,967
            
            
            11,303,110**COMMITMENTS
                AND CONTINGENCIES****STOCKHOLDERS'
                EQUITY**Cumulative
                convertible preferred stock, no par value:8%
                Class A (26,658 and 27,931 shares issued and outstanding, $279,909
                and
                $293,276 liquidation preference)
            
            
            407,017
            
            
            419,75210%
                Class B (7,770 and 8,390 shares issued and outstanding, $81,585 and
                $88,095 liquidation preference)
            
            
            52,700
            
            
            58,90010%
                Class C (124,430 and 125,050 shares issued and outstanding, $1,244,300
                and
                $1,250,500 liquidation preference)
            
            
            1,601,405
            
            
            1,607,60510%
                Class F (150,000 shares issued and outstanding, $1,500,000 liquidation
                preference)
            
            
            1,500,000
            
            
            1,500,0008%
                Class G (45,245 shares issued and outstanding, $452,450 liquidation
                preference)
            
            
            179,897
            
            
            179,8976%
                Class H (2.0 shares issued and outstanding, $200,000 liquidation
                preference)
            
            
            -
            
            
            -Variable
                rate % Class I (65,000 and 90,000 shares issued and outstanding,
                $6,500,000 and $9,000,000 liquidation preference)
            
            
            -
            
            
            -Common
                stock, no par value (34,497,316 and 32,134,558 shares issued and
                outstanding)
            
            
            25,977,112
            
            
            22,801,405Stock
                subscriptions receivable
            
            
            (254,807
            )
            
            (297,105
            )Options
                and warrants
            
            
            44,926,611
            
            
            44,259,540Unamortized
                compensation
            
            
            -
            
            
            (29,861
            )Accumulated
                deficit
            
            
            (64,914,397
            )
            
            (55,531,838
            )Total
                Stockholders' Equity
            
            
            9,475,538
            
            
            14,968,295**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY**
            
            $
            21,357,505
            
            $
            26,271,405




See
      notes
      to condensed consolidated financial statements





3




**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**FOR
      NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**





**NINE
                MONTHS ENDED SEPTEMBER 30,****2006**
            
            **2005**(unaudited)
            
            (unaudited)OPERATING
                ACTIVITIESNet
                loss
            
            $
            (6,294,121
            )
            $
            (5,843,871
            )Adjustments
                to reconcile net loss to net cash flows from operating
                activitiesDepreciation
                and amortization
            
            
            4,158,716
            
            
            3,896,131Amortization
                of deferred compensation
            
            
            29,480
            
            
            128,354Amortization
                of original issue discount
            
            
            358,725
            
            
            913,339Gain
                on sale of business segment
            
            
            -
            
            
            (253,356
            )Warrants
                issued for services
            
            
            12,085
            
            
            6,256Common
                stock issued for services
            
            
            1,156
            
            
            20,580Gain
                on sale of property and equipment and intangible assets
            
            
            (105,782
            )
            
            (94,277
            )Gain
                on sale of URON Inc. subsidiary
            
            
            (26,669
            )
            
            -Change
                in allowance for doubtful accounts receivable
            
            
            (165,130
            )
            
            -Change
                in reserve for stock subscriptions and interest receivable
            
            
            36,434
            
            
            -Stock
                based compensation expense
            
            
            655,367
            
            
            -Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            533,336
            
            
            574,006Inventories
            
            
            17,996
            
            
            (189,220
            )Prepaid
                expenses and other
            
            
            63,868
            
            
            113,991Other
                assets
            
            
            34,488
            
            
            5,000Wholesale
                line of credit
            
            
            -
            
            
            (1,000,987
            )Accounts
                payable and accrued liabilities
            
            
            187,560
            
            
            (1,336,387
            )Deferred
                service obligations and revenue
            
            
            201,037
            
            
            184,995Liabilities
                of discontinued operations
            
            
            (375,000
            )
            
            (250,000
            )Customer
                deposits
            
            
            (2,454
            )
            
            295Net
                cash flows from operating activities
            
            
            (678,908
            )
            
            (3,125,151
            )INVESTING
                ACTIVITIESPurchases
                of property and equipment
            
            
            (756,706
            )
            
            (698,269
            )Purchases
                of intangible assets
            
            
            (31,159
            )
            
            (209,225
            )Purchase
                of Dinamo Entertainment, LLC
            
            
            -
            
            
            (726,525
            )Proceeds
                from sale of URON Inc. subsidiary
            
            
            75,000
            
            
            -Purchase
                of Ultravision
            
            
            -
            
            
            (287,050
            )Purchase
                of Satellite Broadcasting Corporation
            
            
            -
            
            
            (200,000
            )Proceeds
                from sale of business segment
            
            
            -
            
            
            1,682,184Proceeds
                from sale of property and equipment and intangible assets
            
            
            50,000
            
            
            91,500Collections
                on notes receivable
            
            
            2,478
            
            
            -Net
                cash flows from investing activities
            
            
            (660,387
            )
            
            (347,385
            )FINANCING
                ACTIVITIESChecks
                issued in excess of cash in bank
            
            
            119,731
            
            
            (154,760
            )Payments
                on short-term debt
            
            
            -
            
            
            (4,147,765
            )Payments
                on long-term debt
            
            
            (695,877
            )
            
            (2,456,305
            )Payments
                on capital lease obligations
            
            
            (167,821
            )
            
            (137,040
            )Payments
                on note payable to stockholder
            
            
            (3,837
            )
            
            (51,964
            )Payments
                on mandatory redeemable preferred stock
            
            
            (53,334
            )
            
            -Payments
                for debt issuance costs
            
            
            -
            
            
            (25,000
            )Payments
                for stock issuance costs
            
            
            (21,339
            )
            
            -Proceeds
                from issuance of stock and warrants
            
            
            -
            
            
            11,084,783Proceeds
                from issuance of long-term debt
            
            
            -
            
            
            2,000,000Exercise
                of warrants
            
            
            -
            
            
            6,960Payments
                received on stock subscriptions receivable
            
            
            5,938
            
            
            66,399Redemption
                of preferred stock
            
            
            (25,135
            )
            
            (3,400
            )Preferred
                stock dividends
            
            
            (114,496
            )
            
            (52,599
            )Exercise
                of stock options
            
            
            18,000
            
            
            -Net
                cash flows from financing activities
            
            
            (938,170
            )
            
            6,129,309INCREASE
                (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            (2,277,465
            )
            
            2,656,773CASH
                AND CASH EQUIVALENTSBeginning
                of period
            
            
            3,100,427
            
            
            726,553End
                of period
            
            $
            822,962
            
            $
            3,383,326




See
      notes
      to condensed consolidated financial statements





4





**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**FOR
      NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005**




**NINE
                MONTHS ENDED SEPTEMBER 30,****2006**
            
            **2005****(unaudited)**
            
            **(unaudited)**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATIONCash
                paid for interest, net of amortization of original issue
                discount
            
            $
            408,244
            
            $
            658,429SUPPLEMENTAL
                DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIESNote
                receivable recorded on sale of discontinued operations
            
            
            -
            
            
            400,000Conversion
                of preferred stock into common stock
            
            
            2,370,000
            
            
            1,834,001Current
                liabilities converted to stock
            
            
            28,653
            
            
            93,297Conversion
                of notes payable into common stock
            
            
            200,000
            
            
            1,436,062Conversion
                of accrued dividends into common stock
            
            
            416,737
            
            
            185,045Note
                receivable recorded on sale of intangibles to Satellite Broadcasting
                Corporation
            
            
            -
            
            
            75,500Capital
                lease obligation entered into as part of the purchase of intangibles
                from
                Satellite Broadcasting Corporation
            
            
            -
            
            
            105,000Issuance
                of common stock for purchase of SBC intangibles
            
            
            -
            
            
            105,000Note
                payable issued in relation to acquisition of Dinamo Entertainment,
                LLC
            
            
            -
            
            
            600,000Common
                stock issued in relation to acquisition of Dinamo Entertainment,
                LLC
            
            
            -
            
            
            702,500Common
                stock issued in lieu of cash for other current assets
            
            
            -
            
            
            218,000Issuance
                of common stock for deferred financing costs
            
            
            -
            
            
            36,000Capital
                lease obligations related to property and equipment
            
            
            465,242
            
            
            -Warrants
                issued for deferred compensation
            
            
            -
            
            
            213,120Issuance
                of accrued liabilities for debt issuance costs
            
            
            -
            
            
            125,000Note
                payable issued in relation to the acquisition of Rand’M
            
            
            127,360
            
            
            -Note
                payable issued in relation to the acquisition of Extreme
                Video
            
            
            346,750
            
            
            -Common
                stock issued in relation to acquisition of Extreme Video
            
            
            162,500
            
            
            -Sale
                of property and equipment and intangible assets for other current
                asset
            
            
            361,094
            
            
            -Distribution
                of URON, Inc. common stock as stock dividends
            
            
            46,989
            
            
            -Deferred
                revenue related to service agreement with URON, Inc. in exchange
                for other
                current assets
            
            
            116,500
            
            
            -




See
      notes
      to condensed consolidated financial statements




5


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**




**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
      consolidated financial statements should be read in conjunction with the
      consolidated financial statements and footnotes thereto included in the
      Company’s Annual Report on Form 10-K for the year ended December 31, 2005,
      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 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
      nine months ended September 30, 2006 and 2005, the Company incurred net losses
      from continuing operations of $6,296,321 and $5,843,871, respectively. At
      September 30, 2006, the Company had an accumulated deficit of $64,914,397.
      The
      Company's ability to continue as a going concern is dependent on it ultimately
      achieving profitability and/or raising additional capital. Management intends
      to
      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 lease obligations and fund the Company's future
      operations:





1.  Reduction
      of operating expenses by controlling payroll, professional fees and other
      general and administrative expenses.


