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 ANDEXCHANGE
      ACT OF 1934FOR
      THE PERIOD ENDING JUNE 30, 2009ORo
                  TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ANDEXCHANGE
      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, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer“ and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):





Large
accelerated filer o  Accelerated
filer o


Non-accelerated
filer x (do not
check if a smaller reporting company)  Smaller reporting company o





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).





Yes o      No
x





On,
August 5, 2009 there were 9,659,797 shares outstanding of the registrant's
common stock, no par value, and 291,018 outstanding shares of the registrant's
convertible preferred stock.












PART
I.  FINANCIAL INFORMATION





ITEM
1.  CONSOLIDATED FINANCIAL STATEMENTS





MULTIBAND
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(in
thousands, except per share amounts)


Three
      Months Ended
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        Six
      Months EndedJune
      30, 2009 (unaudited)
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        June
      30, 2008 (unaudited)
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        June
      30, 2009 (unaudited)
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        June
      30, 2008 (unaudited)REVENUES
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        67,396
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        10,806
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        129,554
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        16,520COSTS
      AND EXPENSESCost
      of products and services (exclusive of depreciationand
      amortization shown separately below)
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        56,894
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        6,394
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        104,210
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        10,214Selling,
      general and administrative
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        15,509
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        2,561
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        29,249
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        4,416Depreciation
      and amortization
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        2,703
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        879
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        5,988
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        1,617Impairment
      of assets
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        7
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        65Total
      costs and expenses
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        75,106
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        9,841
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        139,447
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        16,312INCOME
      (LOSS) FROM OPERATIONS
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (7,710
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        965
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (9,893
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        208OTHER
      EXPENSEInterest
      expense
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (890
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (113
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (1,745
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (214
                                                                                                                                        )Interest
      income
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        3
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        10
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -Other
      income
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        98
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        32
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        348
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        73Total
      other expense
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (789
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (81
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (1,387
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (141
                                                                                                                                        )NET
      INCOME (LOSS) BEFORE INCOME TAXES ANDNONCONTROLLING
      INTEREST IN SUBSIDIARIES
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (8,499
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        884
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (11,280
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        67PROVISION
      FOR INCOME TAXES
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        102
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        434
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        202
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        463NET
      INCOME (LOSS)
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (8,601
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        450
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (11,482
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (396
                                                                                                                                        )LESS:
      NET INCOME (LOSS) ATTRIBUTABLE TO THENONCONTROLLING
      INTEREST IN SUBSIDIARIES
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (1,482
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        394
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (1,778
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        412NET
      INCOME (LOSS) ATTRIBUTABLE TOMULTIBAND
      CORPORATION AND SUBSIDIARIES
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (7,119
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        56
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (9,704
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (808
                                                                                                                                        )Preferred
      stock dividends
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        71
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        103
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        144
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        3,985LOSS
      ATTRIBUTABLE TO COMMONSTOCKHOLDERS
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        (7,190
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        (47
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        (9,848
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        (4,793
                                                                                                                                        )LOSS
      PER COMMON SHARE – BASIC AND DILUTED:LOSS
      ATTRIBUTABLE TO COMMONSTOCKHOLDERS
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        (0.75
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        (0.00
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        (1.02
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        (0.53
                                                                                                                                        )Weighted
      average common shares outstanding – basic and diluted
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        9,651
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        9,499
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        9,650
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        8,999





See
accompanying notes to the unaudited condensed consolidated financial
statements




Page
2




MULTIBAND
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


(in
thousands)




Three
      Months Ended
                                              
                                              
                                              Six
      Months EndedJune
      30, 2009 (unaudited)
                                              
                                              
                                              June
      30, 2008 (unaudited)
                                              
                                              
                                              June
      30, 2009 (unaudited)
                                              
                                              
                                              June
      30, 2008 (unaudited)NET
      INCOME (LOSS)
                                              
                                              $
                                              (7,119
                                              )
                                              
                                              $
                                              56
                                              
                                              
                                              $
                                              (9,704
                                              )
                                              
                                              $
                                              (808
                                              )OTHER
      COMPREHENSIVE INCOME (LOSS), NETOF
      TAX:Unrealized
      gains (losses) on securities:Unrealized
      holding gains (losses) arising during period
                                              
                                              
                                              (38
                                              )
                                              
                                              
                                              (57
                                              )
                                              
                                              
                                              (8
                                              )
                                              
                                              
                                              152COMPREHENSIVE
      LOSS
                                              
                                              $
                                              (7,157
                                              )
                                              
                                              $
                                              (1
                                              )
                                              
                                              $
                                              (9,712
                                              )
                                              
                                              $
                                              (656
                                              )





See
accompanying notes to the unaudited condensed consolidated financial
statements




Page
3




MULTIBAND
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS




ASSETS


(in
thousands)





June
      30, 2009 (unaudited)
                                
                                
                                December
      31, 2008 (audited)CURRENT
      ASSETSCash
      and cash equivalents
                                
                                $
                                5,584
                                
                                
                                $
                                4,346Securities
      available for sale
                                
                                
                                38
                                
                                
                                
                                46Accounts
      receivable, net
                                
                                
                                16,990
                                
                                
                                
                                3,437Other
      receivable – related party
                                
                                
                                518
                                
                                
                                
                                7,666Inventories
                                
                                
                                14,873
                                
                                
                                
                                1,903Prepaid
      expenses and other
                                
                                
                                2,585
                                
                                
                                
                                1,273Current
      portion of notes receivable
                                
                                
                                61
                                
                                
                                
                                61Total
      Current Assets
                                
                                
                                40,649
                                
                                
                                
                                18,732PROPERTY
      AND EQUIPMENT, NET
                                
                                
                                8,569
                                
                                
                                
                                2,033OTHER
      ASSETSGoodwill
                                
                                
                                34,744
                                
                                
                                
                                1,095Intangible
      assets, net
                                
                                
                                26,694
                                
                                
                                
                                3,668Other
      receivable – related party – long term
                                
                                
                                2,230
                                
                                
                                
                                -Notes
      receivable – long-term, net of current portion
                                
                                
                                34
                                
                                
                                
                                39Other
      assets
                                
                                
                                2,245
                                
                                
                                
                                476Total
      Other Assets
                                
                                
                                65,947
                                
                                
                                
                                5,278TOTAL
      ASSETS
                                
                                $
                                115,165
                                
                                
                                $
                                26,043





See
accompanying notes to the unaudited condensed consolidated financial
statements




Page
4




MULTIBAND
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS





LIABILITIES
AND STOCKHOLDERS' EQUITY


(in
thousands, except share and liquidation preference amounts)





June
      30, 2009 (unaudited)
                                    
                                    
                                    December
      31, 2008 (audited)CURRENT
      LIABILITIESMandatory
      redeemable preferred stock, 0 and 15,000 Class F preferred
      shares
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    150Line
      of credit
                                    
                                    
                                    49
                                    
                                    
                                    
                                    -Short
      term debt
                                    
                                    
                                    731
                                    
                                    
                                    
                                    -Current
      portion of long-term debt
                                    
                                    
                                    236
                                    
                                    
                                    
                                    1,609Current
      portion of capital lease obligations
                                    
                                    
                                    580
                                    
                                    
                                    
                                    311Accounts
      payable
                                    
                                    
                                    43,994
                                    
                                    
                                    
                                    8,274Accrued
      liabilities
                                    
                                    
                                    22,692
                                    
                                    
                                    
                                    4,435Deferred
      service obligations and revenue
                                    
                                    
                                    3,557
                                    
                                    
                                    
                                    1,488Total
      Current Liabilities
                                    
                                    
                                    71,839
                                    
                                    
                                    
                                    16,267LONG-TERM
      LIABILITIESLong-term
      debt – related party
                                    
                                    
                                    1,500
                                    
                                    
                                    
                                    -Long-term
      debt, net of current portion and original issue discount
                                    
                                    
                                    38,465
                                    
                                    
                                    
                                    346Capital
      lease obligations, net of current portion
                                    
                                    
                                    610
                                    
                                    
                                    
                                    317Total
      Liabilities
                                    
                                    
                                    112,414
                                    
                                    
                                    
                                    16,930COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITYCumulative
      convertible preferred stock, no par value:8%
      Class A (14,171 shares issued and outstanding, $148,796liquidation
      preference)
                                    
                                    
                                    213
                                    
                                    
                                    
                                    21310%
      Class B (1,970 and 2,570 shares issued and outstanding, $20,685and
      $26,985 liquidation preference)
                                    
                                    
                                    20
                                    
                                    
                                    
                                    2610%
      Class C (113,480 and 114,080 shares issued and outstanding,$1,134,800
      and $1,140,800 liquidation preference)
                                    
                                    
                                    1,474
                                    
                                    
                                    
                                    1,48210%
      Class F (150,000 shares issued and outstanding, $1,500,000liquidation
      preference)
                                    
                                    
                                    1,500
                                    
                                    
                                    
                                    1,5008%
      Class G (11,595 shares issued and outstanding, $115,950liquidation
      preference)
                                    
                                    
                                    48
                                    
                                    
                                    
                                    486%
      Class H (2.0 shares issued and outstanding, $200,000 liquidationpreference)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Common
      stock, no par value (9,652,297 and 9,642,374 shares issued andoutstanding)
                                    
                                    
                                    37,781
                                    
                                    
                                    
                                    37,687Stock
      subscriptions receivable
                                    
                                    
                                    (55
                                    )
                                    
                                    
                                    (84
                                    )Options
      and warrants
                                    
                                    
                                    46,555
                                    
                                    
                                    
                                    46,038Accumulated
      other comprehensive income – unrealized gain on securitiesavailable
      for sale
                                    
                                    
                                    38
                                    
                                    
                                    
                                    46Accumulated
      deficit
                                    
                                    
                                    (90,768
                                    )
                                    
                                    
                                    (81,314
                                    )Total
      Stockholders' Equity
                                    
                                    
                                    (3,194
                                    )
                                    
                                    
                                    5,642Noncontrolling
      interest in subsidiaries
                                    
                                    
                                    5,945
                                    
                                    
                                    
                                    3,471Total
      Equity
                                    
                                    
                                    2,751
                                    
                                    
                                    
                                    9,113TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                    
                                    $
                                    115,165
                                    
                                    
                                    $
                                    26,043





See
accompanying notes to the unaudited condensed consolidated financial
statements




Page
5




MULTIBAND
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(in
thousands)


SIX
      MONTHS ENDED JUNE 30,2009
                                              
                                              
                                              2008(unaudited)
                                              
                                              
                                              (unaudited)OPERATING
      ACTIVITIESNet
      loss
                                              
                                              $
                                              (11,482
                                              )
                                              
                                              $
                                              (396
                                              )Adjustments
      to reconcile net loss attributable to Multiband Corporationand
      subsidiaries to net cash provided from operating
    activities:Depreciation
      and amortization
                                              
                                              
                                              5,988
                                              
                                              
                                              
                                              1,617Amortization
      of imputed interest discount
                                              
                                              
                                              35
                                              
                                              
                                              
                                              24Amortization
      of original issue discount related to warrants issued with long termdebt
                                              
                                              
                                              9
                                              
                                              
                                              
                                              -Amortization
      of deferred financing costs
                                              
                                              
                                              5
                                              
                                              
                                              
                                              -Loss
      on sale of property and equipment and intangible assets
                                              
                                              
                                              -
                                              
                                              
                                              
                                              59Gain
      on debt extinguishment
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (30
                                              )Impairment
      of goodwill, intangibles and property and equipment
                                              
                                              
                                              -
                                              
                                              
                                              
                                              65Change
      in allowance for doubtful accounts on accounts receivable
                                              
                                              
                                              (127
                                              )
                                              
                                              
                                              (15
                                              )Change
      in reserve for stock subscriptions and interest receivable
                                              
                                              
                                              29
                                              
                                              
                                              
                                              (6
                                              )Expense
      related to repricing of warrants
                                              
                                              
                                              30
                                              
                                              
                                              
                                              -Stock
      based compensation expense
                                              
                                              
                                              114
                                              
                                              
                                              
                                              362Compensation
      expense of restricted stock award
                                              
                                              
                                              -
                                              
                                              
                                              
                                              24Changes
      in operating assets and liabilities:Accounts
      receivable
                                              
                                              
                                              (8,727
                                              )
                                              
                                              
                                              (66
                                              )Inventories
                                              
                                              
                                              1,160
                                              
                                              
                                              
                                              917Prepaid
      expenses and other
                                              
                                              
                                              344
                                              
                                              
                                              
                                              (592
                                              )Other
      assets
                                              
                                              
                                              (31
                                              )
                                              
                                              
                                              (4
                                              )Accounts
      payable and accrued liabilities
                                              
                                              
                                              9,333
                                              
                                              
                                              
                                              (1,766
                                              )Deferred
      service obligations and revenue
                                              
                                              
                                              1,981
                                              
                                              
                                              
                                              736Net
      cash flows from (used by) operating activities
                                              
                                              
                                              (1,339
                                              )
                                              
                                              
                                              929INVESTING
      ACTIVITIESPurchases
      of property and equipment
                                              
                                              
                                              (1,426
                                              )
                                              
                                              
                                              (66
                                              )Checks
      issued in excess of bank balance with the purchase of 80% of outstandingstock
      of DirecTECH operating entities
                                              
                                              
                                              (369
                                              )
                                              
                                              
                                              -Cash
      acquired via purchase of NC (formerly Michigan Microtech, Inc.
      (MMT))
                                              
                                              
                                              -
                                              
                                              
                                              
                                              4,044Cash
      collected on other receivables – related party acquired with the purchase
      of NC(formerly
      Michigan Microtech, Inc. (MMT))
                                              
                                              
                                              -
                                              
                                              
                                              
                                              2,815Purchase
      of US Install
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (101
                                              )Purchases
      of intangible assets
                                              
                                              
                                              (102
                                              )
                                              
