UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


**Washington,
      D.C. 20549**








FORM
      10-K


**(Mark
      One)**


x
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
                ACT
                OF 1934FOR
                THE PERIOD ENDED DECEMBER 31, 2006
              ORo
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
                ACT
                OF 1934FOR
                THE TRANSITION PERIOD FROM ____________ TO ____________COMMISSION
                FILE NUMBER 0 - 1325







MULTIBAND
      CORPORATION


(Exact
      name of registrant as specified in its charter)


**MINNESOTA**





(State
      or
      other jurisdiction of incorporation or organization)


**41-1255001**





(IRS
      Employer Identification No.)





**9449
      Science Center Drive, New Hope, Minnesota 55428**





(Address
      of principal executive offices)





**Telephone
      (763) 504-3000 Fax (763) 504-3060**





The
      Company's Internet Address: www.multibandusa.com





(Registrant's
      telephone number, facsimile number, and Internet address)





Securities
      registered pursuant to Section 12 (b) of the Act: None





Securities
      registered pursuant to Section 12 (g) of the Act:





Common
      Stock (no par value)










Indicated
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


Yes o No
x





Indicate
      by a check mark if the registrant is not required to file reports pursuant
      to
      Section 13 or Section 15(d) of the Act.


Yes
o No
x





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 if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K § 229.405 of this chapter) is not contained herein, and will not
      be contained, to the best of registrant's knowledge, in definitive proxy or
      information statements incorporated by references in Part III of this Form
      10-K
      or any amendment to this Form 10-K o





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





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





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





As
      of
      June 30, 2006, (the most recently completed fiscal second quarter), the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the registrant computed by reference to the price at which
      the
      common equity was last sold, or the average bid and asked price of such common
      equity, as of the last business day of the registrants’ most recently completed
      second fiscal quarter was approximately $22,939,900.





As
      of
      March 27, 2007, there were 35,551,973 outstanding shares of the registrant's
      common stock, no par value stock.
















Documents
      Incorporated By Reference





Portions
      of the registrant's definitive proxy statement to be filed within 120 days
      after
      the end of the fiscal year covered by this report are incorporated by reference
      into Part III hereof.





Table
                of Contents PagePart
                I
            Item
                1.
            Business
            2Item
                1A.
            Risk
                Factors
            4Item
                1B.
            Unresolved
                Staff Comments
            7Item
                2.
            Properties
            7Item
                3.
            Legal
                Proceedings
            7Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            7Part
                IIItem
                5.
            Market
                for the Registrant's Common Equity, Related Shareholder Matters and
                Issuer
                Purchases of Equity Securities
            8Item
                6.
            Selected
                Consolidated Financial Data
            11Item
                7.
            Management's
                Discussion and Analysis of Financial Condition and Results of Operations
            12Item
                7A.
            Quantitative
                and Qualitative Disclosures About Market Risk
            19Item
                8.
            Consolidated
                Financial Statements and Supplementary Data
            19Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            69Item
                9A.
            Controls
                and Procedures
            69Item
                9B.
            Other
                Information
            69Part
                IIIItem
                10.
            Directors,
                Executive Officers, and Corporate Governance
            69Item
                11.
            Executive
                Compensation
            69Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management
            69Item
                13.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            70Item
                14.
            Principal
                Accountant Fees and Services
            70Item
                15.
            Exhibits
                and Financial Statement Schedules.
            70Signatures
            71











***Item
      1:***





***Business***





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





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





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





From
      its
      inception until December 31, 1998, Multiband operated as a telephone
      interconnect company only. Effective December 31, 1998, Multiband acquired
      the
      assets of the Midwest region of Enstar Networking Corporation (ENC), a data
      cabling and networking company. In late 1999, in the context of a forward
      triangular merger, Multiband to expand its range of computer products and
      related services, purchased the stock of Ekman, Inc. d/b/a Corporate
      Technologies, and merged Ekman, Inc. into the newly formed surviving
      corporation, Corporate Technologies, USA, Inc. (MBS). MBS provided voice, data
      and video systems and services to business and government. The MBS business
      segment was sold effective March 31, 2005. All references to financial
      information and descriptions of business in this Form 10-K have been revised
      to
      reflect only our continuing operations and all references to our now
      discontinued Multiband Business Services have been eliminated. MCS segment
      began
      in February 2000. MCS provides voice, data and video services to multiple
      dwelling units (MDUs), including apartment buildings, condominiums and time
      share resorts. During 2004 the Company purchased video subscribers in a number
      of separate transactions, the largest one being Rainbow Satellite Group, LLC.
      During 2004 the Company also purchased the stock of Minnesota Digital Universe,
      Inc. (MDU segment), which made the Company the largest master service operator
      in MDU's for DirecTV satellite television in the United States.