2.  Continue
      to market Multiband services and obtain additional multi-dwelling unit
      customers.


3. Control
          capital expenditures by contracting Multiband services and equipment through
          a
          landlord-owned equipment program or by financing equipment build-outs through
          a
          leasing program.


4.  Establish
      market for wireless internet services.


5.  Solicit
      additional equity investment in the Company by either issuing preferred or
      common stock.


6.
      Sale
      of Subscriber Assets





*Principles
      of Consolidation*





The
      consolidated financial statements include the accounts of Multiband Corporation
      (MB) and its wholly owned subsidiaries, Corporate Technologies, USA, Inc. (CTU),
      URON Inc.(URON) (see Note 10), Multiband USA, Inc. (MB USA), Minnesota Digital,
      Inc. (MDU), Rainbow Satellite Group, LLC (Rainbow) and Multiband Subscriber
      Services, Inc. (Multiband) which provides voice, data and video services to
      residential multi-dwelling units. All significant intercompany transactions
      and
      balances have been eliminated in consolidation.





On
      January 1, 2004, the Company merged Multiband into CTU. On April 1, 2005, the
      continuing operations of CTU terminated (see Note 9). In August 2006, the
      Company completed a stock dividend and sold the remaining interest of URON
      (see
      Note 10).


6


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**


*Discontinued
      Operations*





During
      the first quarter of 2005, the Company sold certain assets and transferred
      certain liabilities related to its Multiband Business Services (a/k/a CTU).
      In
      accordance with appropriate accounting rules, the Company reclassified the
      previously reported financial results to exclude the results of the Multiband
      Business Services (CTU) and these results are presented on a historical basis
      as
      a separate line in the consolidated statements of operations and the
      consolidated balance sheets entitled “Discontinued Operations”. All of the
      financial information in the consolidated financial statements and notes to
      the
      consolidated financial statements has been revised to reflect only the results
      of continuing operations (see Note 9).





*Revenues
      and Cost Recognition*





The
      Company recognizes revenue in accordance with the Securities Exchange
      Commission’s Staff Accounting Bulletin No. 104 (SAB 104) “Revenue Recognition”,
      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) collectibility is reasonable assured; and (iv)
      product delivery has occurred or services have been rendered. The Company
      recognizes revenue (included in discontinued operations) as products are shipped
      based on FOB shipping point terms when title passes to customers.





The
      Company earns revenues from six sources: 1) Video and computer technology
      products which are sold but not installed, 2) Voice, video and data
      communication products which are sold and installed, 3) Service revenues related
      to communication products which are sold and both installed and not installed
      4)
      Multiband user charges to multiple dwelling units 5) MB USA user charges to
      timeshares, and 6) MDU earns revenue primarily through the activation of and
      residual fees on video programming services.





Revenues
      from video and computer technology products, which are sold but not installed,
      are recognized when delivered and the customer has accepted the terms and has
      the ability to fulfill the terms. Product returns and customer discounts are
      netted against revenues. This revenue has been included with discontinued
      operations.





Customer’s
      contract for both the purchase and installation of voice and data networking
      technology products and certain video technologies products on one sales
      agreement, as installation of the product is essential to the functionality
      of
      the product. Revenue is recognized when the products are delivered and installed
      and the customer has accepted the terms and has the ability to fulfill the
      terms. This revenue has been included with discontinued operations. Service
      revenues related to technology products including consulting, training and
      support are recognized when the services are provided. Service revenues
      accounted for less than 10% of total revenues for the three and nine months
      ended September 30, 2006 and 2005. The Company, if the customer elects, enters
      into equipment maintenance agreements for products sold once the original
      manufacturer's warranty has expired. Revenues from all equipment maintenance
      agreements are recognized on a straight-line basis over the terms of each
      contract. Costs for services are expensed as incurred. This revenue has been
      included with discontinued operations.





Revenue
      generated from activation on video programming services is earned in the month
      of activation. According to the Company's 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.
      In accordance with Securities Exchange Commission SAB 104, 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
      and a variable amount depending on the number of activations in a given month.
      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 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. The Company reports DirecTV revenue on a net basis.




7


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**


The
      Company has determined that the accounting policies for income recognition
      described above were in accordance with the Financial Accounting Standards
      Board
      Emerging Issues Task Force (“EITF”) Issue No. 99-19, “Reporting Revenue Gross as
      a Principal versus Net as an Agent”. EITF No. 99-19 employs multi-factor tests
      to determine whether amounts charged to customers in respect of certain expenses
      incurred should be included in revenues or netted against such
      expenses.





Multiband,
      Rainbow, MDU and MB USA user charges are recognized as revenues in the period
      the related services are provided in accordance with SAB 104. Any amounts billed
      prior to services being provided are reported as deferred service obligations
      and revenues.





Warranty
      costs incurred on new product sales are substantially reimbursed by the
      equipment suppliers.





*Cash
      and Cash Equivalents*





The
      Company includes as cash equivalents, investments with original maturities
      of
      three months or less when purchased, which are readily convertible into known
      amounts of cash. The Company deposits its cash in high credit quality financial
      institutions. The balances, at times, may exceed federally insured
      limits.





*Goodwill
      and Other Intangible Assets*





The
      Company periodically evaluates acquired businesses for potential impairment
      indicators. Our judgments regarding the existence of impairment indicators
      are
      based on legal factors, market conditions and operational performance of our
      acquired businesses. Future events could cause us to conclude that impairment
      indicators exist and that goodwill associated with our acquired businesses
      is
      impaired. Any resulting impairment loss could have a material adverse impact
      on
      our financial condition and results of operations. Goodwill related to
      continuing operations was $926,551 and $954,871 at September 30, 2006 and
      December 31, 2005, respectively.





Components
      of intangible assets are as follows:




September
                30, 2006
            
            December
                31, 2005Gross
                Carrying
            
            Accumulated
            
            Gross
                Carrying
            
            AccumulatedAmount
            
            Amortization
            
            Amount
            
            AmortizationIntangible
                assets subject to amortizationDomain
                name
            
            $
            83,750
            
            $
            83,750
            
            $
            83,750
            
            $
            72,583Right
                of entry contracts
            
            
            9,301,738
            
            
            3,430,803
            
            
            9,129,028
            
            
            2,300,664Subscriber
                lists
            
            
            10,151,809
            
            
            4,464,716
            
            
            10,151,809
            
            
            3,261,483Debt
                issuance costs
            
            
            499,837
            
            
            448,943
            
            
            499,837
            
            
            306,152Total
            
            $
            20,037,134
            
            $
            8,428,212
            
            $
            19,864,424
            
            $
            5,940,882Intangible
                assets not subject to amortizationGoodwill
            
            $
            926,551
            
            $
            -
            
            $
            954,871
            
            $
            -





The
      Company amortizes a domain name over its estimated useful life of five years
      using the straight-line method. The Company amortizes the right of entry
      contracts and subscriber lists, over their estimated useful lives ranging from
      24 to 180
      months. Debt issuance costs are amortized over the life of the loan of
      approximately three years using the straight-line method, which approximates
      the
      interest method.