                                              
                                              -Proceeds
      from sale of property and equipment and intangible assets
                                              
                                              
                                              -
                                              
                                              
                                              
                                              6Collections
      on notes receivable
                                              
                                              
                                              35
                                              
                                              
                                              
                                              1Net
      cash flows from (used in) investing activities
                                              
                                              
                                              (1,862
                                              )
                                              
                                              
                                              6,699FINANCING
      ACTIVITIESPayments
      on short-term debt
                                              
                                              
                                              (25
                                              )
                                              
                                              
                                              -Payments
      on long-term debt
                                              
                                              
                                              (2,580
                                              )
                                              
                                              
                                              (34
                                              )Payments
      on capital lease obligations
                                              
                                              
                                              (210
                                              )
                                              
                                              
                                              (112
                                              )Payments
      on note payable – related party
                                              
                                              
                                              (1,400
                                              )
                                              
                                              
                                              -Payments
      for debt issuance costs
                                              
                                              
                                              (144
                                              )
                                              
                                              
                                              -Net
      advances on line of credit
                                              
                                              
                                              4
                                              
                                              
                                              
                                              -Payment
      on mandatory redeemable preferred stock
                                              
                                              
                                              (150
                                              )
                                              
                                              
                                              (38
                                              )Payments
      for stock issuance costs
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (25
                                              )Payments
      received on stock subscriptions receivable
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1Proceeds
      from note payable – related party
                                              
                                              
                                              2,900
                                              
                                              
                                              
                                              -Proceeds
      from issuance of long-term debt
                                              
                                              
                                              6,100
                                              
                                              
                                              
                                              100Redemption
      of preferred stock
                                              
                                              
                                              (12
                                              )
                                              
                                              
                                              (51
                                              )Preferred
      stock dividends
                                              
                                              
                                              (44
                                              )
                                              
                                              
                                              (62
                                              )Net
      cash flows from (used in) financing activities
                                              
                                              
                                              4,439
                                              
                                              
                                              
                                              (221
                                              )INCREASE
      IN CASH AND CASH EQUIVALENTS
                                              
                                              
                                              1,238
                                              
                                              
                                              
                                              7,407CASH
      AND CASH EQUIVALENTS - Beginning of Period
                                              
                                              
                                              4,346
                                              
                                              
                                              
                                              944CASH
      AND CASH EQUIVALENTS - END OF PERIOD
                                              
                                              $
                                              5,584
                                              
                                              
                                              $
                                              8,351





See
accompanying notes to the unaudited condensed consolidated financial
statements




Page
6




MULTIBAND
CORPORATION AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(in
thousands)


SIX
      MONTHS ENDED JUNE 30,2009
                        
                        
                        2008(unaudited)
                        
                        
                        (unaudited)Cash
      paid for interest, net of amortization of original issue discount and
      interestdiscount
                        
                        $
                        989
                        
                        
                        $
                        136Cash
      paid for federal and state income taxes
                        
                        
                        598
                        
                        
                        
                        120Non-cash
      investing and financing transactions:Conversion
      of Class I preferred stock to common stock
                        
                        
                        -
                        
                        
                        
                        3,745Conversion
      of Class G preferred stock to common stock
                        
                        
                        -
                        
                        
                        
                        150Conversion
      of accrued interest into common stock
                        
                        
                        2
                        
                        
                        
                        2Conversion
      of accrued dividends into common stock
                        
                        
                        91
                        
                        
                        
                        175Intrinsic
      value of preferred dividends
                        
                        
                        2
                        
                        
                        
                        70Purchase
      of property and equipment via increase of capital lease
      obligations
                        
                        
                        565
                        
                        
                        
                        34Warrants
      issued for long-term notes payable
                        
                        
                        372
                        
                        
                        
                        -Reduction
      in notes payable via reduction in other receivables
                        
                        
                        76
                        
                        
                        
                        -Purchase
      of US Installs via increase in accrued expenses
                        
                        
                        -
                        
                        
                        
                        103Acquisition
      of securities available for sale upon expiration of contingent
      rights
                        
                        
                        -
                        
                        
                        
                        209Reduction
      of stock subscription receivable via cancellation of common
      stock
                        
                        
                        -
                        
                        
                        
                        61Debt
      and accrued interest paid with issuance of common stock
                        
                        
                        -
                        
                        
                        
                        20Purchase
      of 51% of MMT via issuance of notes payable and common stock, net ofdiscount
      for imputed interest
                        
                        
                        -
                        
                        
                        
                        5,783Increase
      in short-term debt via offset to accounts payable
                        
                        
                        159
                        
                        
                        
                        -Purchase
      of 80% of outstanding stock of DirecTECH operating entities via issuance
      ofshort
      and long-term notes payable
                        
                        
                        38,240
                        
                        
                        
                        -Reduction
      of notes payable via reduction of related party receivable in connection
      withthe
      purchase of 80% of outstanding stock of DirecTECH operating
      entities
                        
                        
                        5,844
                        
                        
                        
                        -Reduction
      of notes payable with issuance notes payable in connection with
      acquisition
                        
                        
                        300
                        
                        
                        
                        -Purchase
      of 29% of outstanding stock of NC (formerly MMT) via issuance of short andlong-term
      notes payable
                        
                        
                        1,660
                        
                        
                        
                        -Purchase
      of 80% of outstanding stock of DirecTECH operating entities via payment toescrow
      in 2008
                        
                        
                        500
                        
                        
                        
                        -





See
accompanying notes to the unaudited condensed consolidated financial
statements




Page
7




MULTIBAND CORPORATION AND
SUBSIDIARIES


NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)


NOTE 1 - Unaudited Consolidated
      Financial Statements





The
information furnished in this report is unaudited and reflects all adjustments
which are normal recurring adjustments and, which in the opinion of management,
are necessary to fairly present the operating results for the interim periods.
The operating results for the interim periods presented are not necessarily
indicative of the operating results to be expected for the full fiscal
year.  The unaudited consolidated financial statements should be read
in conjunction with the audited consolidated financial statements and footnotes
thereto included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008, previously filed with the Securities and Exchange
Commission.





NOTE 2 - Summary of Significant
      Accounting Policies





Nature
of Business





Multiband
Corporation and subsidiaries (the Company) was incorporated in Minnesota in
September 1975.  The Company provides voice, data and video services
to multi-dwelling unit and single family home customers.  The
Company's products and services are sold to customers located throughout the
United States of America.





The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern that contemplates the realization of
assets and satisfaction of liabilities in the normal course of
business.  For the six months ended June 30, 2009 and 2008, the
Company incurred net losses attributable to Multiband Corporation and
subsidiaries of $9,704 and $808, respectively.  At June 30, 2009, the
Company had an accumulated deficit of $90,768.  The Company's ability
to continue as a going concern is dependent on it maintaining profitability
and/or raising additional capital.  Management may sell, if prudent,
certain assets on a strategic basis for prices agreeable to the Company and/or
obtain additional debt or equity capital to meet all of its existing cash
obligations and fund commitments on planned Multiband projects; however, there
can be no assurance that the sources will be available or available on terms
favorable to the Company.  Management anticipates that the impact of
the actions listed below will generate sufficient cash flows to pay current
liabilities, long-term debt and capital and operating lease obligations and fund
the Company's operations through 2009:





1.
            Initiate
      and grow its Home Service Provider (HSP) business by eliminating
      competitive HSP providers from certain of its core
  markets.2.
            Improve
      gross margin percentages by cycling technicians from training and placing
      them in a revenue generating role and by mitigating work order breakage
      expense.3.
            Reduce
      operating expenses by reducing training costs through the lowering of
      technician turnover, managing professional fees and other general and
      administrative expenses.4.
            Evaluate
      and reduce of excess inventory including such factors as anticipated
      usage, inventory turnover, inventory levels and product demand
      levels.5.
            Obtain
      additional debt financing.6.
            Expansion
      of call center support with sales of call center services to both existing
      and future system operators and to buyers of the Company’s video
      subscribers.7.
            Solicit
      additional equity investment in the Company by either issuing preferred or
      common stock.





Principles
of Consolidation





The 2008
consolidated financial statements include the accounts of Multiband Corporation
(MBCorp) and its wholly owned subsidiaries, Minnesota Digital Universe, Inc.
(MDU), Multiband Subscriber Services, Inc. (MBSS), and Multiband USA, Inc.
(MBUSA).  In addition, effective March 1, 2008, the Company acquired a
51% interest in Multiband NC, Inc. (NC) (formerly Michigan Microtech, Inc.
(MMT)) and have also included NC’s results of operations and cash flow for the
four months ended June 30, 2008 in the consolidated financial statements for
that period.





In
addition, effective January 2, 2009, the Company purchased 80% of the issued and
outstanding shares of common stock of all of the DirecTECH Holding Co. (DTHC)
operating subsidiaries (DirecTECH) (an additional 29% of Multiband NC, Inc.
(NC) (formerly Michigan Microtech, Inc. (MMT)), 51% of which was previously
purchased effective March 1, 2008 (see Note 3) and 80% of Multiband NE, Inc.
(NE), Multiband SW, Inc. (SW), Multiband EC, Inc. (EC), Multiband MDU, Inc.
(MBMDU), Multiband DC, Inc. (DC) and Multiband Security, Inc. (Security) (see
Note 3)).  The noncontrolling interest in subsidiaries on the
unaudited condensed consolidated balance sheet (formerly Minority Interest) and
unaudited condensed consolidated statement of operations represents DTHC’s 20%
ownership of Multiband NE, Inc. (NE), Multiband SW, Inc. (SW), Multiband EC,
Inc. (EC), Multiband NC, Inc. (NC), Multiband MDU, Inc. (MBMDU), Multiband DC,
Inc. (DC) and Multiband Security, Inc. (Security).  The 2009
consolidated financial statements include the accounts of all wholly-owned
subsidiaries and the newly acquired companies (DirecTECH).  All
significant intercompany transactions and balances have been eliminated in
consolidation.




Page
8


MULTIBAND CORPORATION AND
SUBSIDIARIES
 NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)


Revenue
Recognition





The
Company recognizes revenue in accordance with the Securities Exchange
Commission’s Staff Accounting Bulletin No. 104 “Revenue Recognition” (“SAB
104”), which requires that four basic criteria be met before revenue can be
recognized: (i) persuasive evidence of a customer arrangement exists; (ii) the
price is fixed or determinable; (iii) collectability is reasonably assured; and
(iv) product delivery has occurred or services have been
rendered.  The Company recognizes revenue as services are performed
and completed.





The
Company earns HSP segment revenue as follows:





·
            installation
      and service of DirecTV video programming for residents of single family
      homes


·
            installation
      of home security systems and internet
services





The
Company has a home services provider (HSP) agreement with DirecTV which allows
the Company to install and activate DirecTV video programming services for
residents of single family homes.  As a DirecTV HSP, the Company earns
revenue for installing and servicing DirecTV video customers pursuant to
predetermined rates set by DirecTV which may vary from time to
time.  Revenue is recognized upon completion of the delivery and
installation of equipment.  DirecTV reimburses the Company for
substantially all DirecTV equipment used for customer installation related to
the HSP segment.





HSP
segment installation and services revenues are recognized in the period the
related services are provided in accordance with SAB 104.  MDU segment
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.





The
Company earns MDU segment revenue as follows:





1.
            from
      voice, video and data communications products which are sold and
      installed


2.
            direct
      billing to user charges to multiple dwelling units, through the activation
      of, enhancement of, and residual fees on video programming services
      provided to residents of multiple dwelling
units





Revenue
generated from activation of video programming services is earned in the month
of activation.  According to Multiband's Master System Operator
agreement with DirecTV, in the event that a customer cancels within the first 12
months of service, DirecTV has the right to chargeback the Company for a portion
of the activation fees received.  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, a variable amount depending
on the number of activations in a given month, and a variable amount for
coordinating improvements of systems used to deliver enhanced programming
services.  The Company’s master system operator contract with DirecTV
also permits the Company to earn revenues through its control of other system
operators who are unable to provide DirecTV video programming services without
the Company’s performance.





The
Company reports the aforementioned MDU voice, data, and video revenues on a
gross basis based on the following factors: the Company has the primary
obligation in the arrangement with its customers; the Company controls the
pricing of its services; the Company performs customer service for the
agreements; the Company approves customers; and the Company assumes the risk of
payment for services provided.


We offer
some products and services that are provided by third party
vendors.  We review the relationship between us, the vendor and the
end customer on an individual basis to assess whether revenue should be reported
on a gross or net basis.  As an example, our resold satellite digital
television revenue is reported on a net basis.




Page
9




MULTIBAND CORPORATION AND
SUBSIDIARIES
 NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)


The
Company has determined that the accounting policies for revenue recognition
described above are 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.





MDU
segment revenue generated by the support center to service third party
subscribers by providing billing and call center support services is recognized
in the period the related services are provided.





Customers
contract for both the purchase and installation of voice and data networking
technology products and certain video technologies products.  Revenue
is recognized when the products are delivered and installed and the customer has
accepted and has the ability to fulfill the terms of the contract.





The
Company applies Emerging Issues Task Force Issue No. 06-3, “How Taxes Collected
from Customers and Remitted to Governmental Authorities Should Be Presented in
the Income Statement (That Is, Gross versus Net Presentation)” (“EITF
06-3”).  EITF 06-3 concluded that the presentation of taxes imposed on
revenue-producing transactions (sales, use, value added and excise taxes) on
either a gross (included in revenues and costs) or a net (excluded from
revenues) basis is an accounting policy that should be disclosed.  The
Company’s policy is to present taxes imposed on revenue-producing transactions
on a net basis.





Deferred Revenue





The
Company invoices for certain installation upgrade projects upon order of project
equipment.  Revenue is deferred on these projects until the equipment
is installed.