***Minnesota
      Digital Universe, Inc. (MDU Segment)***





The
      Company, through its MDU segment , also serves as a master service operator
      for
      DirecTV, a provider of satellite television service. DirecTV is the largest
      provider of satellite television services in the United States with
      approximately 16 million subscribers. DirecTV competes with the leading cable
      companies and with Echostar, America's second largest provider of satellite
      television. The Company, through its direct operations, markets DirecTV
      services. The MDU segment allows the Company to offer satellite television
      services to residents of multi-dwelling-units through a network of affiliated
      operators.





***Multiband
      Consumer Services (MCS Segment)***





Since
      2000, Multiband has offered voice, data and video services to residents of
      the
      multi dwelling unit (MDU) market. Our experience in this market suggests that
      property owners and managers are currently looking for a solution that will
      satisfy two market demands from customers. The first market demand from
      customers that they are dealing with is how to satisfy the residents who desire
      to bring satellite television service to the unit without being visually
      unattractive or a structural/maintenance problem. The second is how to provide
      competitive access for local and long distance telephone cable television and
      internet services. Our MCS offering addresses these demands and provides the
      consumer several benefits, including:





o
      Lower
      Cost Per Service


o
      Blended
      Satellite and Cable Television Package


o
      Multiple Feature Local Phone Services (features such as call waiting, call
      forwarding and three-way calling)


o
      Better
      than Industry Average Response Times


o
      One
      Number for Billing and Service Needs


o
      One
      Bill for Local, Long Distance Cable Television and Internet


o
      “Instant On" Service Availability





In
      late
      2006, DirecTV provided the Company with the right to bill DirecTV services
      directly to end users. At that time the Company began providing such billing
      services to a certain number of customers.





Page
          2




As
      we
      develop and market this package, we keep a marketing focus on two levels of
      customer for this product. The primary decision-makers are the property
      owners/managers. Their concerns are focused on delivering their residents
      reliability, quality of service, short response times, minimized disruptions
      on
      the property, minimized alterations to the property and value added services.
      Each of these concerns is addressed in our contracts with the property owner,
      which includes annual reviews and 10 year terms as service providers on the
      property. The secondary customer is the end-user. We provide the property with
      on-going marketing support for their leasing agents to deliver clear, concise
      and timely information on our services. This will include simple sign up options
      that should maximize our penetration of the property.





When
      taken as a whole, and based on Multiband’s interpretations of U.S. Census Bureau
      statistics, cable television, telephone and internet services currently generate
      over $170 billion of revenues annually in the U.S, with an estimated 26 million
      households living in MDUs. We believe these statistics indicate stable growing
      markets with demand that is likely to deliver significant values to businesses
      that can obtain a subscriber base of any meaningful size.





***Multiband
      Consumer Industry Analysis***


***Strategy***





For
      the
      near future, the services described below will be offered primarily in New
      York,
      Minnesota, Florida, Illinois, Missouri and North Dakota. Our primary competition
      will come from the local incumbent providers of telephone and cable television
      services.





***Local
      Telephone Service***





We
      compete with the former Bell System companies such as Verizon Communications
      (Verizon) and Qwest Communications International, Inc. (Qwest) for local
      telephone services. Although those companies have become the standard for local
      telephone service, we believe we have the ability to under price their service
      while maintaining high levels of customer satisfaction.





***Cable
      Television Service***





We
      compete with Comcast Corporation (Comcast), Time Warner and others for pay-TV
      customers. Comcast and Time-Warner are national cable television service
      providers. We believe we have a significant consumer benefit in that we are
      establishing private rather than public television systems, which allows us
      to
      deliver a package that is not laden with local "public access" stations that
      clog the basic service package. In essence, we will be able to deliver a
      customized service offering to each property based upon pre-installation market
      research that we perform. The pricing of our service is also untariffed which
      allows for flexible and competitive "bundling" of services.