Amortization
      of intangible assets was $898,539 and $934,205 for the three months ended
      September 30, 2006 and 2005, respectively. For the nine months ended September
      30, 2006 and 2005, amortization of intangible assets was $2,651,022 and
      $2,649,059, respectively. Amortization of debt issuance costs of $142,790 and
      $204,461 for the nine months ended September 30, 2006 and 2005, respectively,
      is
      included in interest expense. Estimated amortization expense of intangible
      assets for the years ending December 31, 2006, 2007, 2008, 2009, 2010 and 2011
      is $3,538,078, $3,323,801, $3,101,047, $2,929,094, $1,096,133 and $61,751,
      respectively. The weighted average remaining life of the intangibles is 6.8
      years with right of entry average life of 7.1 years and subscriber lists average
      life of 2 years.


8


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**


*Stock-Based
      Compensation*





Effective
      January 1, 2006, the Company adopted SFAS No. 123R Accounting for
      Stock-Based Compensation (SFAS 123R), which requires companies to measure and
      recognize compensation expense for all stock-based payments at fair value.
      SFAS
      123R is being applied on the modified prospective transition method and
      therefore the Company has not restated results for prior periods. The financial
      statements for the three and nine months ended September 30, 2006 recognize
      compensation cost for the portion of outstanding awards which have vested during
      the period. 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 and nine months ended September
      30, 2006, total stock-based compensation expense of $169,846 ($0.00 per share)
      and $655,367 ($0.02 per share) was included in selling, general and
      administrative expenses. The Company is estimating $171,000 of additional
      stock-based compensation expense for the remainder of 2006 related to SFAS
      123R.





The
      following table illustrates the effect on net loss and net loss per share if
      the
      Company had applied the fair value recognition provisions of SFAS No. 123, *Accounting
      for Stock-Based Compensation* ,
      to its
      stock-based employee compensation for the three and nine months ended September
      30, 2005.





Three
                months ended
              September
                30, 2005
            
            Nine
                months ended
              September
                30, 2005Loss
                attributable to common stockholders
            
            $
            (3,328,489
            )
            $
            (8,808,769
            )Pro
                forma loss attributable to common stockholders
            
            
            (3,361,016
            )
            
            (9,226,215
            )Basic
                and diluted loss attributable to common stockholders:As
                reported
            
            
            (.11
            )
            
            (.31
            )Pro
                forma loss attributable to common shares
            
            
            (.11
            )
            
            (.32
            )Stock-based
                compensation:As
                reported
            
            
            -
            
            
            -Pro
                forma
            
            
            32,527
            
            
            417,446





In
      determining the compensation cost of the options granted during the three and
      nine months ended September 30, 2006 and 2005, as specified by SFAS No. 123,
      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 summarized as follows:





Three
                months ended
              September
                30, 2006
            
            Three
                months ended
              September
                30, 2005
            
            Nine
                months ended
              September
                30, 2006
            
            Nine
                months ended
              September
                30, 2005Risk-free
                interest rate
            4.88%
            
            4.12%
            
            4.73%
            
            3.75%Expected
                life of options granted
            10
                years
            
            10
                years
            
            10
                years
            
            10
                yearsExpected
                volatility range
            216%
            
            211%
            
            215%
            
            207%Expected
                dividend yield
            0%
            
            0%
            
            0%
            
            0%





The
      Company uses the Black-Scholes option-pricing model (Black-Scholes model) for
      the Company’s pro forma information required under SFAS 123 and stock based
      compensation expense recognized under SFAS 123R. 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.


9


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**


*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 net 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 and nine months ended September 30, 2006 and 2005 were anti-dilutive
      due to the Company’s net losses.





*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: 1) MCS, which acts as a principal in billing voice, data
      and
      cable revenues to subscribers; and 2) MDU, Inc. which collects net revenue
      from
      DirecTV.





*Recent
      Accounting Pronouncements*





The
      Financial Accounting Standards Board has published FASB Interpretation (FIN)
      No.
      48 (FIN No. 48), “Accounting for Uncertainty in Income Taxes”, to address the
      noncomparability in reporting tax assets and liabilities resulting from a lack
      of specific guidance in FASB Statement of Financial Accounting Standards (SFAS)
      No. 109 (SFAS 109), “Accounting for Income Taxes”, on the uncertainty in income
      taxes recognized in an enterprise’s financial statements. Specifically, FIN No.
      48 prescribes (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. FIN No. 48 will apply to fiscal
      years beginning after December 15, 2006, with earlier adoption permitted. The
      Company does not expect the adoption of FIN No. 48 to have a material impact
      on
      the consolidated financial statements.





In
      September 2006, the FASB issued SFAS No. 157 (SFAS No. 157), *Fair
      Value Measurements,* to
      eliminate the diversity in practice that exists due to the different definitions
      of fair value and the limited guidance for applying those definitions in GAAP
      that are dispersed among the many accounting pronouncements that require fair
      value measurements. SFAS No. 157 retains the exchange price notion in earlier
      definitions of fair value, but clarifies that the exchange price is the price
      in
      an orderly transaction between market participants to sell an asset or liability
      in the principal or most advantageous market for the asset or liability.
      Moreover, the SFAS states that the transaction is hypothetical at the
      measurement date, considered from the perspective of the market participant
      who
      holds the asset or liability. Consequently, 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 (an
      exit
      price), as opposed to the price that would be paid to acquire the asset or
      received to assume the liability at the measurement date (an entry price).




SFAS
      No.
      157 also stipulates that, as a market-based measurement, fair value measurement
      should be determined based on the assumptions that market participants would
      use
      in pricing the asset or liability, and establishes a fair value hierarchy that
      distinguishes between (a) market participant assumptions developed based on
      market data obtained from sources independent of the reporting entity
      (observable inputs) and (b) the reporting entity's own assumptions about market
      participant assumptions developed based on the best information available in
      the
      circumstances (unobservable inputs). Finally, SFAS No. 157 expands disclosures
      about the use of fair value to measure assets and liabilities in interim and
      annual periods subsequent to initial recognition. Entities are encouraged to
      combine the fair value information disclosed under SFAS No. 157 with the fair
      value information disclosed under other accounting pronouncements, including
      SFAS No. 107, *Disclosures about Fair Value of Financial Instruments,* where
      practicable. The guidance in this Statement applies for derivatives and other
      financial instruments measured at fair value under SFAS No. 133 , *Accounting for Derivative Instruments and Hedging Activities,* at
      initial recognition and in all subsequent periods.




10


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**




SFAS
      No.
      157 is effective for financial statements issued for fiscal years beginning
      after November 15, 2007, and interim periods within those fiscal years, although
      earlier application is encouraged. Additionally, prospective application of
      the
      provisions of SFAS No. 157 is required as of the beginning of the fiscal year
      in
      which it is initially applied, except when certain circumstances require
      retrospective application.




The
      Company is currently evaluating the
      effect of adopting SFAS No. 157 on their consolidated financial
      statements.





In
      September 2006, the FASB issued SFAS No.
      158
      (SFAS No. 158), *Employers' Accounting for Defined Benefit Pension and Other Postretirement
      Plans,* to
      require an employer to fully recognize the obligations associated with
      single-employer defined benefit pension, retiree healthcare, and other
      postretirement plans in their financial statements. Previous standards required
      an employer to disclose the complete funded status of its plan only in the
      notes
      to the financial statements. Moreover, because those standards allowed an
      employer to delay recognition of certain changes in plan assets and obligations
      that affected the costs of providing benefits, employers reported an asset
      or
      liability that almost always differed from the plan's funded status. Under
      SFAS
      No. 158, a defined benefit postretirement plan sponsor that is a public or
      private company or a nongovernmental not-for-profit organization must (a)
      recognize in its statement of financial position an asset for a plan's over
      funded status or a liability for the plan's under funded status, (b) measure
      the
      plan's assets and its obligations that determine its funded status as of the
      end
      of the employer's fiscal year (with limited exceptions), and (c) recognize,
      as a
      component of other comprehensive income, the changes in the funded status of
      the
      plan that arise during the year but are not recognized as components of net
      periodic benefit cost pursuant to SFAS No. 87, *Employers' Accounting for Pensions,* or SFAS
      No. 106, *Employers' Accounting for Postretirement Benefits Other Than
      Pensions.* SFAS No.
      158 also requires an employer to disclose in the notes to financial statements
      additional information on how delayed recognition of certain changes in the
      funded status of a defined benefit postretirement plan affects net periodic
      benefit cost for the next fiscal year. SFAS No. 158 is effective for fiscal
      years ending after December 15, 2006.  The Company is evaluating the effect
      of adopting SFAS No. 158 on their consolidated financial
      statements.





*Reclassifications*





Certain
      accounts in the prior quarters' consolidated financial statements have been
      reclassified for comparative purposes to conform to the presentation in the
      current quarter consolidated financial statements. These reclassifications
      had
      no effect on net loss or stockholders' equity.