Goodwill and Other Intangible
Assets





We
periodically evaluate goodwill and other intangible and long-lived assets for
potential impairment indicators.  Our judgments regarding the
existence of impairment indicators are based on legal factors, market conditions
and operational performance of our business segments.  Future events
could cause us to conclude that impairment indicators exist and that goodwill
and other intangible and long-lived assets are impaired. Any resulting
impairment loss could have a material adverse impact on our financial condition
and results of operations.  Goodwill was $34,744 and $1,095 at June
30, 2009 and December 31, 2008, respectively, and is recorded as part of our MDU
and HSP segments.  The increase in goodwill during 2009 is due to the
purchase of DirecTECH (see Note 3).





Goodwill
by business segment consists of the following:




MBCorp.
                      
                      
                      MDU
                      
                      
                      HSP
                      
                      
                      TotalBalance,
      December 31, 2008
                      
                      $
                      -
                      
                      
                      $
                      50
                      
                      
                      $
                      1,045
                      
                      
                      $
                      1,095Acquisitions
                      
                      
                      -
                      
                      
                      
                      312
                      
                      
                      
                      33,337
                      
                      
                      
                      33,649Balance,
      June 30, 2009
                      
                      $
                      -
                      
                      
                      $
                      362
                      
                      
                      $
                      34,382
                      
                      
                      $
                      34,744




Page
10




MULTIBAND CORPORATION AND
SUBSIDIARIES
 NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)


Components
of intangible assets are as follows:


June 30, 2009
                            
                            
                            December 31, 2008Gross
                              Carrying
                            
                            
                            Accumulated
                            
                            
                            Gross
                              Carrying
                            
                            
                            AccumulatedAmount
                            
                            
                            Amortization
                            
                            
                            Amount
                            
                            
                            AmortizationIntangible
      assets subject to amortizationRight
      of entry contracts
                            
                            $
                            3,137
                            
                            
                            $
                            953
                            
                            
                            $
                            801
                            
                            
                            $
                            526Contracts
      with DirecTV
                            
                            
                            36,902
                            
                            
                            
                            12,392
                            
                            
                            
                            11,502
                            
                            
                            
                            8,060Customer
      contracts
                            
                            
                            102
                            
                            
                            
                            102
                            
                            
                            
                            102
                            
                            
                            
                            86Total
                            
                            
                            40,141
                            
                            
                            
                            13,447
                            
                            
                            
                            12,405
                            
                            
                            
                            8,672Impairment
      of intangibles
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            65Total
      including impairment
                            
                            $
                            40,141
                            
                            
                            $
                            13,447
                            
                            
                            $
                            12,405
                            
                            
                            $
                            8,737





Amortization
of intangible assets was $2,056 and $666 for the three months ended June 30,
2009 and 2008, respectively.  For the six months ended June 30, 2009
and 2008, amortization of intangible assets was $4,710 and $1,183,
respectively.  Estimated amortization expense of intangible assets for
the remainder of the year ending December 31, 2009 and for the years ending
December 31, 2010, 2011, 2012, 2013, 2014 and thereafter is $3,515, $5,768,
$5,147, $5,101, $5,004, $1,756 and $279, respectively.  Right of entry
contracts contain $124 of contracts that have not been placed in service,
therefore no amortization expense has been recorded.  The weighted
average remaining life of the intangibles is 4.69 years with right of entry
contracts average life of 5.50 years, contracts with DirecTV of 4.62 years as of
June 30, 2009.





Debt Issuance Costs





The
Company has incurred $145 of debt issuance costs during the three months ended
June 30, 2009.  The Company amortizes the debt issuance costs over 26 to 43
months and includes these costs with other assets on the unaudited condensed
consolidated balance sheet.  Amortization of debt issuance costs of $5 and
$0 for the three and six months ended June 30, 2009 and 2008, respectively, is
included in interest expense.





Stock-Based Compensation





The
Company applies Financial Accounting Standards (SFAS) No. 123R “Share-Based
Payment” (“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 six months ended June 30, 2009 and 2008 recognize compensation cost for the
portion of outstanding awards which have vested during the year.  The
Company recognizes stock-based compensation costs on a straight-line basis over
the requisite service period of the award, which is generally the option vesting
term. For the three months ended June 30, 2009 and 2008 total share-based
compensation expense of $24 ($.00 per share) and $151 ($.02 per share),
respectively, was included in selling, general and administrative
expenses.  For the six months ended June 30, 2009 and 2008, total
share-based compensation expense of $114 ($.01 per share) and $362 ($.04 per
share) was included in selling, general and administrative expenses,
respectively.  As of June 30, 2009, there was $203 of total
unrecognized compensation cost related to nonvested share-based compensation
arrangements granted under the Plan.  That cost is expected to be
recognized over a weighted-average period of 3.17 years.  This is an
estimate based on options currently outstanding and therefore this projected
expense could be more in the future.





In
determining the compensation cost of the options granted during the three and
six months ended June 30, 2009 and 2008, the Company applies the SFAS 123R, 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
                                      
                                      Six
      months endedJune 30, 2009
                                      
                                      June 30, 2008
                                      
                                      June 30, 2009
                                      
                                      June 30, 2008Risk-free
      interest rate
                                      1.43%
                                      
                                      3.27%
                                      
                                      1.43%
                                      
                                      3.15%Expected
      life of options granted
                                      5.0
      Years
                                      
                                      6.5
      Years
                                      
                                      5.0
      Years
                                      
                                      6.5
      YearsExpected
      volatility range
                                      95%
                                      
                                      92.9%
                                      
                                      95%
                                      
                                      93.3%Expected
      dividend yield
                                      0%
                                      
                                      0%
                                      
                                      0%
                                      
                                      0%




Page
11




MULTIBAND CORPORATION AND
SUBSIDIARIES
 NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)


The
Company’s determination of fair value of share-based payment awards on the date
of grant using an option-pricing model is affected by the Company’s stock price
as well as assumptions regarding a number of variables.  These
variables include, but are not limited to the Company’s expected stock price
volatility, and actual and projected stock option exercise behaviors and
forfeitures.  An option's expected term is the estimated period
between the grant date and the exercise date of the option.  As the
expected-term period increases, the fair value of the option and the
compensation cost will also increase.  The expected-term assumption is
generally calculated using historical stock option exercise data.  The
Company does not have historical exercise data to develop such an
assumption.  In cases where companies do not have historical data and
where the options meet certain criteria, SEC Staff Accounting Bulletin 107 ("SAB
107") provides the use of a simplified expected-term
calculation.  Accordingly, the Company calculated the expected terms
using the SAB 107 simplified method.





In
January 2009, the Company issued 80 shares of stock options with a Black Scholes
valuation of $72 to four directors of the Company.  These seven year
stock options were immediately vested and were issued as long-term incentive
compensation pursuant to the Company’s 2000 Non-employee Directors Stock
Compensation Plan.





In
January 2009, the Company issued 214 shares of stock options with a Black
Scholes valuation of $193 to two officers of the Company.  These seven
year stock options vest over four years and were issued as long-term incentive
compensation pursuant to the Company’s 1999 Stock Compensation
Plan.





Net Loss per Common
Share





Basic net
loss per common share is computed by dividing the loss attributable to common
stockholders by the weighted average number of common shares outstanding for the
reporting period.  Diluted loss per common share is computed by
dividing loss attributable to common stockholders by the sum of the weighted
average number of common shares outstanding plus all additional common stock
that would have been outstanding if potentially dilutive common shares related
to common share equivalents (stock options, stock warrants, convertible
preferred shares, and issued but not outstanding restricted stock) had been
issued.  All options, warrants, convertible preferred shares, and
restricted stock outstanding during the three and six months ended June 30, 2009
and 2008 were excluded from the calculation of diluted loss per share as their
effects were anti-dilutive due to the Company’s net losses for the
periods.





Segment Reporting





A
business segment is a distinguishable component of an enterprise that is engaged
in providing an individual product or service or a group of related products or
services and that is subject to risks and returns that are different from those
of other business segments. Management believes that the Company
has  two operating segments, HSP (Home Service Provider), where the
Company receives net cash payments for the installation and service of DirecTV
video programming for residents of single family homes; and  MDU,
where the Company acts as a master service operator for DirecTV, receives net
cash payments for managing video subscribers through its network of system
operators who are billed by DirecTV and also directly bills voice, data and
video subscribers as a principal.  The previously filed Form 10-K
business segments disclosed the MCS segment which is now reported within the MDU
segment.





Recent Accounting
Pronouncements





During
May 2009, the FASB issued SFAS No. 165 “Subsequent Events” (“SFAS
165”).  SFAS 165 requires all public entities to evaluate subsequent
events through the date that the financial statements are available to be issued
and disclose in the notes the date through which the Company has evaluated
subsequent events and whether the financial statements were issued or were
available to be issued on the disclosed date.  SFAS 165 defines two
types of subsequent events, as follows: the first type consists of events or
transactions that provide additional evidence about conditions that existed at
the date of the balance sheet and the second type consists of events that
provide evidence about conditions that did not exist at the date of the balance
sheet but arose after that date.  SFAS 165 is effective for interim
and annual periods ending after June 15, 2009 and must be applied
prospectively.  The disclosure of the subsequent events did not have a
material effect on the consolidated financial statements.




Page
12




MULTIBAND CORPORATION AND
SUBSIDIARIES
 NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)




Income Taxes





We
account for income taxes under the liability method in accordance with SFAS No.
109, “Accounting for Income Taxes” (“SFAS 109”).  Deferred tax
liabilities are recognized for temporary differences that will result in taxable
amounts in future years.  Deferred tax assets are recognized for
deductible temporary differences and tax operating loss and tax credit
carryforwards.  Deferred tax assets and liabilities are measured using
the enacted tax rates expected to apply to taxable income in the periods in
which the deferred tax asset or liability is expected to be realized or
settled.  We assess the likelihood that our deferred tax assets will
be recovered from future taxable income and record a valuation allowance to
reduce our deferred tax assets to the amounts we believe to be
realizable.  We concluded that a full valuation allowance against our
U.S. deferred tax assets was appropriate as of June 30, 2009 and December 31,
2008.





Reclassifications





Certain
accounts in the prior quarter’s unaudited condensed consolidated financial
statements have been reclassified for comparative purposes to conform to the
presentation in the current quarter’s unaudited condensed consolidated financial
statements.  The reclass was a change in presentation of minority
interest to noncontrolling interest in stockholders’ equity (see Note
4).  These reclassifications had no effect on net loss.





NOTE 3 – Business
      Acquisitions





Effective
January 2, 2009, the Company purchased 80% of the issued and outstanding shares
of common stock of all of the DTHC operating subsidiaries (DirecTECH) (an
additional 29% of NC (formerly MMT), 51% of which was previously purchased
effective March 1, 2008 and 80% of NE, SW, EC, MBMDU, DC and
Security.  DTHC, a fulfillment agent for a national satellite
television company, DirecTV, specializes in the providing of satellite TV to
single family homes.  The purpose of this acquisition was to increase
the Company’s business of installing video services in single family homes (HSP
segment).  The purchase price totaled $40,400 plus other consideration
valued at $1,608 as of the acquisition date.  The $40,400 consists of
three parts; 1) $500 in cash which was paid at the initial closing date of
January 2, 2009 and in escrow as a deposit at December 31, 2008, 2) a
non-interest bearing note of $500 payable without interest as follows: $250
on demand on or after April 1, 2009 and $250 after the Company’s retention of
senior financing, as defined, no later than August 31, 2009 and 3) a
promissory note in the amount of $39,400, due January 1, 2013, bearing interest
at an annual rate of 8.25% (subject to adjustment in the event of a default),
plus the remaining $800 note payable from the purchase of 51% of
NC.  Subsequent to the closing, the Company and DTHC mutually agreed
to offset the $40,200 promissory note by the amount of $5,844, for an offsetting
receivable on Multiband’s books as of December 31, 2008.  This reduced
the amount of this promissory note to $34,356.  As part of the
agreement, Multiband has until December 31, 2009 to purchase the remaining 20%
of the issued and outstanding shares of common stock of all
DirecTECH.  The consideration for the 20% purchase will be $10,000 of
Multiband Series J Preferred Stock, whose issuance will require Multiband
shareholder approval. The closing on the remaining 20% stock transaction is
anticipated to occur on or before December 31, 2009.





The
Company applied SFAS No. 141(R) “Business Combinations” (“SFAS 141(R)”) to
evaluate the purchase price allocation based on the fair value of the assets
acquired and liabilities assumed.  The Company also applied Staff
Position No. FSP FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies” (“FSP FAS 141
(R)-1”) which amends the accounting in FAS 141(R) for assets and liabilities
arising from contingencies in a business combination.  FSP FAS
141(R)-1 requires that pre-acquisition contingencies be recognized at fair
value, if fair value can be reasonably determined.  If fair value
cannot be reasonably determined, FSP FAS 141(R)-1 requires measurement based on
the best estimate in accordance with SFAS No. 5, “Accounting for Contingencies.”
(“SFAS 5”) FSP FAS 141(R)-1 is effective as of January 1, 2009 in connection
with the adoption of FAS 141(R).





The
Company applied SFAS No. 160 “Noncontrolling Interests in Consolidated Financial
Statements” (“SFAS 160”) for the presentation and accounting for the
noncontrolling 20% interest at June 30, 2009.  Multiband had
previously gained control of NC with its purchase of 51% of NC in March 2008,
SFAS 160 required Multiband to recognize the acquisition of additional 29%
ownership interest in NC on January 2, 2009 as an equity
transaction.  The purchase price of $1,660 increased the accumulated
deficit and the transfer of $2,054 of noncontrolling interest to controlling
interest decreased the accumulated deficit.  No increase to goodwill
or intangibles was recorded as part of this acquisition.