***Long
      Distance Telephone Service***





AT&T
      Inc. (AT&T), MCI, Inc. (MCI), and Sprint Corporation (Sprint) are our
      principal competitors in providing long distance telephone service. They offer
      new products almost weekly. Our primary concern in this marketplace is to assure
      that we are competitive with the most recent advertised offerings in the "long
      distance wars." We will meet this challenge by staying within a penny of the
      most current offering, while still maintaining a high gross margin on our
      product. We accomplish this through various carrier agency associations. We
      expect to generate a high penetration in our long distance services amongst
      our
      local service subscribers because private property owners in the shared tenant
      environment (similar to a hotel environment) are not required to offer multiple
      long distance carriers to their tenants.





***Internet
      Access Service***





The
      clear
      frontrunners in this highly unregulated market are America Online, Inc., Comcast
      and Netzero. They compete with local exchange carriers, long distance carriers,
      Internet backbone companies and many local ISPs (Internet Service Providers).
      The general concern among consumers is the quality of the connection and the
      speed of the download. We believe our design provides the highest broadband
      connection speeds that are currently available. The approach that we will market
      is "blocks of service." Essentially, we deliver the same high bit rate service
      in small, medium and large packages, with an appropriate per unit cost reduction
      for those customers that will commit to a higher monthly expenditure.


Page
          3





***Market
      Description***





We
      are
      currently marketing Multiband services to MDU properties primarily throughout
      Minnesota, North Dakota, Missouri, Florida, New York and Illinois. We will
      target properties that range from 50 to 150 units on a contiguous MDU property
      for television and Internet access only. We will survey properties that exceed
      150 units for the feasibility of local and long distance telephone services.





We
      are
      initially concentrating on middle to high-end rental complexes. We are also
      pursuing resort area condominiums. A recent U.S. Census Bureau table indicates
      that there are more than 65,000 properties in the United States that fit this
      profile. Assuming an average of 100 units per complex, our focus is on a
      potential subscriber base of 6,500,000.





A
      recent
      Property Owners and Manager Survey, published by the U.S. Census Bureau, shows
      that the rental properties are focusing on improving services and amenities
      that
      are available to their tenants. These improvements are being undertaken to
      reduce tenant turnover, relieve pricing pressures on rents and attract tenants
      from competing properties. We believe that most of these owners or managers
      are
      not interested in being "in the technology business" and will use the services
      that we are offering. Various iterations of this package will allow the owners
      to share in the residual income stream from the subscriber base.





***Number
      of Units/Customers***





At
      March
      25, 2007, the Company had approximately 106,500 owned and managed
      subscriptions.





***Employees***





As
      of
      March 27, 2007, Multiband employed three full-time management employees, eight
      accounting personnel, six information technology employees and four in
      administrative positions. As of that same date, MCS had 59 full-time employees,
      consisting of five in sales and marketing, eighteen in technical positions,
      thirty-two in customer service and related support, and four in management.
      MDU
      had two management employees, two sales and marketing personnel and four
      customer service employees.





***Item
      1A:***





***Risk
      Factors***





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





***General***





Multiband,
      since 1998, has taken several significant steps to reinvent and reposition
      itself to take advantage of opportunities presented by a shifting economy and
      industry environment.





Recognizing
      that voice, data and video technologies in the late twentieth century were
      beginning to systematically integrate as industry manufacturers were evolving
      technological standards from "closed" proprietary networking architectures
      to a
      more "open" flexible and integrated approach, Multiband, between 1998 and 2001,
      purchased three competitors which, in the aggregate, possessed expertise in
      data
      networking, voice and data cabling and video distribution technologies.





In
      early
      2000, Multiband created its MCS division, employing the aforementioned
      expertise, to provide communications and entertainment services (local dial
      tone, long distance, high-speed internet and expanded satellite television
      services) to residents in MDUs on one billing platform, which the Company
      developed internally.





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




Page
          4





***Net
      Losses***





The
      Company had net losses of $10,183,723 for the year ended December 31, 2006,
      $7,475,000 for the year ended December 31, 2005, and $9,783,962 for the year
      ended December 31, 2004. Multiband may never be profitable.




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





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


o  our
      capital expenditure objectives;


o  our
      debt
      service obligations; or


o  our
      working capital needs.