**NOTE
      3 - Business Acquisitions** **and Asset Sales**





On
      August
      26, 2005, the Company completed its acquisition of certain assets of Dinamo
      Entertainment, Inc. for $2,074,225, $652,500 of which was paid for in Company
      stock, valued at $1.50 per share (as negotiated between buyer and seller),
      $475,000 of which was paid for in cash, and the remaining balance of $600,000
      as
      a note payable to the former owner payable in monthly payments of $14,091
      including interest at 6% with a balloon payment of $317,933 due in November
      2007. The note is collateralized by the sellers assets acquired as part of
      the
      purchase. The Company also assumed debt of $170,200 of which $75,000 in cash
      was
      paid at closing and 40,000 shares of Company stock were issued at fair market
      value of $50,000 to the debtor. The Company has assumed the lease payments
      for
      the remaining balance of $45,200. The Company assumed monthly payments on the
      remaining $45,200 balance outstanding related to ceased equipment. The Company
      has agreed to repurchase the 40,000 shares one year from closing if the fair
      market value in the 5 consecutive trading days immediately subsequent to the
      one
      year period falls below $1.25. In connection with the acquisition, the Company
      incurred a $176,525 finder’s fee paid in cash at closing. The consideration paid
      was based on the Company’s analysis of the value of the acquired video equipment
      and related video subscribers totaling about 3,000.


11




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**


Allocation
                of Purchase Pricefor Dinamo:Total
                Cash/Stock/Notes Payable Consideration
            
            $
            1,727,500Add:
                Transaction Costs
            
            
            176,525Add:
                Liabilities assumed
            
            
            170,200Total
                Consideration
            
            
            2,074,225Less:
                Tangible assets
            
            
            1,450,000Less:
                Goodwill
            
            
            150,000Intangible
                assets
            
            $
            474,225





Effective
      April 1, 2005, the Company purchased certain video assets (equipment and video
      subscribers) from Ultravision, Inc. for $287,050 cash including a finder’s fee
      of $12,050.





Effective
      September 30, 2005, the Company sold certain video subscriber assets located
      in
      Ohio, Oklahoma and Texas to Satellite Broadcasting Corporation (SBC). The
      Company sold 152 video subscribers for $167,000; $91,500 in cash and the balance
      in a three year note. Terms of this note include variable monthly payments
      at 7%
      with a balloon payment in October 2008. Effective the same date, the Company
      purchased approximately 550 video subscribers in Minnesota from SBC for a total
      purchase price of $420,125, paid as follows: $200,000 cash at closing; $105,000
      in Company common stock valued at $1.50 per share (as negotiated by buyer and
      seller); and the assumption of a capital lease obligation. Terms of this capital
      lease obligation include monthly payments of $3,223 including interest at 7%
      through November 2008 and are collateralized by assets purchased. Included
      in
      the purchase price is $10,125 related to a finder’s fee. The purchase price was
      allocated to the acquired assets based on the estimated fair values as of the
      acquisition date. The Company allocated the purchase price to intangibles of
      a
      right of entry contracts with a value of $315,125 and equipment of $105,000.
      The
      rights of entry contract will be amortized over its estimated useful live of
      108
      months.





Effective
      July 1, 2006, Multiband Corporation (the Company) acquired the video assets
      and
      rights of entry of Extreme Video Enterprise, LLC for a total purchase price
      of
      $578,125. The assets included 5,567 homes under rights of entry and 928
      subscribers. The reason for the purchase is to continue to expand the Company’s
      services related to multi-users of voice, data and video services. 162,500
      shares of restricted common stock valued at $1.00 per share (fair value at
      the
      date of the agreement) were issued to the Seller as part of the consideration
      for the purchase. The balance of the purchase of $415,625 is to be paid in
      48
      equal payments and is collateralized by the assets purchased. The first payment
      of $8,659 was paid at closing. The note bears an imputed interest rate of 8.25%.
      The agreement allows for a reduction of the purchase price if the annual cash
      flow generated is less than $94,000 in the first 3 years and less than $7,844
      per month in the final year of the repayment of the note payable. Any shortfall
      will be deducted from the payment dollar for dollar. The purchase price was
      allocated to the acquired assets based on the estimated fair values as of the
      acquisition date. The rights of entry will be amortized over its estimated
      useful life of 36 months. The expected life of the cable systems will also
      be 36
      months.





Effective
      September 20, 2006, Multiband Corporation (the Company) acquired the video
      assets and rights of entry of Rand’M for a total purchase price of $146,500. The
      assets included approximately 2,350 homes under rights of entry. The reason
      for
      the purchase is to continue to expand the Company’s services related to
      multi-users of voice, data, and video services. The purchase price of $146,500
      is to be paid in 42 equal monthly payments of $3,250 and one payment of $10,000
      on September 20, 2007, and is collateralized by the assets purchased. This
      note
      bears an imputed interest rate of 8.25%. The purchase price was allocated to
      the
      acquired assets based on the estimated fair values as of the acquisition date.
      The rights of entry will be amortized over its estimated useful life of 18
      months. The expected life of the cable systems will also be amortized over
      18
      months.


12


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**


Allocation
                of Purchase Pricefor Extreme and Rand’M:




Total
                Cash/Stock/Notes Payable Consideration
            
            $
            645,269Less:
                Tangible assets
            
            
            166,760Intangible
                assets
            
            $
            478,509





Effective
      September 29, 2006, pursuant to the agreement referenced in Note 11, the Company
      sold five rights of entry agreements located in California to Consolidated
      Smart
      Broadband Systems, LLC. The Company sold the assets for $386,000 in cash subject
      to a $24,900 reserve related to a contingency. The Company recorded a gain
      on
      the sale of approximately $178,000.





The
      unaudited pro forma results of operations for the three and nine months ended
      September 30, 2006 and 2005 as a result of the SBC, Ultravision, Dinamo, Extreme
      Video, and Rand’M acquisitions of video subscribers and video equipment is not
      material to the historical financial statements.




**NOTE
      4** **- Lease Financing**





In
      June
      2006, the Company entered into a lease financing arrangement with B&L
      Financial, Inc. The Company signed a five year lease for equipment with a cost
      of $259,120, payable in 60 monthly payments of $5,501 including interest at
      10.4%. The lease is collateralized by the income stream from the installation
      of
      communications equipment at specific property locations. In August 2006, the
      Company signed an additional five year lease with a cost of $206,122, payable
      in
      60 monthly installments of $4,405, including interest at 10.7%. The lease is
      collateralized by the income stream from the installation of communications
      equipment at specific property locations.





**NOTE
      5** **- Stockholders’ Equity**





Stock
      warrants activity is as follows for the nine months ended September 30,
      2006:





Number
                of Warrants
            
            Weighted
                - Average Exercise PriceOutstanding,
                December 31, 2005
            
            
            18,715,979
            
            $
            1.68Granted
            
            
            15,670
            
            
            1.05Exercised
            
            
            -
            
            
            -Cancelled
            
            
            (548,363
            )
            
            (3.21
            )Outstanding,
                September 30, 2006
            
            
            18,183,286
            
            $
            1.63





The
      Company granted 15,670 warrants in lieu of cash for services during the nine
      months ended September 30, 2006 valued at $12,085 using the Black Scholes
      pricing model. On August 10, 2006, 42,857 warrants originally issued to an
      investor on September 30, 2003, were reissued due to a related warrant agreement
      with the same investor dated November, 2004.


13


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**


**NOTE
      6** **- Accrued Liabilities**





Accrued
      liabilities consisted of the following:





**September
                30, 2006**
            
            **December
                31, 2005**Payroll
                and related taxes
            
            $
            408,905
            
            $
            391,707Accrued
                preferred stock dividends
            
            
            646,752
            
            
            506,535Accrued
                liability-vendor charge backs
            
            
            1,103,414
            
            
            1,347,673Other
            
            
            459,621
            
            
            495,139**Total**
            
            $
            2,618,692
            
            $
            2,741,054





**NOTE** **7
      - Business Segments**





The
      Company has the following business segments. Multiband Corp. includes corporate
      expenses (e.g. corporate administrative costs), interest income, interest
      expense, depreciation and amortization. The MCS segment provides voice, data
      and
      video services to residential multi-dwelling units as the principal to
      subscribers. This segment encompasses the subsidiary corporations, Multiband
      Subscriber Services, Inc., Multiband USA, Inc., URON, Inc., and Rainbow
      Satellite Group, LLC. The MDU segment represents results as the master service
      operator for DirecTV which includes the subsidiary corporation, Minnesota
      Digital Universe, Inc. and certain DirecTV revenue generated by the owned
      properties in the subsidiary Multiband Subscriber Services, Inc. The
      discontinued operations segment includes the Multiband Business Services segment
      which was sold effective after the close of business March 31, 2005 (see Note
      9).