Page
13




MULTIBAND CORPORATION AND
SUBSIDIARIES
 NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)




As it
relates to the purchase of the remainder of the DTHC operating subsidiaries,
SFAS 141(R) required the Company to recognize the assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree at the
acquisition date, measured at their fair values as of that date, with certain
exceptions.  It also required the Company to recognize goodwill as of
the acquisition date, measured using an income, market or cost approach, which
in most types of business combinations will result in measuring goodwill as the
excess of the fair value of consideration transferred plus the fair value of any
noncontrolling interest in the acquiree at the acquisition date over the fair
value of the identifiable net assets acquired or assumed.  A
qualitative and quantitative analysis of factors that make up recognized
goodwill, such as DirecTECH’s assets, liabilities and other contingent
considerations, such as leases and other off-balance sheet commitments,
follows.  This analysis is preliminary while the Company is still in
its one year measurement period.





A summary
of the transaction is as follows:


Cash
      paid
                    
                    $
                    500Short-term
      debt
                    
                    
                    500Promissory
      note
                    
                    
                    39,400Total
      consideration
                    
                    
                    40,400Less
      consideration for 29% of NC (recorded separatelyas
      an equity transaction)
                    
                    
                    (1,660
                    )Consideration
      for 80% of outstanding stock of EC, NE, SW,MBMDU,
      DC, and Security
                    
                    $
                    38,740Assets
                    
                    $
                    30,802Intangible
      assets
                    
                    
                    27,634Goodwill
                    
                    
                    33,649Liabilities
                    
                    
                    (47,039
                    )Noncontrolling
      interest
                    
                    
                    (6,306
                    )$
                    38,740





The fair
value of the intangible assets of $27,634 and noncontrolling interest of $6,306
was obtained by management, using significant level 3 unobservable inputs, as
defined in SFAS No. 157, “Fair Value Measurements” (“SFAS 157”) including
discount rates of 15%, a terminal value of $28,200, as well as a noncontrolling
discount of 30%.





The
contingent consideration recorded on the acquisition is related to the
acquisition agreement which requires a 20% cash payout on all earnings in 2009
until the remaining 20% of the Company is acquired.  The Company
estimated this consideration based on significant level 3 inputs as defined in
SFAS 157 and the probability adjusted cash flow.





As part
of the acquisition, the Company preliminarily assessed a $5,040 contingent legal
accrual related to an existing litigation.  In connection with the
purchase of the operating subsidiaries of DTHC, the Company has the right to
offset 50% of certain claims against the note to DTHC once those claims are
settled and paid. The Company has recorded a receivable of $2,290 which
represents an estimate of the amount that can be recovered from DTHC based on
the current legal estimate. The receivable is classified as long-term since
management intends to offset the receivable with any balance remaining on the
note payable to DTHC.  At present, the litigation is proceeding
through a discovery stage.  While the parties have made some
preliminary attempts to settle the matter there is no guarantee that the matter
can be settled out of court.  As a result there is no current timeline
under which the amount of the aforementioned accrual can be
finalized.  The Company intends to adjust the purchase price
allocation should more information become available as to the fair value of the
legal contingency during the measurement period.





The
Company acquired $25,400 of intangible assets relating to contracts with DirecTV
as well as right of entry contracts of $2,234.  At the time of the
acquisition, the weighted average remaining life of the intangibles acquired was
2.57 years based on terms without renewals, with right of entry contracts
average life of 5.44 years and contracts with DirecTV of 2.33
years.  The weighted average remaining life of the intangibles
acquired was 3.49 years assuming one year term renewals, with right of entry
contracts average life of 5.44 years and contracts with DirecTV of 3.33
years.  In May 2009, the Company signed a new contract with DirecTV
(see Note 10).  The Company capitalizes material costs incurred to
renew or extend terms of intangible assets.  No costs have been
incurred to renew or extend the terms of intangible assets during the three and
six months ended June 30, 2009.  Goodwill and intangible assets
acquired are not expected to be deductible for tax purposes




Page
14




MULTIBAND CORPORATION AND
SUBSIDIARIES
 NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)


The
Company’s report on Form 10-K for the year ended December 31, 2008 contained a
preliminary estimated fair value of all the aforementioned assets and
liabilities related to the purchase.  At the time of the preliminary
estimate DirecTech had not completed its audit for the year ended December 31,
2008.  Nor at this time had the Company completed its procedures to
value and allocate the final purchase price to intangible and tangible assets
acquired in the acquisition.  The Company’s subsequent receipt of
final balance sheet information to the aforementioned Form 10-K filing,
necessitated a revision of the DirecTech purchase price
valuation.  This revision is reflected in this
footnote.  The revision consists of reallocations of goodwill and
other intangible assets related to the purchase.  More specifically,
goodwill assets were increased by $14,400 and intangible assets were decreased
by $9,066 from the original estimate, due to the additional purchase of 29% of
NC being treated as an equity transaction under SFAS 160 and therefore no
additional assets (including goodwill) or liabilities were allocated for NC in
the purchase price (see Note 4).  At June 30, 2009, the Company
revised the fair value of the contingent consideration from $1,608 to
zero.  The Company determined that the significant level 3 inputs
previously used to determine the contingent consideration were
incomplete.  After further review, the Company determined that it was
appropriate to define this change as a measurement period adjustment to the
purchase price as a result of improved information regarding circumstances that
existed as of the acquisition date.




Since the
transaction was effective January 2, 2009, there is not a change in the June 30,
2009 balance sheet or income statement for the three and six months ended June
30, 2009.  The unaudited pro forma information for the three and six
months ended June 30, 2008 does not purport to represent what the Company’s
results of operations would actually have been if such transactions in fact had
occurred at such date or to project the Company’s results of future
operations.





2008Consolidated
                                        as
      reported
                                      
                                      
                                      2008
                                        Pro
      FormaThree
      months ended June 30, 2008Revenues
                                      
                                      $
                                      10,806
                                      
                                      
                                      $
                                      52,833Income
      from operations
                                      
                                      
                                      965
                                      
                                      
                                      
                                      2,576Net
      income attributable to Multiband Corp and subsidiaries
                                      
                                      
                                      56
                                      
                                      
                                      
                                      727Preferred
      stock dividends
                                      
                                      
                                      103
                                      
                                      
                                      
                                      103Income
      (loss) attributable to common shareholders
                                      
                                      $
                                      (47
                                      )
                                      
                                      $
                                      624Income
      (loss) attributable to common shareholders per commonshare
      – basic and diluted
                                      
                                      $
                                      (0.00
                                      )
                                      
                                      $
                                      0.07Weighted
      average shares outstanding – basic and diluted
                                      
                                      
                                      9,499
                                      
                                      
                                      
                                      9,499Six
      months ended June 30, 2008Revenues
                                      
                                      $
                                      16,520
                                      
                                      
                                      $
                                      111,741Income
      (loss) from operations
                                      
                                      
                                      208
                                      
                                      
                                      
                                      (4,869
                                      )Net
      loss attributable to Multiband Corp and subsidiaries
                                      
                                      
                                      (808
                                      )
                                      
                                      
                                      (6,293
                                      )Preferred
      stock dividends
                                      
                                      
                                      3,985
                                      
                                      
                                      
                                      3,985Loss
      attributable to common shareholders
                                      
                                      $
                                      (4,793
                                      )
                                      
                                      $
                                      (10,278
                                      )Loss
      attributable to common shareholders per common share – basicand
      diluted
                                      
                                      $
                                      (0.53
                                      )
                                      
                                      $
                                      (1.11
                                      )Weighted
      average shares outstanding – basic and diluted
                                      
                                      
                                      8,999
                                      
                                      
                                      
                                      9,252
  Page
15
  MULTIBAND CORPORATION AND
SUBSIDIARIES
 NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)


NOTE 4 – Noncontrolling
      Interest




June 30,
                        2009
                      
                      
                      December 31, 2008Equity of noncontrolling interest
      (previously minority interest) insubsidiaries:Noncontrolling
      interest in subsidiaries, beginning balance
                      
                      $
                      3,471
                      
                      
                      $
                      -Purchase
      of 51% of NC
                      
                      
                      -
                      
                      
                      
                      2,819Purchase
      of 80% of NE, SC, EC, MBMDU, DC & Security
                      
                      
                      6,306
                      
                      
                      
                      -Purchase
      of NC from noncontrolling interest
                      
                      
                      (2,054
                      )
                      
                      
                      -Net income(loss) attributable to
      the noncontrolling interest insubsidiaries
                      
                      
                      (1,778
                      )
                      
                      
                      652Noncontrolling
      interest (previously minority interest) insubsidiaries,
      ending balance
                      
                      $
                      5,945
                      
                      
                      $
                      3,471





NOTE 5 –
      Inventories


June 30,
                            2009
                          
                          
                          December 31, 2008Inventories
      consisted of the following:DirecTV
      – serialized
                          
                          $
                          6,222
                          
                          
                          $
                          813DirecTV
      – nonserialized
                          
                          
                          5,930
                          
                          
                          
                          670Other
                          
                          
                          2,721
                          
                          
                          
                          420Total
                          
                          $
                          14,873
                          
                          
                          $
                          1,903





The
Company’s inventories are segregated into three major
categories.  Serialized DirecTV inventories consist primarily of
satellite receivers and similar devices.  Non-serialized DirecTV
inventories consist primarily of satellite dishes, poles and similar devices
which are supplied by DirecTV.  Other inventory consists primarily of
cable, switches and various small parts used in the installation of DirecTV
satellite dishes.  The large increase in inventory is due to the
purchase of DirecTECH (see Note 3).





NOTE 6 – Securities Available for
      Sale





As of
December 31, 2007, Multiband had the voting rights for and was holding in trust
58,161 common shares of URON for various contingent rights holders whose rights
were tied to potential future warrant exercises or preferred stock
conversions.  Effective January 1, 2008, FASB issued SFAS No. 157,
“Fair Value Measurements” (“SFAS 157”), which provides a framework for
measuring, reporting and disclosing fair value under generally accepted
accounting principles.  SFAS 157 applies to all assets and liabilities
that are measured, reported and/or disclosed on a fair value basis.





As
defined in SFAS 157, fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.  In determining fair value, the
Company values and records all investment securities transactions on a trade
date basis.  Securities listed on a national or regional securities
exchange are valued at their last reported sales price on the last business day
of the period.  Securities which are not traded on a major exchange or
for which no sale was reported on that date are valued at the average of their
last quoted "bid" price and "asked" price.  Short positions are valued
at the last quoted "asked" price.  Inputs used in the valuation
methods can be either readily observable, market corroborated, or generally
unobservable inputs.  Whenever possible the Company attempts to
utilize valuation methods that maximize the use of observable inputs and
minimizes the use of unobservable inputs.  The Company’s investments
in available-for-sale securities was determined based on quoted market prices in
active markets for identical assets and liabilities (level 1).  As of
February 4, 2008, certain aforementioned contingent rights were not exercised by
the various holders; therefore Multiband owns 37,994 shares of
URON.  As a result, Multiband recorded the fair value of URON shares
based on quoted market prices as an unrealized gain.  URON
subsequently changed their name to Western Capital Resources, Inc.  At
June 30, 2009 and December 31, 2008 the balance in securities available for sale
was $38 and $46, respectively.




Page
16




MULTIBAND CORPORATION AND
SUBSIDIARIES
 NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)


Securities
available for sale consisted of the following:


June 30,
                    2009
                  
                  
                  December 31, 2008Beginning
      balance
                  
                  $
                  46
                  
                  
                  $
                  -Initial
      investment
                  
                  
                  -
                  
                  
                  
                  122Current
      period unrealized loss
                  
                  
                  (8
                  )
                  
                  
                  (76
                  )Ending
      balance
                  
                  $
                  38
                  
                  
                  $
                  46








Fair
value of securities available for sale is as follows:




Cost
                        
                        
                        Unrealized
                          Gain(Loss)
                        
                        
                        Fair
      Value at
                          Period EndJune
      30, 2009
                        
                        $
                        -
                        
                        
                        $
                        38
                        
                        
                        $
                        38December
      31, 2008
                        
                        $
                        -
                        
                        
                        $
                        46
                        
                        
                        $
                        46








NOTE 7 – Notes
      Payable





On May
26, 2009, the Company paid off its loan from Convergent Capital Partners I, L.P.
in the amount of $1,400. On May 27, 2009, the Company entered into a loan
agreement with Convergent Capital Partners, II, L.P. for five million dollars.
This loan carries an interest rate of fourteen percent and requires monthly
interest only payments until December 2012 when the principal is due and payable
in full.  In connection with this loan, the Company paid a closing fee
to the lender of $100.  The Company also issued the lender 212,574
fully vested five year warrants with an exercise price of $3.  The
gross proceeds were allocated between the note and the warrants based on the
relative fair value at the time of issuance.  The warrants were valued
at $372 using the Black Scholes pricing model, recorded as original issue
discount, and amortized as interest expense over the term of the
note.  The Company expensed $9 during the three and six months ended
June 30, 2009.  In the event the Company wishes to prepay the loan a
prepayment penalty will be assessed.  The loan gives the lender a
first security position in the Company’s assets.  The loan contains
certain covenants with regards to the Company’s capital expenditures and
quarterly earnings before interest, taxes, depreciation and amortization which
will begin for the period ended September 30, 2009.





NOTE 8 – Accrued
      Liabilities





Accrued
liabilities consisted of the following:


June 30,
                    2009
                  
                  
                  December 31, 2008Payroll
      and related taxes
                  
                  $
                  8,442
                  
                  
                  $
                  1,354Accrued
      legal settlements and contingencies
                  
                  
                  4,920
                  
                  
                  
                  960Accrued
      preferred stock dividends
                  
                  
                  633
                  
                  
                  
                  622Accrued
      income taxes
                  
                  
                  73
                  
                  
                  
                  499Other
                  
                  
                  8,624
                  
                  
                  
                  1,000Total
      Accrued Liabilities
                  
                  $
                  22,692
                  
                  
                  $
                  4,435




Page
17




MULTIBAND CORPORATION AND
SUBSIDIARIES
 NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)


NOTE 9 - Business
      Segments





The
Company has three reporting segments.  Multiband Corp. segment
(MBCorp) includes corporate expenses (e.g. corporate administrative costs),
interest income, interest expense, depreciation and amortization.  The
MDU segment (MDU, MBSS, MBMDU and MBUSA) represents results as the master
service operator for DirecTV and provides voice, data and video services to
residential multi-dwelling units as the principal to subscribers.  The
HSP segment (NE, SW, EC, NC, DC and Security) provides the installation and
service of DirecTV video programming, internet and home security systems for
residents of single family homes.  Segment disclosures by entity are
provided to the extent practicable under the Company's accounting
system.