***Working
      Capital Deficit***





The
      Company had a working capital deficiency of ($5,294,245) and ($971,418), as
      of
      December 31, 2006 and December 31, 2005, respectively; primarily due to
      operating losses and acquisition related debt. There is no assurance the Company
      will have positive working capital or be able to meet its working capital needs
      in future periods.





***Goodwill***





In
      June
      2001, the Financial Accounting Standards Board (FASB) adopted Statement of
      Financial Accounting Standards (SFAS) 142, "Goodwill and Other Intangible
      Assets" which changed the amortization rules on recorded goodwill from a monthly
      amortization to a periodic "impairment" analysis for fiscal years beginning
      after December 15, 2001. In 2004, the Company recorded an impairment charge
      of
      $2,748,879 related to Multiband Business Services which is included in
      discontinued operations at December 31, 2004. In 2006, the Company recorded
      an
      impairment charge to goodwill of $417,465 related to the sale of video assets
      to
      Consolidated Smart Broadband Systems, LLC., (CSBS) (see Note 17). As of December
      31, 2006, the Company had remaining recorded goodwill of $509,086 primarily
      related to the purchase of Rainbow Satellite Group, LLC.





***Deregulation***





Several
      regulatory and judicial proceedings have recently concluded, are underway or
      may
      soon be commenced that address issues affecting operations and those of our
      competitors, which may cause significant changes to our industry. We cannot
      predict the outcome of these developments, nor can we assure you that these
      changes will not have a material adverse effect on us. Historically, we have
      been a reseller of products and services, not a manufacturer or carrier
      requiring regulation of its activities. Pursuant to Minnesota statutes, our
      Multiband activity is specifically exempt from the need to tariff our services
      in MDU's. However, the Telecommunications Act of 1996 provides for significant
      deregulation of the telecommunications industry, including the local
      telecommunications and long-distance industries. This federal statute and the
      related regulations remain subject to judicial review and additional
      rule-makings of the Federal Communications Commission, making it difficult
      to
      predict what effect the legislation will have on us, our operations, and our
      competitors.





***Dependence
      on Strategic Alliances***





Several
      suppliers or potential suppliers of Multiband, such as McLeod, WorldCom, WS
      Net,
      XO Communications and others have filed for bankruptcy in recent years. While
      the financial distress of its suppliers or potential suppliers could have a
      material adverse effect on Multiband's business, Multiband believes that enough
      alternate suppliers exist to allow the Company to execute its business plans.
      The Company is also highly dependent on its Master System Operator agreement
      with DirecTV. The initial term of the agreement, which expires in August 2008,
      is for three years and provides for two additional two-year renewals if the
      Company has a minimum number of paying video subscribers in its system operator
      network. Although an alternate provider of satellite television services,
      Echostar, exists, the termination of its agreements with DirecTV could have
      a
      material adverse effect on Multiband's business.


Page
          5


***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.





***Variability
      of Quarterly Operating Results***





Variations
      in Multiband's revenues and operating results occur from quarter to quarter
      as a
      result of a number of factors, including customer engagements commenced and
      completed during a quarter, the number of business days in a quarter, employee
      hiring and utilization rates, the ability of customers to terminate engagements
      without penalty, the size and scope of assignments and general economic
      conditions. Because a significant portion of Multiband's expenses are relatively
      fixed, a variation in the number of customer projects or the timing of the
      initiation or completion of projects could cause significant fluctuations in
      operating results from quarter to quarter.





***Certain
      Anti-Takeover Effects***





Multiband
      is subject to Minnesota statutes regulating business combinations and
      restricting voting rights of certain persons acquiring shares of Multiband.
      These anti-takeover statutes may render more difficult or tend to discourage
      a
      merger, tender offer or proxy contest, the assumption of control by a holder
      of
      a large block of Multiband's securities, or the removal of incumbent management.





***Volatility
      of Multiband's Common Stock***





The
      trading price of our common stock has been and is likely to be volatile. The
      stock market has experienced extreme volatility, and this volatility has often
      been unrelated to the operating performance of particular companies. We cannot
      be sure that an active public market for our common stock will continue after
      this offering. Investors may not be able to sell the common stock at or above
      the price they paid for their common stock, or at all. Prices for the common
      stock will be determined in the marketplace and may be influenced by many
      factors, including variations in our financial results, changes in earnings
      estimates by industry research analysts, investors' perceptions of us and
      general economic, industry and market conditions.