14




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**


Segment
      disclosures are as follows:




MultibandCorp.
            
            MDU
            
            MCS
            
            DiscontinuedOperations
            
            TotalThree
                months ended September 30, 2006:Revenues
            
            $
            -
            
            $
            2,630,299
            
            $
            1,894,586
            
            $
            -
            
            $
            4,524,885Income
                (loss) from operations
            
            
            (1,041,312
            )
            
            962,819
            
            
            (1,804,583
            )
            
            -
            
            
            (1,883,076
            )Identifiable
                assets
            
            
            2,445,687
            
            
            6,788,833
            
            
            12,147,891
            
            
            -
            
            
            21,382,411Depreciation
                and amortization
            
            
            56,589
            
            
            401,079
            
            
            947,187
            
            
            -
            
            
            1,404,855Capital
                expenditures
            
            
            7,413
            
            
            -
            
            
            169,244
            
            
            -
            
            
            176,657




MultibandCorp.
            
            MDU
            
            MCS
            
            DiscontinuedOperations
            
            TotalThree
                months ended September 30, 2005:Revenues
            
            $
            -
            
            $
            2,091,442
            
            $
            2,166,218
            
            $
            -
            
            $
            4,257,660Income
                (loss) from operations
            
            
            (872,324
            )
            
            443,435
            
            
            (1,325,406
            )
            
            -
            
            
            (1,754,295
            )Identifiable
                assets
            
            
            5,980,426
            
            
            8,807,015
            
            
            13,770,664
            
            
            -
            
            
            28,558,105Depreciation
                and amortization
            
            
            71,360
            
            
            401,079
            
            
            782,749
            
            
            -
            
            
            1,255,188Capital
                expenditures
            
            
            20,707
            
            
            -
            
            
            258,015
            
            
            4,482
            
            
            283,204MultibandCorp.
            
            
            MDU
            
            
            MCS
            
            
            DiscontinuedOperations
            
            
            TotalNine
                months ended September 30, 2006:Revenues
            
            $
            -
            
            $
            7,785,688
            
            $
            5,644,978
            
            $
            -
            
            $
            13,430,666Income
                (loss) from operations
            
            
            (3,246,183
            )
            
            3,016,733
            
            
            (5,234,601
            )
            
            -
            
            
            (5,464,051
            )Identifiable
                assets
            
            
            2,445,687
            
            
            6,788,833
            
            
            12,147,891
            
            
            -
            
            
            21,382,411Depreciation
                and amortization
            
            
            175,594
            
            
            1,203,234
            
            
            2,637,097
            
            
            -
            
            
            4,015,925Capital
                expenditures
            
            
            32,332
            
            
            -
            
            
            724,374
            
            
            -
            
            
            756,706MultibandCorp.
            
            
            MDU
            
            
            MCS
            
            
            DiscontinuedOperations
            
            
            TotalNine
                months ended September 30, 2005:Revenues
            
            $
            -
            
            $
            6,105,405
            
            $
            6,042,737
            
            $
            -
            
            $
            12,148,142Income
                (loss) from operations
            
            
            (2,205,245
            )
            
            1,817,807
            
            
            (3,951,621
            )
            
            -
            
            
            (4,339,059
            )Identifiable
                assets
            
            
            5,980,426
            
            
            8,807,015
            
            
            13,770,664
            
            
            -
            
            
            28,558,105Depreciation
                and amortization
            
            
            143,131
            
            
            1,203,237
            
            
            2,276,554
            
            
            -
            
            
            3,622,922Capital
                expenditures
            
            
            26,136
            
            
            -
            
            
            629,293
            
            
            42,840
            
            
            698,269





Segment
      disclosures are provided by entity to the extent practicable under the Company's
      accounting system. Depreciation and amortization above does not include
      depreciation and amortization related to discontinued operations. The cash
      flow
      statements presentation of depreciation and amortization includes the
      depreciation and amortization from discontinued operations.


15




**MULTIBAND
          CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
          30, 2006 AND 2005**





**NOTE** **8
      - Commitments and Contingencies**





*Legal
      Proceedings*





The
      Company is involved in legal actions in the ordinary course of its business
      including an action maintained by Multiband USA, Inc., in the Federal District
      Court of Minnesota against DirecTechologies, LLC, a New York entity, for fraud
      and breach of contract. The defendant, in the action, has counterclaimed against
      Multiband, USA, Inc. for breach of contract. However, as of September 30, 2006,
      management believes that there are no pending legal proceedings against or
      involving the Company for which the outcome is likely to have a material adverse
      effect upon the Company’s consolidated financial position, results of
      operations, or cash flows.





*Significant
      Relationship*





The
      Company is a master agent for DirecTV pursuant to a system operator agreement
      with DirecTV dated August, 2005. 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.
      Termination of the Company's DirecTV agreement would have a material adverse
      impact on the Company's on-going operations. Revenues generated from DirecTV
      were 58.1% and 58.0% of total revenues for the three and nine months ended
      September 30, 2006, respectively. Revenues generated from DirecTV for the three
      and nine months ended September 30, 2005 were 49.1% and 50.3% of total revenue,
      respectively.





*Related
      Party*





The
      Company has an accrued dividend of $371,844 and $337,460 owed to an officer
      of
      the Company at September 30, 2006 and 2005, respectively.





*Guaranty*





On
      March
      1, 2006, Corporate Technologies, LLC (CTLLC), a subsidiary of North Central
      Equity, LLC, the purchaser of the MBS business segment, signed a lease with
      Lexstar Tower I Limited Partnership whereby CTLLC assumed the lease obligation
      for substantially all of the first floor space the Company is renting in Fargo,
      North Dakota for the period beginning March 1, 2006 to February 28, 2011.
      Pursuant to the aforementioned lease, the Company entered into a guaranty
      whereby the Company, in the event of a default or early termination of the
      lease
      by CTLLC, is obligated to perform CTLLC’s lease obligation during months 43-60
      of the lease. The Company remains obligated to provide free rent to CTLLC
      through March 31, 2007 as defined in the purchase agreement of MBS (see Note
      9).
      This guaranty has no effect on the Company’s consolidated financial statements
      for the periods ended September 30, 2006. However, should Multiband eventually
      have to perform on the guaranty in the future, it could be liable for up to
      $348,881 in rent payments plus any associated charges such as property taxes
      and
      common area maintenance.





**NOTE** **9
      -Sales of Multiband Business Services Segments**





After
      the
      close of business on March 31, 2005, the Company completed the sale of certain
      assets and liabilities relating to its Multiband Business Services (MBS, a/k/a
      Corporate Technologies USA) division. The buyer was North Central Equity LLC
      (“Buyer”).


16


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**





The
      original purchase price paid by the Buyer was $2,550,000 which consisted of
      $1,682,184 in cash at closing, $349,817 in assumed vacation pay and warranty
      liabilities, and the balance of $517,999 in the original note receivable at
      7%
      interest due on December 31, 2005. The amount of the note receivable was subject
      to adjustment based on certain representations and warranties and estimated
      presale customer service obligations the Buyer assumed liability for in the
      purchase agreement. Due to the aforementioned representations and warranties
      and
      estimated liabilities, the Company, at the notes inception established a reserve
      of $178,948 against the collectibility of the note receivable. In November
      2005,
      the note was paid by the buyer in the amount of $400,000 which included the
      net
      adjustment for the actual amount of presale customer service obligations. The
      Company’s gain on sale was increased $149,865 accordingly as of September 30,
      2005 to reflect this prepayment and the resolution of estimated assumed
      liabilities.





In
      connection with the purchase agreement, the Company entered into an interim
      services agreement whereby the Buyer is able to sublease space at no charge
      at
      the Company’s Minneapolis and Fargo locations and obtain access to certain
      aspects of the Company’s information technology resources for one year. Services
      provided will be charged by either party at fair value and is estimated by
      management to be insignificant. In addition the services agreement is explicit
      that the Company has no control over the buyer’s operations. The buyer also
      receives additional free rent for a second year due to the results of a post
      closing inventory appraisal (see Note 8).