Segment
disclosures are as follows:


MBCorp
                                                  
                                                  
                                                  MDU
                                                  
                                                  
                                                  HSP
                                                  
                                                  
                                                  TotalThree
      months ended June 30, 2009:Revenues
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  6,705
                                                  
                                                  
                                                  $
                                                  60,691
                                                  
                                                  
                                                  $
                                                  67,396Loss
      from operations
                                                  
                                                  
                                                  (1,044
                                                  )
                                                  
                                                  
                                                  (125
                                                  )
                                                  
                                                  
                                                  (6,541
                                                  )
                                                  
                                                  
                                                  (7,710
                                                  )Identifiable
      assets
                                                  
                                                  
                                                  3,837
                                                  
                                                  
                                                  
                                                  16,748
                                                  
                                                  
                                                  
                                                  94,580
                                                  
                                                  
                                                  
                                                  115,165Depreciation
      and amortization
                                                  
                                                  
                                                  95
                                                  
                                                  
                                                  
                                                  994
                                                  
                                                  
                                                  
                                                  1,614
                                                  
                                                  
                                                  
                                                  2,703Capital
      expenditures
                                                  
                                                  
                                                  65
                                                  
                                                  
                                                  
                                                  468
                                                  
                                                  
                                                  
                                                  20
                                                  
                                                  
                                                  
                                                  553
  MBCorp
                                                
                                                
                                                MDU
                                                
                                                
                                                HSP
                                                
                                                
                                                TotalThree
      months ended June 30, 2008:Revenues
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                4,201
                                                
                                                
                                                $
                                                6,605
                                                
                                                
                                                $
                                                10,806Income
      (loss) from operations
                                                
                                                
                                                (915
                                                )
                                                
                                                
                                                651
                                                
                                                
                                                
                                                1,229
                                                
                                                
                                                
                                                965Identifiable
      assets
                                                
                                                
                                                3,988
                                                
                                                
                                                
                                                7,353
                                                
                                                
                                                
                                                11,627
                                                
                                                
                                                
                                                22,968Depreciation
      and amortization
                                                
                                                
                                                279
                                                
                                                
                                                
                                                592
                                                
                                                
                                                
                                                8
                                                
                                                
                                                
                                                879Capital
      expenditures
                                                
                                                
                                                1
                                                
                                                
                                                
                                                23
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                24
   MBCorp
                                                
                                                
                                                MDU
                                                
                                                
                                                HSP
                                                
                                                
                                                TotalSix
      months ended June 30, 2009:Revenues
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                12,030
                                                
                                                
                                                $
                                                117,524
                                                
                                                
                                                $
                                                129,554Loss
      from operations
                                                
                                                
                                                (2,021
                                                )
                                                
                                                
                                                (382
                                                )
                                                
                                                
                                                (7,490
                                                )
                                                
                                                
                                                (9,893
                                                )Identifiable
      assets
                                                
                                                
                                                3,837
                                                
                                                
                                                
                                                16,748
                                                
                                                
                                                
                                                94,580
                                                
                                                
                                                
                                                115,165Depreciation
      and amortization
                                                
                                                
                                                178
                                                
                                                
                                                
                                                2,027
                                                
                                                
                                                
                                                3,783
                                                
                                                
                                                
                                                5,988Capital
      expenditures
                                                
                                                
                                                146
                                                
                                                
                                                
                                                1,260
                                                
                                                
                                                
                                                20
                                                
                                                
                                                
                                                1,426
  MBCorp
                                              
                                              
                                              MDU
                                              
                                              
                                              HSP
                                              
                                              
                                              TotalSix
      months ended June 30, 2008:Revenues
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              7,935
                                              
                                              
                                              $
                                              8,585
                                              
                                              
                                              $
                                              16,520Income
      (loss) from operations
                                              
                                              
                                              (1,743
                                              )
                                              
                                              
                                              662
                                              
                                              
                                              
                                              1,289
                                              
                                              
                                              
                                              208Identifiable
      assets
                                              
                                              
                                              3,988
                                              
                                              
                                              
                                              7,353
                                              
                                              
                                              
                                              11,627
                                              
                                              
                                              
                                              22,968Depreciation
      and amortization
                                              
                                              
                                              416
                                              
                                              
                                              
                                              1,190
                                              
                                              
                                              
                                              11
                                              
                                              
                                              
                                              1,617Capital
      expenditures
                                              
                                              
                                              22
                                              
                                              
                                              
                                              44
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              66




Page
18




MULTIBAND CORPORATION AND
SUBSIDIARIES
 NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)


NOTE 10 – Commitments and
      Contingencies





Legal
proceedings





The
Company is subject to claims, regulatory processes and lawsuits that arise in
the ordinary course of business.  The Company accrues for such matters
when a loss is considered probable and the amount of such loss, or a range of
loss, can be reasonably estimated.  The Company has recorded $4,920 of
accrued liabilities as of June 30, 2009 for claims and potential settlements
associated with existing litigation.  The majority of the accrual
relates to claims for back overtime wages alleged in a number of cases filed
between 2006 to 2008 entitled Lachiev v. JBM (S.D. Ohio); Davis v. JBM (S.D.
Ohio); Gruchy v. DirecTech Northeast (D. Mass); Stephen v. Michigan Microtech
(E.D. Mich); and In re DirecTECH Southwest, Inc. (E.D. La).  At
present, the Company is vigorously defending those claims.





In
connection with the purchase of the operating subsidiaries of DTHC, the Company
has the right to offset 50% of certain claims, currently estimated at $4,675,
against the note to DTHC once those claims are settled and paid.  The
Company has recorded a receivable of $2,230 as of June 30, 2009 which represents
an estimate of the amount that potentially be recovered from
DTHC.  Defense costs are expensed as
incurred.  Additionally, the Company is subject to pending claims,
regulatory processes and lawsuits for which losses are not probable and amounts
cannot be reasonably estimated.  Those losses could ultimately be
material to the Company’s financial position, results of operations and cash
flows.





Significant
relationship





The
Company is a master agent for DirecTV pursuant to a system operator agreement
with DirecTV dated August 2005.  Under that agreement the Company is
required to ensure that its system operators meet minimum technical DirecTV
system standards so that the system operator subscribers may properly receive
DirecTV programming services.  The initial term of the agreement is
for three years and provides for two additional two-year renewals if the Company
has a minimum number of paying video subscribers in its system operator
network.  The Company has met the requirements and has entered into
the first two year automatic renewal period.





The
Company also has a separate home service provider agreement with DirecTV ending
May 1, 2013.  The term of this agreement with DirecTV will
automatically renew as of May 1, 2013 for additional one year periods unless
either the Company or DirecTV gives written notice of termination at least 90
days in advance of expiration of the then current term.  Termination
of the Company's DirecTV agreements would have a material adverse impact on the
Company's on-going operations.  Revenues generated from DirecTV
amounted to 99.2% and 99.2% of total revenue for the three and six months ended
June 30, 2009, respectively.  Revenues generated from DirecTV for the
three and six months ended June 30, 2008 were 92.2% and 89.8% of total revenue,
respectively.  Accounts receivable from this customer was 89.4% and
52.6% of total accounts receivable as of June 30, 2009 and December 31, 2008,
respectively.  The Company purchases a substantial portion of its
inventory from DirecTV.  DirecTV is the only supplier of the major
components (i.e., dishes and receivers) used in HSP segment
installations.  The total accounts payable to DirecTV, related to
inventory being supplied, was $24,929 and $3,034 at June 30, 2009 and December
31, 2008, respectively.





Gain
on extinguishment of debt





In
January 2008, the Company negotiated payment of the remaining balance of the
note payable to Vern Swedin by issuing 7,500 shares of common stock at $2.60 per
share in settlement of this debt resulting in a gain on extinguishment of debt
of $30.  This modification was accounted for as a gain on
extinguishment of debt in accordance with EITF 96-19, “Debtor’s Accounting for a
Modification or Exchange of Debt Instruments”.  This amount is
included in other income on the consolidated statement of operations for the six
months ended June 30, 2008.





Line
of credit





The
Company has a line of credit agreement with a bank that provides borrowings up
to $50, due on demand.  Amounts outstanding under this line of credit
carry an interest rate defined as the prime rate plus 3.0% (6.25% as of June 30,
2009). As of June 30, 2009 and December 31, 2008, the amount outstanding was $49
and $0, respectively. This line of credit is guaranteed by a shareholder of the
Company.




Page
19




MULTIBAND CORPORATION AND
SUBSIDIARIES
 NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)


Current portion of long-term
debt





At
December 31, 2008, the Company was in compliance with all debt covenants of its
lender, Convergent Capital.  This loan was paid off May 26, 2009 (see
Note 7).  The new loan has debt covenants beginning with the quarter
ended September 30, 2009 (see Note 7).





Operating
leases – vehicles





The
Company leases substantially all of its fleet vehicles under operating leases
from one lessor.  Each lease commences upon the in-service date of the
vehicle and requires scheduled lease payments to be paid monthly for one
year.  After one year, the Company has the option to renew the open
ended lease for one year renewal periods or surrender the leased vehicle to the
lessor to be sold.  If the net proceeds of such sale exceed the
vehicle’s then depreciated value, the lessee receives the benefit of such
excess. If there is a deficiency upon such sale, then lessee is required to pay
the deficiency as additional rent to lessor.  The Company has entered
this agreement jointly and severally with various of its
subsidiaries.  For the three months ended June 30, 2009 the Company
recognized a loss on the sale of vehicles of $69 and a gain of $7 for the three
months ended June 30, 2008.  For the six months ended June 30, 2009
and the four months ended June 30, 2008 the Company recognized a loss on the
sale of vehicles of $72 and $2, respectively.  For the three months
ended June 30, 2009 and 2008 the Company’s operating lease expense under the
lease totaled approximately $1,855 and $280, respectively.  For the
six months ended June 30, 2009 and four months ended June 30, 2008, the
Company’s operating lease expense under the lease totaled approximately $3,736
and $367, respectively.  In addition, the Company has a security
deposit with the lessor in the amount of approximately $1,701 and $257 which is
included in other assets in the accompanying balance sheet as of June 30, 2009
and December 31, 2008, 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.  This guaranty has no effect on the Company’s
consolidated financial statements for the six months ended June 30, 2009 and
2008. However, should Multiband eventually have to perform on the guaranty in
the future, it could be liable for up to $349 in rent payments plus any
associated charges such as property taxes and common area
maintenance.  The Company has evaluated the accounting guidance of FIN
45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees” and has
determined that it does not apply to this guaranty.





NOTE 11 – Income
      Taxes





Due to
the Company’s purchase of 80% of the issued and outstanding shares of common
stock of all of the DTHC operating subsidiaries (DirecTECH) (an additional
29% of Multiband NC, Inc. (NC) (formerly Michigan Microtech, Inc. (MMT)), 51% of
which was previously purchased effective March 1, 2008 and 80% of Multiband NE,
Inc. (NE), Multiband SW, Inc. (SW), Multiband EC, Inc. (EC), Multiband MDU, Inc.
(MBMDU), Multiband DC, Inc. (DC) and Multiband Security, Inc. (Security)
effective January 2, 2009 the Company will file a 2009 consolidated tax return
which includes all of the newly acquired subsidiaries.  Therefore, the
Company may be able to utilize the tax loss carryforwards of Multiband
Corporation if there is not a limitation of the use of the tax loss
carryforwards and there is taxable income.  For the three months ended
June 30, 2009 and 2008, the Company has recorded income tax expense of $102 and
$434, respectively, related to state taxes.  For the six months ended
June 30, 2009 and 2008, the Company recorded income tax expense related to state
taxes of $202 and $463, respectively.




Page
20




MULTIBAND CORPORATION AND
SUBSIDIARIES
 NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)


The
Company applies FASB Interpretation 48 (FIN 48), “Accounting for Uncertainty in
Income Taxes” to address the non-comparability in reporting tax assets and
liabilities resulting from a lack of specific guidance in SFAS No.
109  “Accounting for Income Taxes” (“SFAS 109”), on the uncertainty in
income taxes recognized in an enterprise’s financial
statements.  Specifically, FIN 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.  To the extent interest and penalties would be
assessed by taxing authorities on any underpayment of income taxes, such amounts
would be accrued and classified as a component of income tax expenses on the
consolidated statement of operations.  There was no impact on the
consolidated financial statements for the six months ended June 30, 2009 and
2008 related to FIN 48.  The Company’s federal and state tax returns
are potentially open to examinations for years 2005-2007.  The Company
has no significant unrecognized tax benefits as of June 30, 2009 that would
reasonably be expected to affect our effective tax rate during the next twelve
months.




NOTE 12 – Related Party
      Transactions





On April
15, 2009, the Company entered into an unsecured short term promissory note in
the amount of $1,500 with director Frank Bennett. The note carries an interest
rate of 6% with a 1% origination fee totaling $15, and was due May 15,
2009.  On May 4, 2009 the note was extended until June 15,
2009.  On June 15, 2009, the note was extended until June 14,
2011.  The terms of the loans were approved by the disinterested
members of the Company’s audit committee.





On May
26, 2009, the Company entered into a separate short-term loan with Mr. Bennett
in the amount of $1,400.  This loan was paid in full on May 28,
2009.  The term of the loan was approved by the disinterested members
of the Company’s audit committee.