Page
          6





***Future
      Sales of Our Common Stock May Lower Our Stock Price***





If
      our
      existing shareholders sell a large number of shares of our common stock, the
      market price of the common stock could decline significantly. The perception
      in
      the public market that our existing shareholders might sell shares of common
      stock could depress our market price.





***Competition***





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





***Forward-Looking
      Statements***





This
      document contains forward-looking statements within the meaning of federal
      securities law. Terminology such as "may," "will," "expect," "anticipate,"
      "believe," "estimate," "continue," "predict," or other similar words, identify
      forward-looking statements. These statements discuss future expectations,
      contain projections of results of operations or of financial condition or state
      other forward-looking information. Forward-looking statements appear in a number
      of places in this prospectus and include statements regarding our intent, belief
      or current expectation about, among other things, trends affecting the
      industries in which we operate, as well as the industries we service, and our
      business and growth strategies. Although we believe that the expectations
      reflected in these forward-looking statements are based on reasonable
      assumptions, forward-looking statements are not guarantees of future performance
      and involve risks and uncertainties. Actual results may differ materially from
      those predicted in the forward-looking statements as a result of various
      factors, including those set forth in "Risk Factors."





***Item
      1B:***





***Unresolved
      Staff Comments***





None.





***Item
      2B:***





***Properties***





Multiband
      and its subsidiaries lease principal offices located at 2000 44th Street SW,
      Fargo, ND 58103 and 9449 Science Center Drive, New Hope, Minnesota 55428. We
      have no foreign operations. The main Fargo office lease expires in 2017 and
      covers approximately 11,744 square feet. The Fargo base rent ranges from $9,846
      to $10,680 per month. The New Hope office lease expires in 2013 and covers
      approximately 47,000 square feet. The New Hope base rent ranges from $19,889
      to
      $25,167 per month. Both the New Hope and Fargo leases have provisions that
      call
      for the tenants to pay net operating expenses, including property taxes, related
      to the facilities. Both offices have office, warehouse and training
      facilities.





Multiband
      considers its current facilities adequate for its current needs and believes
      that suitable additional space would be available as needed.





***Item
      3:***





***Legal
      Proceedings***





The
      Company is involved in legal actions in the ordinary course of business,
      including an action maintained by Multiband USA, Inc., in the Federal District
      Court of Minnesota against DirecTechnologies, LLC, a New York entity, for fraud
      and breach of contract. The defendant, in the action, has counterclaimed against
      Multiband USA, Inc., for breach of contract. However, as of December 31, 2006,
      Multiband was not engaged in any pending legal proceedings where, in the opinion
      of the Company, the outcome is likely to have a material adverse effect upon
      the
      business, operating results and financial condition of the Company.





***Item
      4:***





***Submission
      of Matters to a Vote of Security Holders***





The
      Company did not submit matters to a vote of security holders during the last
      quarter of the year covered by this report.


Page
          7





***PART
      II***





***Item
      5:***





***Market
      for the Registrant's Common Equity, Related Shareholder Matters and Issuer
      Purchases of Equity Securities***





Through
      May 17, 2000, Multiband's common stock was traded and quoted on the OTC Bulletin
      Board(R) ("OTCBB") under the symbol "VICM." From May 18, 2000 until August
      21,
      2000, the common stock was quoted under the VICM symbol on the Pink Sheets(R)
      operated by Pink Sheets LLC. From August 21, 2000, to December 12, 2000,
      Multiband's common stock was traded and quoted on the OTCBB under the VICM
      symbol. Since then, the stock has been traded and quoted on the NASDAQ Smallcap
      market system. In July 2004, the symbol was changed to MBND to coincide with
      the
      Company's name change to Multiband Corporation. The table below sets forth
      the
      high and low bid prices for the common stock during each quarter in the two
      years ended December 31, 2006 and December 31, 2005 as provided by
      NASDAQ.