The
      gain
      on sale of MBS business services segment is as follows as adjusted at December
      31, 2005:




**Sale
                Price**Cash
                proceeds
            
            $
            1,682,184Note
                receivable
            
            
            400,000Assumed
                liabilities
            
            
            438,868Total
                sale price
            
            
            2,521,052


******Assets
                sold**Inventory,
                net of reserve
            
            
            1,045,110Property
                and equipment
            
            
            52,351Net
                assets sold
            
            
            1,097,461**Less
                costs and expenses**Broker’s
                fee
            
            
            122,500Other
                selling expense
            
            
            10,135Sublease
                for one year at no charge
            
            
            500,000Additional
                free rent related to inventory adjustment
            
            
            500,000Legal
                and accounting costs
            
            
            37,600Total
                costs
            
            
            1,170,235**Net
                gain on sale**
            
            $
            253,356




17




**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2006 AND 2005**





The
      following are condensed statements of operations of the discontinued operations
      for the three and nine months ended September 30:





Three
                months ended
              September
                30,
            
            Nine
                months ended
              September
                30,**Statement
              of Operations**
            
            2006
            
            2005
            
            2006
            
            2005Revenues
            
            $
            -
            
            $
            1,056
            
            $
            -
            
            $
            3,699,983Cost
                of sales
            
            
            -
            
            
            -
            
            
            -
            
            
            2,701,664Selling,
                general and administrative
            
            
            -
            
            
            (97,328
            )
            
            (2,200
            )
            
            1,210,174Depreciation
                and amortization
            
            
            -
            
            
            -
            
            
            -
            
            
            56,188Income
                (loss) from operations
            
            
            
            
            
            98,834
            
            
            2,200
            
            
            (268,043
            )Other
                income (expense)
            
            
            -
            
            
            -
            
            
            -
            
            
            (55,440
            )Income
                (loss)
            
            
            -
            
            
            98,384
            
            
            2,200
            
            
            (323,483
            )Gain
                on sale
            
            
            -
            
            
            149,865
            
            
            -
            
            
            253,356Income
                (loss) from discontinued operations
            
            $
            -
            
            $
            248,249
            
            $
            2,200
            
            $
            (70,127
            )





The
      Company has recorded $1 million in deferred rent liability in relation to the
      sale of the MBS business segment. This liability is amortized over the 24 month
      term of the sublease. Amortization has been netted with rent expense and the
      resulting income of $16,100 and $48,300 is included in other income (expense)
      for the three and nine months ended September 30, 2006,
      respectively.





**NOTE** **10
      - Stock Dividend**





As
      of May
      1, 2006, certain Multiband shareholders of record and certain contingent rights
      holders became eligible for a distribution of URON common stock based on the
      holder’s ownership of Multiband shares or rights as of that date. The holders
      received .05 shares of URON common stock for each share or right to a share
      of
      Multiband common stock held on the record date. In July 2006, URON’s Form 10-SB
      was declared effective by the SEC. On August 10, 2006, the stock distribution
      occurred. In August 2006, Multiband sold its majority interest in URON to
      Lantern Advisors for $75,000 in cash. As of September 30, 2006, Multiband was
      holding in trust 606,609 common shares of URON for various contingent rights
      holders whose rights are tied to potential future warrant exercises or preferred
      stock conversions. It is unknown as of September 30, 2006 as to whether the
      aforementioned contingent rights will ever be exercised in full or in part
      by
      the various holders.





**NOTE** **11
      - Subsequent Events**





Effective
      October 19, 2006, the Company entered into an asset purchase agreement with
      Consolidated Smart Broadband Systems, LLC., the intent of which is to sell
      approximately all of the Company’s California assets to the purchaser. The
      Company anticipates that the sale will be completed 90 to 180 days from October
      19, 2006 provided certain conditions precedent are met. The ultimate purchase
      price for the assets will be determined, in part, by a formula tied to free
      subscriber cash flow and length of right of entry contracts. A portion of this
      transaction was effective September 29, 2006 (Note 3). The Company is evaluating
      whether this sale should be reported as discontinued operations. The agreement’s
      full terms and conditions can be found in the Company’s 8K report filed on
      October 24, 2006.





18




**FORWARD-LOOKING
      STATEMENTS**





From
      time
      to time, the Company may publish forward-looking statements relating to such
      matters as anticipated financial performance, business prospects, product
      pricing, management for growth, integration of acquisitions, 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 statement. 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 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 IT and
      telecommunications industries; market acceptance of the Company's products
      and
      services; the Company's products and services; the Company's continued ability
      to provide integrated communication solutions for customers in a dynamic
      industry; 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 anticipated future period results.





**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF
      OPERATION**




**OUR
      COMPANY**





Multiband
      Corporation (Multiband), is a Minnesota corporation formed in
      September 1975. Multiband has two operating segments: 1) Multiband Consumer
      Services (MCS, legally known as Multiband Subscriber Services, Inc.), which
      encompasses the subsidiary corporations, Multiband USA, Inc., and Rainbow
      Satellite Group, LLC; and 2) Minnesota Digital Universe, Inc. (MDU)





Multiband
      completed an initial public offering in June 1984. In November 1992,
      Multiband became a non-reporting company under the Securities Exchange Act
      of
      1934. In July 2000, Multiband regained its reporting company status. In
      December, 2000, Multiband 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.





As
      of May
      1, 2006, certain Multiband shareholders of record and certain contingent rights
      holders became eligible for a distribution of URON common stock based on the
      holder’s ownership of Multiband shares or rights as of that date. The holders
      will receive .05 shares of URON common stock for each share or right to a share
      of Multiband common stock held on the record date. In July 2006, URON’s Form
      10-SB was declared effective by the SEC. On August 10, 2006, the stock
      distribution occurred. Also, in August 2006, Multiband sold its majority
      interest in URON Inc. to Lantern Advisors for $75,000 in cash. As of September
      30, 2006, Multiband was holding in trust 606,609 common shares of URON for
      various contingent rights holders whose rights are tied to potential future
      warrant exercises or preferred stock conversions. It is unknown as of
      September 30, 2006 as to whether the aforementioned contingent rights will
      ever
      be exercised in full or in part by the various holders





Multiband’s
      website is located at : www.multibandusa.com .





From
      its
      inception until December 31, 1998, Multiband operated as a telephone
      interconnect company only. Effective December 31, 1998, Multiband 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, Multiband 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. All references to financial
      information and descriptions of business in this registration have been revised
      to reflect only our continuing operations and all references to our now
      discontinued Multiband Business Services have been eliminated. MCS segment
      began
      in February 2000. MCS, the Company’s continuing operating division, provides
      voice, data and video services to multiple dwelling units (MDU), 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., (MDU segment) which
      made the Company the largest master service operator in MDU’s for DirecTV
      satellite television in the United States.





19




At
      September 30, 2006, the Company had 116,200 owned and managed subscriptions.




**SELECTED
      CONSOLIDATED FINANCIAL DATA**





DOLLAR
                AMOUNTS AS A PERCENTAGEOF
              REVENUES
            
            DOLLAR
                AMOUNTS AS A PERCENTAGE OF
              REVENUESTHREE
                MONTHS ENDED
            
            NINE
                MONTHS ENDEDSeptember
                30, 2006
              (unaudited)
            
            September
                30, 2005 (unaudited)
            
            September
                30, 2006
              (unaudited)
            
            September
                30, 2005 (unaudited)REVENUES
            100%
            
            100%
            
            100%
            
            100%COST
                OF PRODUCTS & SERVICES (Exclusive of depreciation and amortization
                shown below)
            46.1%
            
            54.1%
            
            45.3%
            
            48.5%SELLING,
                GENERAL & ADMINISTRATIVE
            64.4%
            
            57.6%
            
            65.5%
            
            57.4%DEPRECIATION
                & AMORTIZATION
            31.0%
            
            29.5%
            
            29.9%
            
            29.8%LOSS
                FROM OPERATIONS
            -41.5%
            
            -41.2%
            
            -40.7%
            
            -35.7%INTEREST
                EXPENSE & OTHER, NET
            -6.2%
            
            -10.7%
            
            -6.2%
            
            -11.8%LOSS
                FROM CONTINUING OPERATIONS
            -47.7%
            
            -51.9%
            
            -46.9%
            
            -47.5%INCOME
                (LOSS) FROM DISCONTINUED OPERATIONS
            0.0%
            
            5.8%
            
            0.0%
            
            -0.6%NET
                LOSS
            -47.7%
            
            -46.1%
            
            -46.9%
            
            -48.1%




**RESULTS
      OF OPERATIONS**





*Revenues*





Total
      revenues increased 6.3% to $4,524,885 for the quarter ended September 30, 2006
      as compared to $4,257,660 for the quarter ended September 30, 2005. This
      increase is primarily due to an increase in agent fees and revenue generating
      subscriptions during the comparable periods. The Company expects revenues to
      continue to increase in 2006 over 2005 as the Company adds additional services
      and thus additional revenue generating subscriptions to new and existing
      properties.