Proceeds
for the acquisition of US Install Inc. by the Company completed in February,
2008 were obtained via an unsecured promissory note in the amount of $100
between Multiband and Bas Mattingly Master, LLC, a trust controlled by J. Bas
Mattingly, chairman of DTHC, which is a 20% owner of DirecTECH. The note carries
an interest rate of 7% per annum and is due August 20, 2009.





The
Company has a line of credit agreement with a bank that provides borrowings up
to $50 (see Note 9).  This line of credit is guaranteed by J. Bas
Mattingly, chairman of DTHC.





NC leases warehouse space from two
individuals that have ownership via related trusts in DTHC.  DTHC owns
20% of DirecTECH as a noncontrolling interest
shareholder (see Note 3).  Lease payments amount to $9 per month plus
expenses, expiring in December
2010.





Multiband
and its subsidiaries lease principal offices located at 2000 44th Street
SW, Fargo, ND 58013. The Fargo base rate is $14 per month. The Fargo property is
owned in part by David Ekman, Chief Information Officer, of the
Company.





As of
June 30, 2009, Bernard Schafer is a director of both DTHC and
Multiband.  DTHC is the minority shareholder of DirecTECH (see Note
3).





Jim
Mandel, CEO of Multiband, loaned DTHC $100 in a short-term subordinated note
paying simple interest monthly at 10% and is due December 2012.





In 2008,
Multiband and DTHC performed certain management and information systems
functions for one another pursuant to management consulting and employee leasing
agreements.  These agreements terminated concurrent with Multiband’s
purchase of the former DTHC operating entities (Note 3).  During the
three and six months ended June 30, 2008, the Company has reduced selling,
general and administrative expenses $330 and $630 as a reimbursement of direct
expenses in relation to these management consulting agreements,
respectively.




Page
21




MULTIBAND CORPORATION AND
SUBSIDIARIES
 NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
 JUNE30, 2009 AND 2008
 (in thousands, except for share
amounts)


Prior to
the purchase of DirecTECH on January 2, 2009, Multiband provided support center
services to a then DirecTECH MDU (DTMDU), subsidiary of DTHC, currently
Multiband MDU, Inc. (MBMDU).  The Company recorded MDU segment revenue
of $82 and $139 from DTMDU for the three and six months ended June 30, 2008,
respectively.  DTMDU was also one of the system operators in the MDU
segment during 2008.  The Company has recorded MDU segment cost of
products and services of $652 and $1,022 for the three and six months ended
June 30, 2008 related to this system operator, respectively.  The
Company had $771 in accounts receivable and $1,127 in accounts payable related
to these agreements at December 31, 2008.





Multiband
also had receivable balances with various DTHC entities at December 31, 2008 of
$7,666.  Of this amount, $5,844 was subsequently offset in the first
quarter of 2009 against the purchase price note used to acquire majority
ownership of the operating subsidiaries of DTHC (Note 3).





The
Company has a note receivable due from a non-affiliated entity that is 50% owned
by a shareholder.  The stated value of this note receivable is $17 and
$51 at June 30, 2009 and December 31, 2008, respectively.  The note is non-interest
bearing and is paid monthly beginning October 31, 2007 through maturity on
December 31, 2009.  The Company has discounted this note to its
present value using the Company’s effective borrowing rate.  The
carrying value of this note receivable was $0 and $34 at June 30, 2009 and
December 31, 2008, respectively.  Interest income on this note is
immaterial and has not been recognized.





NOTE 13–Subsequent
      Events





In
connection with preparation of the condensed consolidated financial statements
and in accordance with the recently issued SFAS 165, the Company evaluated
subsequent events after the balance sheet date of June 30, 2009 through August
13 , 2009, the date these unaudited consolidated financial statements were
issued.





Page
22




FORWARD-LOOKING STATEMENTS





From time
to time, the Company may publish forward-looking statements relating to such
matters as anticipated financial performance, business prospects, product
pricing, management for growth, integration of acquisitions, technological
developments, new products, and similar matters.  Words such as
“anticipates”, “may”, “will”, “should”, “believes”, “estimates”, “expects”,
“intends”, “plans”, “predicts”, “will likely result”, “will continue”, or
similar expressions identify forward-looking statements.  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; the Company’s ability to successfully integrate and operate recently
acquired operations, 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 (in thousands)





OUR
COMPANY





Multiband
Corporation (the Company), is a Minnesota corporation formed in
September 1975. The Company has two operating segments: 1) Multi-Dwelling
Unit (MDU), which encompasses the subsidiary corporations Multiband Subscriber
Services, Inc., Minnesota Digital Universe, Inc.; and Multiband MDU, Inc.
(MBMDU), and 2) Home Service Provider (HSP), which encompasses the following
subsidiaries of which Multiband owns an 80% interest in: Multiband NE, Inc.
(NE), Multiband SW, Inc. (SW), Multiband EC, Inc. (EC), Multiband DC, Inc. (DC)
and Multiband Security, Inc. (Security) (see Note 3).





The
Company completed an initial public offering in June 1984.  In
November 1992, the Company became a non-reporting company under the
Securities Exchange Act of 1934.  In July 2000, the Company regained
its reporting company status.  In December 2000, the Company stock
began trading on the NASDAQ stock exchange under the symbol VICM.  In
July 2004, the symbol was changed to MBND concurrent with the Company’s name
change from Vicom, Incorporated to Multiband Corporation.





The Company’s website is located
at:www.multibandusa.com.





From its
inception until December 31, 1998, the Company operated as a telephone
interconnect company only. Effective December 31, 1998, the Company
acquired the assets of the Midwest region of Enstar Networking Corporation
(ENC), a data cabling and networking company. In late 1999, in the context of a
forward triangular merger, the Company, to expand its range of computer products
and related services, purchased the stock of Ekman, Inc. d/b/a Corporate
Technologies, and merged Ekman, Inc. into the newly formed surviving
corporation, Corporate Technologies USA, Inc. (MBS).  MBS
provided voice, data and video systems and services to business and
government.  The MBS business segment was sold effective April 1,
2005.  The Company’s MCS segment (now known as MDU) 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.,  which made
the Company the largest master service operator in MDU’s for DirecTV satellite
television in the United States.  At July 31, 2009, the Company had
approximately 133,000 owned and managed subscriptions with an additional 52,000
subscriptions supported by the call center.





During
2008, the Company became involved in the business of installing video services
in single family homes by acquiring 51% of the outstanding stock of NC (formerly
Michigan Microtech, Inc. (MMT a former subsidiary of DTHC)), a fulfillment agent
for a national satellite television company, DirecTV, which specializes in the
providing of satellite TV to single family homes. This acquisition was followed
up by the acquisition of an 80% interest in a group of companies which were the
former operating subsidiaries of DTHC, (Multiband NE, Inc. (NE), Multiband SW,
Inc. (SW), Multiband EC, Inc. (EC), Multiband DC, Inc. (DC) and Multiband
Security, Inc. (Security)).  The Company also purchased an additional
29% ownership interest in Multiband NC, of which it previously owned 51%,
effective on January 2, 2009.




Page
23




The
Company’s rationale for acquiring the aforementioned operating subsidiaries is
as listed below.





1.
            The
      operating entities are potentially accretive to our business model as they
      have the:


a.
            Same
      line of business (DirecTV)


b.
            Ability
      to leverage systems and management


c.
            Ability
      to leverage core competencies in support center, software, and
      engineering


d.
            Ability
      to expand geographic presence with ample technician
    capacity


e.
            Size,
      scale, and scope of combined business enterprise more in line with growth
      necessary to support public entity


f.
            Potential
      for accretive positive cash flow and capacity for net
    income.


2.
            Also,
      new business opportunities may be integrated into an existing installation
      process which touches over 5,000 homes per day.  Multiband Enterprise
      Manager software application is capable of modification to support
      “bundled billing” attribute resulting from new sales
      opportunity.


3.
            Furthermore,
      the transaction produced a strong barrier to entry to other potential
      competitors which creates potential for longevity and
      exclusivity.


4.
            Other
      reasons for the acquisition
included:


a.
              Strong financial performance by DirecTV which provides
      security and continued growth potential for
Multiband.
 b.
              Strong DirecTV balance sheet and liquidity which provides
      comfort for continued, successful
operations.
 c.
              Multiband’s public company reporting status provides an
      excellent platform to support and motivate new human resource
    asset.
 d.
              Multiband’s management is, we believe, capable of
      “rightsizing” operating expense structure of DTHC operating entities to
      provide increased cash flow and earning potential over a short period of
      time; and
 e.
              Opportunity for significant shareholder appreciation when
      comparing industry valuation metrics to pre-existing Multiband market
      values.


This
purchase was a significant event for the Company. The purchase materially
increased the size and scope of the Company’s operations.  The Company
has now expanded its operations into 16 states with 32 field offices. The
Company now employs approximately 4,000 people. Multiband is now the second
largest independent DirecTV field services provider in
the United States.




Page
24




SELECTED
CONSOLIDATED FINANCIAL DATA





DOLLAR
      AMOUNTS AS A
                      PERCENTAGE
      OF REVENUES
                    DOLLAR
      AMOUNTS AS A
                      PERCENTAGE
      OF REVENUESTHREE
      MONTHS ENDED
                    SIX
      MONTHS ENDEDJune 30, 2009
                      (unaudited)
                    June 30, 2008
                      (unaudited)
                    June 30, 2009
                      (unaudited)
                    June 30, 2008
                      (unaudited)REVENUES
                    100%
                    100%
                    100%
                    100%COST
      OF PRODUCTS & SERVICES (Exclusive of depreciation and amortization
      shown below)
                    84.4%
                    59.2%
                    80.4%
                    61.8%SELLING,
      GENERAL & ADMINISTRATIVE
                    23.0%
                    23.7%
                    22.6%
                    26.7%DEPRECIATION
      & AMORTIZATION
                    4.0%
                    8.1%
                    4.6%
                    9.8%IMPAIRMENT
      OF ASSETS
                    -
                    0.1%
                    -%
                    0.4%INCOME
      (LOSS) FROM OPERATIONS
                    -11.4%
                    8.9%
                    -7.6%
                    1.3%INTEREST
      EXPENSE & OTHER, NET
                    -1.2%
                    -0.7%
                    -1.1%
                    -0.9%INCOME
      (LOSS) BEFORE INCOME TAXES AND NONCONTROLLING INTEREST IN
      SUBSIDIARIES
                    -12.6%
                    8.2%
                    -8.7%
                    0.4%PROVISION
      FOR INCOME TAXES
                    .2%
                    4.0%
                    .2%
                    2.8%NET
      INCOME (LOSS)
                    -12.8%
                    4.2%
                    -8.9%
                    -2.4%LESS:
      NET INCOME (LOSS) ATTRIBUTABLE TO THE NONCONTROLLING INTEREST IN
      SUBSIDIARIES
                    -2.2%
                    3.7%
                    -1.4%
                    2.5%NET
      LOSS ATTRIBUTABLE TO MULTIBAND CORPORATION AND
SUBSIDIARIES
                    -10.6%
                    0.5%
                    -7.5%
                    -4.9%




Page
25




RESULTS
OF OPERATIONS





Revenues





Total revenues increased 523.7% to
$67,396 for the quarter ended June 30, 2009 as compared to $10,806 for the
quarter ended June 30, 2008.  Revenues for the six month period ended
June 30, 2009 increased 684.2% to $129,554 from $16,520 for the same period in
2008.  This overall increase in revenues is due to the purchase of the
former DirecTECH operating entities in January 2009.





Revenues for the three months ended
June 30, 2009 for the HSP segment, were $60,691 in comparison to $6,605 for the
same period in 2008, an increase of 818.9%.  Revenues for the six
month period ended June 30, 2009, for the HSP segment (acquired March 1, 2008),
were $117,524 as compared to $8,585 for the same period in 2008, an increase of
1268.9%. This increase is due to the purchase of the former DirecTECH operating
subsidiaries (see Note 3).  The Company expects that revenues in the
HSP segment will be consistent with the six months ended June 30, 2009
throughout the balance of 2009.





Revenues in the second quarter of 2009
for the MDU segment increased 59.6% to $6,705 as compared to $4,201 in the
second quarter of 2008.  Revenues for the six month period ended June
30, 2009, for the MDU segment, increased 51.6% to $12,030 from $7,935 for the
same period in 2008.  These increases are primarily due to a larger
subscriber base, and increased activity from the call center.  The
Company believes it can ultimately increase revenues by selling its support
center services to its network of system operators and by providing ancillary
programs for voice and data services to that same network.  Due to
demand for high definition television services and a larger subscriber base, MDU
revenues are expected to remain above 2008 levels for the balance of
2009.





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





The Company's cost of products and
services, increased by 789.8% to $56,894 for the quarter ended June 30, 2009, as
compared to $6,394 for the similar quarter last year.  For the six
months ended June 30, 2009, cost of products and services were $104,210 compared
to $10,214 in the prior year, a 920.3% increase.  Overall cost of
products and services increased due to the purchase of the former DirecTECH
operating entities in January 2009.





Cost of products and services for the
HSP segment for the three months ended June 30, 2009 were $52,259 for the HSP
segment (acquired March 1, 2008), compared to the $4,300 in the prior year, a
1115.3% increase.  For the six months ended June 30, 2009, cost of
products and services were $95,990 for the HSP segment (acquired March 1, 2008),
compared to the $5,737 in the prior year, a 1573.2% increase.  This
increase is due to the purchase of the former DirecTECH operating entities (see
Note 3).  In addition, the HSP segment incurred increased costs in the
second quarter as described in the following paragraphs.