**Quarter
                Ended**
            **High
                Bid**
            **Low
                Bid**March
                31, 2006
            1.45
            1.10June
                30, 2006
            1.30
            0.82September
                30, 2006
            1.01
            0.66December
                31, 2006
            0.89
            0.53March
                31, 2005
            1.75
            1.33June
                30, 2005
            1.50
            1.07September
                30, 2005
            1.55
            1.07December
                31, 2005
            1.52
            1.18





As
      of
      March 27, 2007, Multiband had 1,088 shareholders of record of its common stock
      and 35,551,973 shares of common stock outstanding. As of that date, seven
      shareholders held a total of 26,658 of Class A Preferred, two shareholders
      held
      7,270 shares of Class B Preferred, four shareholders held a total of 123,930
      shares of Class C Preferred, one shareholder held a total of 150,000 shares
      of
      Class F Preferred, twelve shareholders held a total of 38,195 shares of Class
      G
      Preferred, six shareholders held a total of 2 shares of Class H Preferred,
      and
      four shareholders held a total of 57,500 shares of Class I Preferred.





***Recent
      Sales of Unregistered Securities***





In
      July
      2006, the Company issued 162,500 shares of common stock worth $162,500 in
      connection with an acquisition of video subscribers located in
      Ohio.





In
      2005,
      the Company issued ten million dollars worth of Preferred Stock to a group
      of
      institutional investors.





In
      2005,
      the Company issued $1,819,220 worth of common stock to various accredited
      investors.





In
      2004,
      the Company, via accredited investor purchasers of common stock, exercise of
      warrants, or other conversion into common stock, issued 2.3 million common
      shares at various prices, netting proceeds of approximately $3.2
      million.





The
      Company in 2004 issued $212,110 worth of its common stock to Pyramid Trading
      LP
      in connection with conversion of a note payable and accrued interest. The common
      stock was issued at various prices pursuant to a formula tied to the trading
      price of the Company's common stock.





The
      Company in 2004 issued $230,909 worth of its common stock to Laurus Master
      Fund
      Ltd in connection with conversion of a note payable. The common stock was issued
      at a conversion rate of $1.40.





At
      various other times in 2004, the Company issued $194,575 worth of common stock
      in connection with conversion of interest and notes payable. The common stock
      was issued at various prices pursuant to a formula tied to the trading price
      of
      the Company's common stock.





In
      2004
      the Company repurchased 27,500 shares of common stock for $62,975 from a former
      officer of the Company.





The
      Company, during 2004, issued $452,450 worth of Class G Preferred Stock and
      $1,083,341 worth of Class H Preferred Stock to various accredited investors.




Page
          8




In
      connection with these sales, we relied on the exemption from registration
      provided by Sections 4(2) and 4(6) of the Securities Act of 1933, as well as
      Rule 506 of Regulation D based on (i) our belief that the issuances did not
      involve a public offering, (ii) the transactions involved fewer than 35
      purchasers, and (iii) because we had a reasonable basis to believe that each
      of
      the shareholders were either accredited or otherwise had sufficient knowledge
      and sophistication, either alone or with a purchaser representative, to
      appreciate and evaluate the risks and merits associated with their investment
      decision.





***Common
      Stock***





Holders
      of common stock are entitled to one vote per share in all matters to be voted
      upon by shareholders. There is no cumulative voting for the election of
      directors, which means that the holders of shares entitled to exercise more
      than
      50% of the voting rights in the election of directors are able to elect all
      of
      the directors. Multiband's Articles of Incorporation provide that holders of
      the
      Company's common stock do not have preemptive rights to subscribe for and to
      purchase additional shares of common stock or other obligations convertible
      into
      shares of common stock which may be issued by the Company.





Holders
      of common stock are entitled to receive such dividends as are declared by
      Multiband's Board of Directors out of funds legally available for the payment
      of
      dividends. Multiband presently intends not to pay any dividends on the common
      stock for the foreseeable future. Any future determination as to the declaration
      and payment of dividends will be made at the discretion of the Board of
      Directors. In the event of any liquidation, dissolution or winding up of
      Multiband, and subject to the preferential rights of the holders of the various
      classes of Multiband’s preferred stocks, the holders of common stock will be
      entitled to receive a pro rata share of the net assets of Multiband remaining
      after payment or provision for payment of the debts and other liabilities of
      Multiband.





All
      of
      the outstanding shares of common stock are fully paid and non-assessable.
      Holders of common stock of Multiband are not liable for further calls or
      assessments.