Revenues
      in the third quarter of 2006, for the MCS segment, decreased 12.5% to $1,894,586
      as compared to $2,166,218 in the third quarter of fiscal 2005. This decrease
      is
      entirely due to a decrease in revenue from equipment sales to property owners
      between comparable periods. Sales of recurring revenue services, exclusive
      of
      equipment sales, increased 4.9% between comparable periods.





Revenues
      in the third quarter of 2006 for the MDU segment increased 25.8% to $2,630,299
      as compared to $2,091,442 in the third quarter of fiscal 2005. This increase
      is
      primarily due to the number of managed subscribers and a related increase in
      agent fees during the comparable period.





Revenues
      for the nine month period ended September 30, 2006 increased 10.6% to
      $13,430,666 from $12,148,142 for the same period in 2005. Again, this revenue
      increase is primarily due to an increase in agent fees and revenue generating
      subscriptions during the comparable periods. Looking forward into early 2007,
      the Company currently anticipates continuing growth in its MDU segment as
      Multiband expands its network of system operators. However, the Company in
      early
      2007 would expect revenues in its MCS segment to decline as the Company may
      sell
      and monetize the value of some of its owned subscribers.


20





*Cost
      of Products and Services (Exclusive of depreciation and
      amortization)*





The
      Company's cost of products and services, exclusive of depreciation and
      amortization, decreased by 9.4% to $2,087,643 for the quarter ended September
      30, 2006 compared to $2,303,357 for the same quarter last year. Costs of
      products and services for the MCS segment for the quarter were $992,614 compared
      to $1,234,466 in the same quarter last year, a 19.6% decrease. The decrease
      in
      costs for the MCS segment is directly related to the decrease in equipment
      sales. Costs in the MCS segment decreased more significantly than revenues,
      reflecting the Company’s higher margins in the sales of services versus
      equipment sales. Costs of products and services for the MDU segment for the
      quarter were $1,095,029 compared to $1,068,891 in the same quarter last year,
      a
      2.4% increase. The increase in costs for the MDU segment are directly related
      to
      the increase in sales. The Company anticipates that, on a percentage basis,
      revenues throughout the balance of 2006 will increase slightly ahead of costs
      due to the expectation that customer penetrations in certain properties will
      grow as additional services are added to those properties. The Company’s past
      operating performance indicates that revenues and gross margins on a property
      level improve when the Company offers two or three services (e.g. voice, data
      and video) at a property versus a single service (video only).





For
      the
      nine months ended September 30, 2006, costs of products and services, exclusive
      of depreciation and amortization were $6,082,068 compared to $5,886,382 in
      the
      prior year, a 3.3% increase. This overall increase in costs of products and
      services over the prior year resulted primarily from an increase in overall
      revenues. The anticipated sale of certain MCS segment owned subscribers in
      early
      2007 may produce an overall decrease in cost of products and services next
      year.




*Selling,
      General and Administrative Expenses*





Selling,
      general and administrative expenses increased 18.8% to $2,915,463 in the quarter
      ended September 30, 2006, compared to $2,453,410 in the prior year quarter.
      Selling, general and administrative expenses were, as a percentage of revenues,
      64.4% for the quarter ended September 30, 2006 and 57.6% for the similar period
      a year ago. This increase is primarily a result of increased payroll expenses
      related to an increase in revenue and due to stock option expense of $169,846
      required to be recognized in the current quarter verses $0 stock option in
      expense in the comparable period last year. The Company anticipates that
      selling, general and administrative expenses, exclusive of stock option
      expenses, will decrease beginning in 2007 as the Company sells subscribers
      in
      the MCS portfolio and reduces headcount.





For
      the
      nine months ended September 30, 2006, these expenses increased 26.1% to
      $8,796,724 compared to $6,977,897 for the nine months ended September 30, 2005.
      As a percentage of revenue, selling, general and administrative expenses were
      65.5% for the nine months ended September 30, 2006, compared to 57.4% for the
      same period in 2005. Again, this percentage increase is primarily due to the
      aforementioned stock option expenses of $655,367 for the nine months ended
      September 30, 2006 and payroll expense increase, which included developmental
      expense associated with several major information technology initiatives. The
      Company also expects reduced administrative expense in 2007 in its MDU segment
      related to the termination of its outsourced management agreement with Pace
      Electronics.





*Loss
      from Operations*





The
      Company, in the third quarter of 2006, incurred a loss from operations for
      its
      combined operating business segments of $1,883,076 compared to a loss of
      $1,754,295 during the third quarter in 2005. Loss from operations from said
      segments was $5,464,051 during the first nine months of 2006, compared to
      $4,339,059 during the third quarter in 2005. The MDU segment showed a profit
      from operations of $962,819 and $3,016,733 for the three and nine months ended
      September 30, 2006 compared to profits of $443,435 and $1,817,807 for the three
      and nine months ended September 30, 2005. For the third quarter of 2006, the
      MCS
      segment showed a loss from operations of $1,804,583, compared to a loss of
      $1,325,406 for the same quarter last year. For the nine months ended September
      30, 2006, the MCS segment showed a loss from operations of $5,234,601 compared
      to a loss of $3,951,621 for the same period in 2005. The Multiband Corporation
      segment, which has no revenues, showed a loss from operations of $1,041,312
      for
      the three months ended September 30, 2006 and $3,246,183 for the nine months
      ended September 30, 2006 compared to losses of $872,324 and $2,205,245 for
      the
      same periods last year. The Multiband Corporation loss is expected to be
      constant in future periods as corporate overhead is expected to remain constant.
      The Company expects the MDU segment profitability in future periods to remain
      steady or improve as that segment continues to experience growth. The Company
      hopes that it can mitigate its loss in the MCS segment by selling subscribers
      in
      the MCS portfolio and reducing related payroll expenses. At the same time,
      the
      Company will look to add subscribers in its MDU division since the on-going
      selling, general and administrative expenses to service those subscribers can
      be
      more variable than fixed.


21





*Interest
      Expense*





Interest
      expense was $306,672 for the quarter ended September 30, 2006, versus $536,000
      for the same quarter last year primarily reflecting a decrease in the Company’s
      debt and original issue discount expense. Amortization of original issue
      discount was $111,907 and $248,359 for the three months ended September 30,
      2006
      and 2005, respectively.





Interest
      expense was $936,876 for the nine months ended September 30, 2006, and
      $1,594,714 for the same period last year. Amortization of original issue
      discount was $358,725 for the nine months ended September 30, 2006 and $913,339
      for the same period last year.





*Net
      Loss*





In
      the
      third quarter of fiscal 2006, the Company incurred a net loss of $2,162,528
      compared to a net loss of $1,964,309 for the third fiscal quarter of 2005.
      For
      the nine months ended September 30, 2006, the Company recorded a net loss of
      $6,294,121 compared to $5,843,871 for the nine months ended September 30, 2005.





*Liquidity
      and Capital Resources*





During
      the nine months ended September 30, 2006 and 2005, the Company recorded a net
      loss of $6,294,121 and $5,843,871, respectively. Net cash used by operations
      during the nine months ended September 30, 2006 was $678,908 compared to cash
      used by operations during the nine months ended September 30, 2005 of
      $3,125,151. Operating cash flows improved during the comparable periods. This
      improvement in cash flows between the comparable periods is primarily due to
      an
      overall decrease in the balance of accounts payable and accrued liabilities
      and
      retirement of a wholesale line of credit related to the Company’s sale of the
      MBS segment in 2005. Management believes that over the next 12 months there
      will
      be a decrease in accrued liabilities and no significant change in accounts
      payable. Principal payments on current long-term debt over the next 12 months
      are expected to be $522,975.





Cash
      and
      cash equivalents totaled $822,962 at September 30, 2006 versus $3,100,427 at
      December 31, 2005. The working capital deficit for the nine months ended
      September 30, 2006 increased to $3,976,427 as compared to $971,418, at December
      31, 2005, primarily due to funds invested in project build-outs and the
      operating loss for the nine months ended September 30, 2006. The Company intends
      to fund future build-outs near term through its leasing facility to reduce
      the
      impact on working capital. Total debt was reduced in the nine months ended
      September 30, 2006 as the Company continued to retire financing debt and debt
      related to acquisitions. Net cash flows from investing activities totaled
      $660,387 compared to $347,385 for the comparable period last year, reflecting
      the sale of the MBS segment.