One factor that materially increased
the HSP segment costs in the second quarter of 2009 related to a substantial
increase in the number of technicians employed by the
Company.  Beginning at the end of the first quarter ended March 31,
2009, the Company adopted a business strategy to increase revenues and,
ultimately operating profits, by adding technicians to achieve a competitive
advantage in markets with competing providers.  In order to execute on
this strategy, the Company increased its technical work force to be able to
perform the additional work that would be created as a result of driving out the
competition. Since new technicians go through a six to eight week training
program prior to working on revenue producing jobs, this created additional
expense without any offsetting revenue.  During the three months ended
June 30, 2009, the Company increased the number of employee technicians to
handle the increase in work order volume by approximately 500
technicians.  To attain a net gain of 500 revenue producing
technicians, the Company had to hire approximately 1,000 employees during the
quarter (to account for attrition). As a result, the Company incurred
significant up-front costs to train and equip the workforce before they produced
any revenue.  Based on an internal analysis, the Company estimates the
cost per new hire to be approximately $3,700, which includes the cost to train
and provide installation tools to the technician. As a result of the increase in
the technical work force, cost of goods sold increased by approximately $3.0 to
$3.5 million, or 3-4% of HSP revenue.





Another factor that materially
increased HSP segment costs was a work order closure system change implemented
in the second quarter of 2009.  During the quarter, the Company
experienced an increase in the number of work orders improperly closed due to
the improper use of parts and due to the deployment of portable, electronic
handheld devices, which if used correctly enables technicians to close work
orders electronically as opposed to having to contact a call center by telephone
while at the customer’s home. The Company believes that, during the second
quarter, an influx of new technicians combined with accelerated efforts to meet
certain DirecTV performance standards (which can lead to achieving incentive
income) resulted in some improper parts utilization. More specifically,
technicians were installing components that were more technologically advanced
than necessary in order to close out jobs faster and better meet the performance
standards.  Technicians, the Company believes, were also installing
parts not listed on the electronic work orders.




Page
26




The Company is reimbursed by DirecTV
for certain of the installation materials used to install its systems in
customer homes. However, DirecTV has no contractual obligation to reimburse the
Company for use of the “wrong” installation materials or installation materials
not properly recorded. The accuracy of the work order closure process is
critical to ensure the Company is properly reimbursed for the material used.
Prior to the deployment of the portable, handheld electronic devices,
technicians would contact a call center representative, who would interview the
technician regarding the work that was performed including what materials were
consumed on the job. This interview provided a good “audit” of the work order
closure process to be sure it was properly closed.





Because of this change in technology
and process, we have experienced a large increase in the number of work orders
using the “wrong” part  and work orders that have not been properly
closed. In other words, the technicians did not properly use and/or record the
materials they used on the jobs which resulted in a decline in the reimbursement
from DirecTV for the materials consumed. This breakdown in process increased
costs of goods sold for the three months ended June 30, 2009 by almost $3
million or 4.79% of HSP revenues over the three months ended March 31,
2009.





The Company has implemented several
initiatives to reduce work order breakage due to the use of the handheld devices
as follows:





·
            Additional
      “train the trainer” classes have been completed by staff increasing the
      number of certified trainers for the handheld
  devices.


·
            Ongoing
      and repeated training classes have been held for all technicians and their
      supervisors on the use of handheld
devices.


·
            Technician
      job aids have been developed and distributed to all handheld technicians
      with instructions on proper handheld
usage.


·
            Reporting
      is now being generated at the technician level which indicates any
      potential work order errors.  This tool is being used to up-train
      technicians and to make the necessary changes to the work order to ensure
      the correct equipment is consumed.


·
            A
      technician manifest has been developed and deployed.  The
      technician’s truck level inventory is checked weekly for
      accuracy.


·
            A
      warehouse manifest has been developed and deployed.  Warehouse
      inventory is counted weekly and checked for
  accuracy.


·
            The
      documentation of all processes in the inventory cycle is being developed
      with proper controls to ensure all personnel involved are trained and to
      enable them to manage their part of the cycle in a consistent
      manner.





Cost of products and services for the
MDU segment for the quarter were $4,635 compared to $2,094 in the same quarter
last year, a 121.3% increase.  For the six months ended June 30, 2009,
cost of products and services were $8,220 for the MDU segment, compared to
$4,477 in the prior year, a 83.6% increase.  The increase in cost of
products and services in the MDU segment is primarily related to the purchase of
MBMDU, one of the former DirecTECH operating subsidiaries.  The
increase in costs is also related to the increase in revenue generated by the
system operators due to a change in revenue mix and certain commission
payments.  In 2009, the Company expects MDU cost of products and
services to increase slightly throughout the balance of the year due to certain
commission payments.





During
the remainder of 2009, the Company expects HSP cost of products and services to
decrease as the Company corrects the issues that resulted in increased second
quarter costs.




Page
27




Selling,
General and Administrative Expenses





Selling, general and administrative
expenses increased 505.6% to $15,509 in the quarter ended June 30, 2009,
compared to $2,561 in the prior year’s quarter due primarily to the acquisition
of DirecTECH in 2009.  Selling, general and administrative expenses
were, as a percentage of revenues, 23.0% for the quarter ended June 30, 2009 and
23.7% for the similar period a year ago.  For the six months ended
June 30, 2009, selling, general and administrative expenses increased 562.3% to
$29,249 compared to $4,416 for the six months ended June 30, 2008, due primarily
to the acquisition of DirecTECH in 2009.  As a percentage of revenue,
selling, general and administrative expenses were 22.6% for the six months ended
June 30, 2009, compared to 26.7% for the same period in 2008.  The
decrease in selling, general and administrative expenses as a percentage of
revenue is primarily due to the significant increase in revenues with only
modest increases in payroll and administrative expenses offset by reimbursed
payroll expenses for management consulting to DTHC recorded to the Multiband
Corp segment of $330 and $630 in the three and six months ended June 30, 2008,
respectively, per its management consulting agreement.  This agreement
ended in 2009 as a result of the acquisition of the majority ownership of former
operating subsidiaries of DTHC (see Note 3).  The Company anticipates
that for the remainder of 2009, selling, general and administrative expenses
will remain consistent with second quarter levels.





Depreciation
and Amortization





Depreciation and amortization expense
increased 207.5% to $2,703 for the quarter ended June 30, 2009 compared to $879
in the prior year’s quarter.  For the six months ended June 30, 2009,
depreciation and amortization expense decreased 270.3% to $5,988 compared to
$1,617 for the six months ended June 30, 2008.  This increase is
largely due to amortization of intangibles related to the DirecTECH purchase
(see Note 3).  Depreciation and amortization expense is expected to
remain at levels comparable to the second quarter through the remainder of
2009.





Income
(Loss) from Operations





The Company, in the second quarter of
2009, incurred a loss from operations of $7,710 as compared to generating an
income of $965 during the prior year’s comparable period.  Loss from
operations was $9,893 during the first six months of 2009 compared to an income
of $208 during the first half of 2008.  The MDU segment incurred a
loss from operations of $125 and $382 for the three and six months ended June
30, 2009 compared to income from operations of $651 and $662 for the three and
six months ended June 30, 2008.  The MBCorp segment, which has no
revenues, incurred a loss from operations of $1,044 for the three months ended
June 30, 2009 and $2,021 for the six months ended June 30, 2009 compared to
losses of $915 and $1,743 for the same periods last year.  For the
second quarter of 2009, the HSP segment incurred a loss from operations of
$6,541, compared to income from operations of $1,229 in the same period last
year, which included NC (MMT) only.  For the six months ended June 30,
2009, loss from operations was $7,490 for the HSP segment, compared to a income
from operations of $1,289 in the prior year which included four months of NC
(MMT) only.  The MBCorp segment loss is expected to continue in future
periods as corporate overhead is expected to remain consistent with current
levels.  The Company plans to mitigate its loss in the MDU segment in
future periods as increased payments to dealers have negatively impacted profits
for this segment. The Company believes these payments will stabilize in future
periods as a percentage of revenues. At the same time, the Company believes it
can enhance profitability in its MDU division by growing its subscriber base at
existing properties since the on-going selling, general and administrative
expenses to service those subscribers is more variable than
fixed.  The HSP segment is expected to improve its profitability
throughout the balance of 2009 as competitive providers are driven out of some
of its existing core markets increasing revenues without further material
increases in expense since technicians will have completed their training in the
second quarter.  The key to removing competitive providers involves
the Company’s commitment to DirecTV  to significantly expand its
technical workforce.  The expanded workforce creates expense upfront
without offsetting revenue due to a training period.  However, once
the technicians are trained they move into a revenue generating
role.





Interest
Expense





Interest expense was $890 for the
quarter ended June 30, 2009, versus $113 for the similar period a year
ago.  Amortization of original issue discount was $9 and $0 for the
three months ended June 30, 2009 and 2008.  Interest expense was
$1,745 for the six months ended June 30, 2009 and $214 for the same period last
year, primarily reflecting an increase due to interest expense incurred on the
debt issued for the purchase of DirecTECH (see Note 3).  Amortization
of original issue discount was $9 for the three and six months ended June 30,
2009 and $0 for the same periods last year.




Page
28




Noncontrolling
Interest




Effective
January 1, 2009, the Company implemented FAS 160, noncontrolling interests in
subsidiaries (see Note 4).  This resulted in the transferring of
minority interest of $3,471 at December 31, 2008 related to the 51% ownership of
NC from the mezzanine section of the balance sheet to the noncontrolling
interest in the equity section of the balance sheet.  As of January 2,
2009, Multiband purchased an additional 29% of the outstanding stock of NC,
$2,054 of noncontrolling interest was transferred to Multiband’s controlling
interest related to this acquisition, leaving $1,417 as the remaining value of
the noncontrolling interest.  In addition, Multiband purchased 80% of
the outstanding stock of EC, NE, SC, DC, Security and MBMDU (see Note
3).  The Company recorded $6,306 of noncontrolling interest related to
this acquisition. The net loss attributable to the noncontrolling interest in
subsidiaries for the three and six months ended June 30, 2009 was $1,482 and
$1,778, respectively.  For the three and six months ended June 30,
2008, net income attributable to the noncontrolling interest in subsidiaries was
$394 and $412, respectively.





Income
Taxes





Due to
the Company’s purchase of 51% of NC’s stock, effective March 1, 2008, NC did not
file a consolidated tax returns in 2008 with its former parent DTHC but will
file as a single entity as it no longer meets the 80% ownership required for tax
consolidation.  Effective with the additional stock purchased in 2009,
NC expects to be able to utilize the tax loss carryforwards of Multiband
Corporation. For the three months ended June 30, 2009 and 2008, the Company has
recorded income tax expense of $102 and $434, respectively, related to state
taxes.  For the six months ended June 30, 2009 and 2008, the Company
recorded income tax expense related to state taxes of $202 and $463,
respectively.





Net
Income (Loss) Attributable to Multiband Corporation and
Subsidiaries





In the
second quarter of fiscal 2009, the Company reported a net loss attributable to
Multiband Corporation and subsidiaries of $7,119 compared to a net income
attributable to Multiband Corporation and subsidiaries of $56 for the second
fiscal quarter of 2008.  For the six months ended June 30, 2009, the
Company recorded a net loss attributable to Multiband Corporation and
subsidiaries of $9,704 compared to $808 for the six months ended June 30,
2008.




Page
29




Liquidity
and Capital Resources





During the six months ended June 30,
2009 and 2008, the Company incurred net losses attributable to Multiband
Corporation and subsidiaries of $9,704 and $808, respectively. Net cash used by
operations during the six months ended June 30, 2009 was $1,339 as compared to
the net cash from operations during the six months ended June 30, 2008 of
$929.  Principal payments on current long-term debt over the next 12
months are expected to total $236.  As of June 30, 2009, the Company
met the compliance covenants of its lender, Convergent Capital.





Cash and cash equivalents totaled
$5,584 at June 30, 2009 versus $4,346 at December 31, 2008.  Working
capital deficit at June 30, 2009 was $31,190 as compared to positive working
capital of $2,465 at December 31, 2008, primarily due to the acquisition of the
former DTHC operating entities.  Total debt and capital lease
obligations increased by $38,808 in the six months ended June 30, 2009 due
mainly to the addition of notes payable in order to purchase
DirecTECH.  The Company had a material increase in accounts
receivable, accounts payable and accrued liabilities for the period ended June
30, 2009 versus the period ended December 31, 2008 due to the acquisition of 80%
of outstanding stock of the former DTHC operating entities.  Net cash
used by investing activities totaled $1,862 for the period ended June 30, 2009,
compared to net cash of $6,699 provided by investing activities for the period
ended June 30, 2008, related to cash acquired in the acquisition of NC (formerly
MMT).





The Company experienced a material
increase in revenues between the quarter ended June 30, 2009 and the quarter
ended June 30, 2008 as a result of the additional revenue obtained from the
purchase of the former DTHC operating entities.  For the balance of
2009, the Company intends to focus on facilitating growth of its HSP business
segment and its managed subscriber services including its support center and its
master system operator program.  The Company believes it can increase
revenues by selling its support center services to its network of system
operators and by providing ancillary programs for voice and data services to
that same network.





The Company used $1,426 for capital
expenditures during the six months ended June 30, 2009, as compared to $66 in
the similar period last year.  Capital expenditures consisted of
project build-outs and equipment acquired for internal use.  This
increase was related to an expansion of company funded video and internet
service build outs to MDU properties made during 2009.  Throughout the
remainder of 2009, the Company estimates that it will have $1,000 of additional
capital expenditures.





Management anticipates that the impact
of the actions listed below will generate sufficient cash flows to pay current
liabilities, long-term debt and capital and operating lease obligations and fund
the Company's operations for the next twelve months:





1.
            Initiate
      and grow its Home Service Provider (HSP) business by eliminating
      competitive HSP providers from certain of its core
  markets2.
            Improve
      gross margin percentages by cycling technicians from training and placing
      them in a revenue generating role and by mitigating work order breakage
      expense.3.
            Reduce
      operating expenses by reducing training costs through decreased technician
      turnover, managing professional fees and other general and administrative
      expenses.4.
            Evaluate
      and reduce excess inventory including such factors as anticipated usage,
      inventory turnover, inventory levels and product demand
      levels.5.
            Obtain
      additional debt financing.6.
            Expand
      call center support with sales of call center services to both existing
      and future system operators and to buyers of the Company’s video
      subscribers.7.
            Solicit
      additional equity investment in the Company by issuing either preferred or
      common stock.