The
      Company's Board of Directors has not declared any dividends on our common stock
      since our inception, and does not intend to pay out any cash dividends on our
      common stock in the foreseeable future. We presently intend to retain all
      earnings, if any, to provide for our growth. The payment of cash dividends
      in
      the future, if any, will be at the discretion of the Board of Directors and
      will
      depend upon such factors as earnings levels, capital requirements, our financial
      condition and other factors deemed relevant by our Board of Directors.





***Preferred
      Stock***





In
      December 1998, Multiband issued 2,550 shares of Class A Preferred for $23,638
      and 37,550 shares of Class B Preferred for $359,893. The Class B Preferred
      was
      offered to certain note holders at a conversion rate of $10.00 per share of
      Class B Preferred. Each share of Class A Preferred and Class B Preferred is
      non-voting (except as otherwise required by law) and convertible into five
      shares of common stock, subject to adjustment in certain circumstances. Each
      holder of a share of Class A Preferred or Class B Preferred has a five-year
      warrant to purchase one share of common stock at $3.00 per share, subject to
      adjustment. During 2001, Multiband issued 67,655 shares of Class A Preferred
      for
      $676,556.





In
      June
      2000, Multiband issued 80,500 shares of Class C Preferred for $805,000. The
      Class C Preferred was offered to certain note holders at a conversion rate
      of
      $10.00 a share. In September 2000, Multiband issued an additional 72,810 shares
      of Class C Preferred for $728,100. Each share of Class C Preferred is non-voting
      (except as otherwise required by law) and convertible into two shares of
      Multiband common stock, subject to adjustment in certain
      circumstances.





In
      November 2000, Multiband issued 72,500 shares of Class D Preferred for $490,332.
      The Class D Preferred was sold to eight accredited investors at $10.00 per
      share. Each share of Class D Preferred is non-voting (except as otherwise
      required by law) and convertible into two and one-half shares of Multiband
      Common Stock, subject to adjustment in certain circumstances.





In
      the
      second quarter of 2002, Preferred Class D stocks were redeemed; $100,000
      converted to Common Stock, and $300,000 converted to a Note
      Payable.





In
      the
      fourth quarter of 2002, Multiband issued 70,000 shares of Class E Preferred
      for
      $700,000, with $600,000 related to conversion of a note payable from a director
      of the Company into Preferred Stock.





In
      the
      first quarter of 2003, $72,000 worth of Class C Preferred Stock was issued
      to an
      officer of the Company in a conversion of accounts payable. Also in the first
      quarter of 2003, $76,500 worth of Class E Preferred Stock was issued to a member
      of the Board, pursuant to an offering to accredited investors.




Page
          9




In
      the
      third quarter of 2003 $25,000 worth of Class B Preferred Stock was purchased
      by
      an accredited investor.





In
      addition, during 2003 $133,100 worth of Class C Preferred Stock was redeemed.





During
      the second quarter of 2004, $776,500 worth of Class E Preferred Stock was
      converted into Common Stock at a price of $1.25 per share. During the third
      quarter of 2004, two million dollars worth of Class F Preferred Stock was
      issued. During the fourth quarter of 2004, $452,450 worth of Class G Preferred
      Stock was issued and $1,083,341 worth of Class H Preferred Stock was issued.





In
      the
      first quarter of 2005, the Company issued $10,000,000 worth of Class I Preferred
      Stock.





During
      the fourth quarter of 2006, one of the Class I Preferred Stock holders sold
      all
      of their shares to another accredited investor.





The
      holders of the Class A Preferred, Class B Preferred, Class C Preferred, Class
      D
      Preferred, Class E Preferred, Class F Preferred, Class G Preferred Class H
      Preferred and Class I Preferred (collectively, "Preferred Stock") are entitled
      to receive out of the assets of the Company legally available for payment
      thereof, cumulative cash dividends calculated based on the per share stated
      value of the Preferred Stock. The per annum dividend rate is eight percent
      (8%)
      for the Class A Preferred and ten percent (10%) for the Class B Preferred,
      Class
      C Preferred and Class F Preferred, fourteen percent (14%) for the Class D
      Preferred, fifteen percent (15%) for the Class E Preferred, to be paid in kind,
      eight percent (8%) for the Class G Preferred, six percent (6%) for the Class
      H
      Preferred and variable rate tied to prime for the Class I Preferred dividends
      on
      the Class A Preferred, Class C Preferred, Class D Preferred, Class F Preferred
      and Class G Preferred are payable quarterly on March 31, June 30, September
      30,
      and December 31 of each year. Dividends on the Class B and Class I Preferred
      are
      payable monthly on the first day of each calendar month. Dividends on the Class
      H Preferred are payable semiannually on June 30 and December 31 of each year.
      Dividends on the Preferred Stock accrue cumulatively on a daily basis until
      the
      Preferred Stock is redeemed or converted.