The
      Company continues to experience growth, primarily due to increased subscriber
      related recurring revenues acquired from the various transactions previously
      mentioned herein. However, the Company’s growth in its MDU segment is outpacing
      the growth in its MCS segment. The Company also continues to analyze the values
      the equity capital marketplace is providing to its MCS directly owned
      subscribers. As a result of the aforementioned, the Company may seek to monetize
      the intangible values of some of its directly owned subscribers in future
      periods, both to establish values for those subscribers and to provide
      additional liquidity and reduced future amortization to the
      Company.





Management
      of Multiband believes that cash on hand, combined with capital resources and
      anticipated leasing availability, as of September 30, 2006, is adequate to
      meet
      the anticipated liquidity and capital resource requirements of its business
      for
      the next 12 months.





*Capital
      Expenditures*





The
      Company used $756,706 for capital expenditures during the nine months ended
      September 30, 2006, as compared to $698,269 in the same period last year.
      Capital expenditures consisted of project build-outs and equipment acquired
      for
      internal use. We estimate capitalized expenditures for the remainder of 2006
      will be approximately $75,000.


22





**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**





Impairment
      of Long-Lived Assets


The
      Company’s long-lived assets include property, equipment and leasehold
      improvement. At September 30, 2006, the Company had net property and equipment
      of $5,081,420, which represents approximately 23.8% of the Company’s total
      assets. The estimated fair value of these assets is dependent on the Company’s
      future performance. In assessing for potential impairment for these assets,
      the
      Company considers future performance. If these forecasts are not met, the
      Company may have to record an impairment charge not previously recognized,
      which
      may be material. During the nine months ended September 30, 2006 and 2005,
      the
      Company did not record any impairment losses related to long-lived assets.





Impairment
      of Goodwill


We
      periodically evaluate acquired businesses for potential impairment indicators.
      Our judgments regarding the existence of impairment indicators are based on
      legal factors, market conditions and operational performance of our acquired
      businesses. Future events could cause us to conclude that impairment indicators
      exist and that goodwill associated with our acquired businesses is impaired.
      Any
      resulting impairment loss could have a material adverse impact on our financial
      condition and results of operations. During the nine months ended September
      30,
      2006 and 2005, the Company did not record any impairment losses related to
      goodwill.





Amortization
      of Intangible Assets


The
      Company amortizes a domain name over its estimated useful life of five years
      using the straight-line method. The Company amortizes right of entry contracts
      and subscriber lists over their estimated useful lives ranging from 24 to 180
      months. The estimated fair value of these assets is dependent on the Company’s
      future performance. In assessing for potential impairment for these assets,
      the
      Company considers future performance. If these forecasts are not met, the
      Company may have to record an impairment charge not previously recognized,
      which
      may be material. During the nine months ended September 30, 2006 and 2005,
      the
      Company did not record any impairment losses related to intangible assets.





**ITEM
      3. QUANTITIVE AND QUALITIVE DISCLOSURE ABOUT MARKET RISK**





Multiband
      is not subject to any material interest rate risk as any current lending
      agreements are at a fixed rate of interest except for the notes payable to
      Laurus Master Fund, Ltd., which is three percent over the prime interest rate
      and the Convergent Capital note of $2,500,000, which varies from 11% to 14%,
      dependent on the Company’s common stock price. Multiband also has variable rate
      percentage Class I convertible preferred stock which pays dividends on a basis
      of prime rate.





**ITEM
      4. CONTROLS AND PROCEDURES**





As
      of the
      end of the period covered by this quarterly report, the Company carried out
      an
      evaluation, under the supervision and with the participation of the Company’s
      management, of the effectiveness of the design and operation of the Company’s
      disclosure controls and procedures pursuant to Rule 13a-14(c) of the Securities
      Exchange Act of 1934. Based upon that evaluation, the Company’s Chief Executive
      Officer and Chief Financial Officer concluded that the Company’s disclosure
      controls and procedures are effective in alerting them in a timely basis to
      material information relating to the Company required to be disclosed in the
      Company’s periodic SEC reports. There have been no significant changes in the
      Company’s internal controls or in other factors which could significantly affect
      internal controls subsequent to the date the Company carried out its evaluation.
      There was no change in the Company’s internal control over financial reporting
      during the Company’s most recently completed fiscal quarter that has materially
      affected, or is reasonably likely to materially affect, the Company’s internal
      control over financial reporting.





**PART
      II. OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





The
      Company is involved in legal actions in the ordinary course of its business
      including an action maintained by Multiband USA, Inc., in the Federal District
      Court of Minnesota against DirecTechologies, LLC, a New York entity, for fraud
      and breach of contract. The defendant, in the action, has counterclaimed against
      Multiband, USA, Inc. for breach of contract. However, as of September 30, 2006,
      management believes that there are no pending legal proceedings against or
      involving the Company for which the outcome is likely to have a material adverse
      effect upon the Company’s consolidated financial position, results of
      operations, or cash flows.




23




**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 Multiband
      and
      the trading price or value of our common stock could be materially adversely
      affected.





**General**





Multiband,
      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, Multiband, 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, Multiband created its MCS 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.





The
      specific risk factors, as detailed below, should be analyzed in the context
      of
      the Company's anticipated MCS related growth.





**Net
      Losses**





The
      Company had net losses of $6,294,121 for the nine months ended September 30,
      2006, $7,475,000 for the year ended December 31, 2005, $9,783,962 for the year
      ended December 31, 2004. Multiband may never be 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:




·
              our
                  capital expenditure
                  objectives;




·
              our
                  debt service obligations; or




·
                  our
                      working capital needs.




**Goodwill**





In
      June
      2001, the Financial Accounting Standards Board (FASB) adopted Statement of
      Financial Accounting Standards (SFAS) 142, "Goodwill and Other Intangible
      Assets" which changed the amortization rules on recorded goodwill from a monthly
      amortization to a periodic "impairment" analysis for fiscal years beginning
      after December 15, 2001. As of December 31, 2005, the Company had goodwill
      of
      $954,871 primarily related to the purchase of Rainbow Satellite Group, LLC.
      and
      the purchase of certain assets of Dinamo Entertainment, Inc. At September 30,
      2006, the Company had goodwill of $926,551, after recording a $28,320 reduction
      due to sale of properties in California (Note 3). At September 30, 2006, the
      Company did not note any indications of impairment related to
      goodwill.




24


**Deregulation**





Several
      regulatory and judicial proceedings have recently concluded, are underway or
      may
      soon be commenced that address issues affecting 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
      Multiband 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.





**Dependence
      on Strategic Alliances**





Several
      suppliers or potential suppliers of Multiband, 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 Multiband's business, Multiband 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, which expires in August 2008,
      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. Although an alternate provider of satellite television services,
      Echostar, exists, the termination of its agreements with DirecTV could have
      a
      material adverse effect on Multiband'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 Multiband'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 Multiband is
      unable to adopt or deploy such technologies.





**Attraction
      and Retention of Employees**





Multiband's
      success depends on the continued employment of certain key personnel, including
      executive officers. If Multiband 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,
      Multiband'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**





Multiband
      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
      Multiband licenses intellectual property. Multiband also relies on agreements
      with owners of MDUs which grant the Company rights of access for a specific
      period to MDU premises whereby Multiband is allowed to offer its voice, data,
      and video services to individual residents of the MDUs. If it was determined
      that Multiband 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 Multiband's business, financial condition and results of
      operations. Also, there can be no assurance that Multiband would be able to
      develop non-infringing technology or that it could obtain a license on
      commercially reasonable terms, or at all. Multiband'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 Multiband or the steps taken by Multiband
      will be adequate to prevent misappropriation of Multiband's intellectual
      property.


25





**Variability
      of Quarterly Operating Results**





Variations
      in Multiband'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 Multiband'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**





Multiband
      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 Multiband's securities, or the removal of incumbent management.





**Volatility
      of Multiband's Common Stock**





The
      trading price of our common stock has been and is likely to be volatile. The
      stock market has experienced extreme volatility, and this volatility has often
      been unrelated to the operating performance of particular companies. We cannot
      be sure that an active public market for our common stock will continue after
      this offering. Investors may not be able to sell the common stock at or above
      the price they paid for their common stock, or at all. Prices for the common
      stock will be 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.





**Competition**





We
      face
      competition from others who are competing for a share of the MDU market,
      including other satellite companies, cable companies and telephone companies.
      Some of these companies have significantly greater assets and resources than
      we
      do.




26


**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:
                November 14, 2006
            By:
            /s/
              James L. Mandel*Chief
                Executive Officer*  Date:
                November 14, 2006
            By:
            /s/
              Steven M. Bell*Chief
                Executive Officer*
              *(Principal
                Financial and Accounting
                Officer)*




27