The
Company, as of June 30, 2009, needs to improve its working capital ratio over
the next few quarters to adequately manage the size of its expanded operations.
Since the Company acquired significant assets in its purchase of 80% of the
outstanding stock of the former DTHC operating entities, Multiband believes it
has the capacity to leverage certain of those assets. The Company, during the
second quarter, entered into a new five million dollar loan facility using the
aforementioned assets as collateral (see Note 7). Management believes that
through a combination of leveraging assets, its cash on hand, greater expense
control, positive operating income, combined with capital resources and the
potential ability to monetize intangible subscriber assets, it can meet its
anticipated liquidity and capital resource requirements for the next twelve
months.




Page
30




CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





Impairment of Long-Lived
Assets





The
Company’s long-lived assets include property, equipment and leasehold
improvements.  At June 30, 2009, the Company had net property and
equipment of $8,569, which represents approximately 7.4% of the Company’s total
assets.  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, which may be
material.  During the three and six months ended June 30, 2009 and
2008, the Company did not record any impairment losses related to long-lived
assets.





Impairment of
Goodwill





At year
end, we test goodwill for impairment.  If indicators of impairment are
determined to exist, we test goodwill for impairment quarterly.  Our
judgments regarding the existence of impairment indicators are based on legal
factors, market conditions and operational performance of our operating
segments.  Future events could cause us to conclude that impairment
indicators exist and that goodwill associated with our operating segments which
amounts to $34,744 as of June 30, 2009, may be impaired.  Any
resulting impairment loss could have a material adverse impact on our financial
condition and results of operations.  During the three and six months
ended June 30, 2009 and 2008, the Company did not record any impairment losses
related to goodwill.





Impairment of Intangible
Assets





The
intangible assets consist of rights of entry contracts, contracts with DirecTV
and customer contracts.  These intangibles are being amortized over
their estimated useful lives ranging from 3.5 to 116.5 months.  If
significant changes would occur to the estimated future cash flows associated
with these intangibles, the Company would determine if there is impairment and
reduce the value of intangibles based on the discounted present value of such
cash flows.  At June 30, 2009, the Company had net intangibles of
$26,694 which represented approximately 23.3% of the Company’s total
assets.  During the three and six months ended June 30, 2009, the
Company did not record any impairment charge to intangible
assets.  During the three and six months ended June 30, 2008, the
Company recorded an impairment charge to intangible assets of $7 and $65,
respectively (see Note 2).





Inventories





We value
our inventories at the lower of the actual cost or the current estimated market
value of the inventories. We regularly review inventory quantities on hand and
record a provision for excess and obsolete inventories. Rapid technological
change, frequent new product development, and rapid product obsolescence that
could result in an increase in the amount of obsolete inventory quantities on
hand characterize our industry.





Share-Based
Payments





The
Company accounts for its stock options in compliance with the SFAS No. 123
(revised 2004), Share-Based
Payment(“SFAS 123(R)”), which requires the measurement and recognition
of compensation expense for all share-based payment awards made to employees and directors
including employee stock options based on fair values.  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.  During the third quarter of 2008, the Company evaluated
the variables used in calculating its option values and through their
application has reduced the ongoing expense recorded related to stock
options.




Page
31




Revenue
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) collectability is reasonably assured; and (iv)
product delivery has occurred or services have been rendered.  The
Company recognizes revenue as services are performed and complete.





The
Company earns HSP segment revenue as follows:





·
            installation
      and service of DirecTV video programming for residents of single family
      homes


·
            installation
      of home security systems and internet
services





The
Company has home services provider (HSP) agreements with DirecTV which allow the
Company to install and activate DirecTV video programming services for residents
of single family homes.  As a DirecTV HSP, the Company earns revenue
for installing and servicing DirecTV video customers pursuant to predetermined
rates set by DirecTV which may vary from time to time.  Revenue is
recognized upon completion of the delivery and installation of
equipment.  DirecTV reimburses the Company for substantially all
DirecTV equipment used for customer installation related to the HSP
segment.





HSP
segment installation and services revenues are recognized in the period the
related services are provided in accordance with SAB 104.  MDU segment
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.





The
Company earns MDU segment revenue as follows:





·
            from
      voice, video and data communications products which are sold and
      installed


·
            direct
      billing to user charges to multiple dwelling units, through the activation
      of, enhancement of, and residual fees on video programming services
      provided to residents of multiple dwelling
units





Revenue
generated from activation of video programming services is earned in the month
of activation.  According to Multiband's Master System Operator
agreement with DirecTV, in the event that a customer cancels within the first 12
months of service, DirecTV has the right to chargeback the Company for a portion
of the activation fees received.  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, a variable amount depending
on the number of activations in a given month, and a variable amount for
coordinating improvements of systems used to deliver enhanced programming
services.  The Company’s master system operator contract with DirecTV
also permits the Company to earn revenues through its control of other system
operators who are unable to provide DirecTV video programming services without
the Company’s performance.





The
Company reports the aforementioned MDU voice, data, and video revenues on a
gross basis based on the following factors: the Company has the primary
obligation in the arrangement with its customers; the Company controls the
pricing of its services; the Company performs customer service for the
agreements; the Company approves customers; and the Company assumes the risk of
payment for services provided.





We offer
some products and services that are provided by third party
vendors.  We review the relationship between us, the vendor and the
end customer on an individual basis to assess whether revenue should be reported
on a gross or net basis.  As an example, our resold satellite digital
television revenue is reported on a net basis.





The
Company has determined that the accounting policies for revenue recognition
described above are 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.




Page
32




MDU
segment revenue generated by the support center to service third party
subscribers by providing billing and call center support services is recognized
in the period the related services are provided.




Customers
contract for both the purchase and installation of voice and data networking
technology products and certain video technologies products.  Revenue
is recognized when the products are delivered and installed and the customer has
accepted and has the ability to fulfill the terms of the contract.





The
Company applies Emerging Issues Task Force Issue No. 06-3, “How Taxes Collected
from Customers and Remitted to Governmental Authorities Should Be Presented in
the Income Statement (That Is, Gross versus Net Presentation)” (EITF
06-3).  EITF 06-3 concluded that the presentation of taxes imposed on
revenue-producing transactions (sales, use, value added and excise taxes) on
either a gross (included in revenues and costs) or a net (excluded from
revenues) basis is an accounting policy that should be disclosed.  The
Company’s policy is to present taxes imposed on revenue-producing transactions
on a net basis.





Deferred
Revenue





The
Company invoices for certain installation upgrade projects upon order of project
equipment.  Revenue is deferred on these projects until the equipment
is installed.





Disclosures about
Contractual Obligations and Commercial Commitments





The
following summarizes our contractual obligations as of June 30, 2009, that have
changed materially since our annual 10-K filing.  The changes are due
to the acquisition of the DTHC operating subsidiaries (see Note 3) and the
effect these additional contractual obligations including interest payments are
expected to have on our liquidity and cash flows in future periods:





Total
                      
                      
                      1
      Year or
                        Less
                      
                      
                      2-3
      Years
                      
                      
                      Over
      3
                        YearsOperating
      leases – buildings
                      
                      $
                      20,529
                      
                      
                      $
                      7,519
                      
                      
                      $
                      10,041
                      
                      
                      $
                      2,969Operating
      leases – vehicles
                      
                      
                      19,241
                      
                      
                      
                      7,036
                      
                      
                      
                      9,636
                      
                      
                      
                      2,569Long-term
      debt
                      
                      
                      43,541
                      
                      
                      
                      2,787
                      
                      
                      
                      5,573
                      
                      
                      
                      35,181Totals
                      
                      $
                      83,311
                      
                      
                      $
                      17,342
                      
                      
                      $
                      25,250
                      
                      
                      $
                      40,719








ITEM
3.  QUANTITIVE AND QUALITIVE DISCLOSURE ABOUT MARKET RISK





The
Company is not subject to any material interest rate risk as all current lending
agreements are at fixed rates of interest.  The Convergent Capital
note of $1,400, which varied from 11% to 14%, dependent on the Company’s common
stock price was paid off on May 26, 2009.





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.  As of June 30, 2009, the Company has not tested
the effectiveness of any controls or procedures with regards to its HSP business
segment due to the recent acquisition of same.  The Company does
intend to perform such testing prior to December 31, 2009.





Based
upon that evaluation and the aforementioned acquisition, the Company’s Chief
Executive Officer and Chief Financial Officer concluded that the Company’s
disclosure controls and procedures are not 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.  While the Company
believes its financial information as presented herein is materially accurate,
the Company is not prepared to conclude all of its key disclosure controls and
procedures are effective until it has completed its testing.  Based on
the Company’s detailed account reconciliation and analysis process, the Company
needs to improve certain inventory control procedures.  Currently the
Company is actively reviewing and updating those procedures.




Page
33




PART
II.  OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS





The
Company is subject to claims, regulatory processes and lawsuits that arise in
the ordinary course of business.  The Company accrues for such matters
when a loss is considered probable and the amount of such loss, or a range of
loss, can be reasonably estimated.  The Company has preliminarily
recorded $4,920 of accrued liabilities as of June 30, 2009 for claims and
potential settlements associated with existing litigation.  The
majority of the accrual relates to claims for back overtime wages alleged in a
number of cases filed between 2006 to 2008 entitled Lachiev v. JBM (S.D. Ohio);
Davis v. JBM (S.D. Ohio); Gruchy v. DirecTech Northeast (D. Mass); Stephen v.
Michigan Microtech (E.D. Mich); and In re DirecTECH Southwest, Inc. (E.D.
La).  At present, the Company is vigorously defending those
claims.





In
connection with the purchase of the operating subsidiaries of DTHC, the Company
has the right to offset 50% of certain third party claims against the purchase
price note to DTHC once those claims are settled and paid.  The
Company has recorded a receivable of $2,230 as of June 30, 2009, which
represents an estimate of the 50% portion to be offset against the note to DTHC
due to certain third party claims.  Defense costs are expensed as
incurred.  Additionally, the Company is subject to pending claims,
regulatory processes and lawsuits for which losses are not probable and amounts
cannot be reasonably estimated.  Those losses could ultimately be
material to the Company’s financial position, results of operations and cash
flows.





ITEM
1A.  RISK FACTORS





Our
operations and our securities are subject to a number of risks, including but
not limited to those described below. If any of the following risks actually
occur, the business, financial condition or operating results of Multiband and
the trading price or value of our common stock could be materially adversely
affected.





General





Multiband
over the past decade has continued to reinvent and reposition itself as
technologies for communications and entertainment services continue to grow and
evolve. Multiband needs to continue to stay on the edge of changes in technology
if it is to remain competitive in its chosen marketplaces.





Net Income (Losses)Attributable to Multiband Corporation
and Subsidiaries





The
Company had a net loss attributable to Multiband Corporation and subsidiaries of
$9,704 for the six months ended June 30, 2009, net income of $945 for the year
ended December 31, 2008 and net loss of $6,088 for the year ended December 31,
2007.  The Company may never be consistently profitable.





The
prolonged effects of generating losses without additional funding may restrict
our ability to pursue our business strategy. Unless our business plan is
successful, an investment in our common stock may result in a complete loss of
an investor's capital.


*


If we
cannot achieve profitability from operating activities, we may not be able to
meet:


o           our
capital expenditure objectives;


o           our
debt service obligations; or


o           our
working capital needs.





Working
Capital





The
Company had a working capital deficit of $31,190 at June 30, 2009 as compared to
positive working capital in the amount of $2,465 at December 31, 2008 due to the
acquisition of DirecTECH.





Goodwill
and Intangible Assets





The
Company applies the SFAS No. 142, “Goodwill and Other Intangible Assets,” (“SFAS
142”) which sets forth financial and reporting standards for the acquisition of
intangible assets, other than those acquired in a business combination, and for
goodwill and other intangible assets subsequent to their
acquisition.  As of June 30, 2009, the Company had goodwill of $34,744
and intangibles of $26,694 primarily related to the purchase of
DirecTECH.  At June 30, 2009 the Company did not note any indications
of impairment related to goodwill or its intangible assets.




Page
34




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 expired in August
2008, and provided for two additional two-year renewals if the Company had a
minimum number of paying video subscribers in its system operator network. The
Company did meet the requirements and has entered into the first two year
automatic renewal period.  The Company also has a home service
provider agreement with DirecTV ending May 1, 2013.   The term of this
agreement with DirecTV will automatically renew for additional one year periods
unless either the Company or DirecTV gives written notice of termination at
least 90 days in advance of expiration of the then current term.  
Although an alternate provider of satellite television services, Echostar,
exists, the termination of any or all of its HSP dealer agreements with DirecTV
would have a material adverse effect on 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.




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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.  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.





National
Market for Stock





There is
no assurance that the Company’s common stock will continue to trade on the
Nasdaq Stock Market or other national stock exchange due to ongoing listing
criteria for such exchanges.





Competition





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





Uncertain
Effects of the  Acquisition





During
the first quarter of 2009, the Company completed its  Stock Purchase
Agreement (SPA) with DTHC (see Note 3).   The DTHC operating
entity business as merged into the Multiband business may not achieve the
operating results and growth anticipated by management in structuring the
transaction.





General
Economic Conditions





As of
this writing, the United States is experiencing overall adverse economic
conditions. While we believe this environment may actually assist the Company in
that consumers may stay home more for entertainment, there is no guarantee that
consumers will continue to purchase the Company’s services at a constant level
if the country’s recession becomes prolonged.




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36




ITEM
6.  EXHIBITS





(a)
              Exhibits31.1    
      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:  August
      13, 2009
                  By:/s/
      James L. Mandel
                    Chief
      Executive OfficerDate:  August
      13, 2009
                  By:/s/
      Steven M. Bell
                    Chief
      Financial Officer
                    (Principal
      Financial and Accounting
Officer)




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