In
      the
      event of any liquidation, dissolution or winding up of Multiband, the holders
      of
      the Class A Preferred and Class B Preferred will be entitled to receive a
      liquidation preference of $10.50 per share, and the holders of the Class C
      Preferred, Class D Preferred, Class E Preferred, Class F Preferred and Class
      G
      Preferred will be entitled to receive a liquidation preference of $10.00 per
      share, each subject to adjustment. Holders of the Class H Preferred will be
      entitled to receive a liquidation preference of $100,000 per share. Holders
      of
      the Class I Preferred will be entitled to receive a liquidation preference
      of
      $100. per share. Any liquidation preference shall be payable out of any net
      assets of Multiband remaining after payment or provision for payment of the
      debts and other liabilities of Multiband.





No
      holder
      of Preferred Stock can require Multiband to redeem his or her shares, except
      for
      a single Class F and Class H shareholders. The single Class F shareholder who,
      at its sole discretion pursuant to a put option, can force the Company to redeem
      up to 50,000 Class F Preferred Shares (the equivalent of $500,000 worth,
      $220,000 redeemed as of December 31, 2006). Class H shareholders have the right
      to convert all or a portion of preferred shares upon the occurrence of a major
      transaction or triggering event as defined in the agreement and Multiband has
      the sole option to pay the redemption price in cash or shares of the Company’s
      common stock. Multiband, upon notice, may voluntarily redeem the Preferred
      Stock, in whole or in part, at a redemption price per class equal to the
      liquidation prices stated above provided the closing bid price of the common
      stock exceeds a certain share price, ($4.00 per share for Classes A, B and
      C;
      $2.75 per share for Class F; $2.00 per share for Class H; Classes G and I have
      no redemption “call” price; and Classes D and E have been completely redeemed
      and extinguished as of December 31, 2004). Upon Multiband's call for redemption,
      the holders of the Preferred Stock called for redemption will have the option
      to
      convert each share of Preferred Stock into shares of common stock until the
      close of business on the date fixed for redemption, unless extended by Multiband
      in its sole discretion. Preferred Stock not converted would be redeemed.


Page
          10


***Item
      6:***





***Selected
      Consolidated Financial Data***





The
      following selected financial data should be read in conjunction with our
      consolidated financial statements including the accompanying notes and with
      "Management's Discussion and Analysis of Financial Condition and Results of
      Operations". The data for each of the fiscal years in the three year period
      ended December 31, 2006, have been derived from our consolidated financial
      statements and accompanying notes contained in this prospectus. The Statement
      of
      Operations Data for the years ended December 31, 2003 and 2002 and the Balance
      Sheet data at December 31, 2004, 2003 and 2002 have been derived from our
      audited consolidated financial statements which are not contained in this
      filing. In the financial data below, the Company reclassed the operations
      related to the MBS segment to discontinued operations. The Company sold this
      segment in the first quarter of 2005.





**Statement
                of Operations Data 2006**
            **2006**
            **2005**
            **2004**
            **2003**
            **2002**Revenues
            $18,051,601
            $16,515,426
            $11,067,834
            $1,441,118
            $577,221Cost
                of products and services (exclusive of depreciation and amortization
                listed separately below)
            $8,280,666
            $7,849,597
            $5,943,395
            $884,536
            $418,093Cost
                of products and services as % of revenue
            45.9%
            47.5%
            53.7%
            61.4%
            72.4%Selling,
                general and administrative expenses
            $11,480,677
            $9,723,132
            $5,986,267
            $2,647,870
            $1,971,584Selling,
                general and administrative as % of revenues
            63.6%
            58.9%
            54.1%
            183.7%
            341.6%Depreciation
                and amortization
            $5,168,209
            $4,780,436
            $3,432,779
            $1,065,650
            $1,193,306Impairment
                of assets
            $2,261,500
            $0
            $0
            $0
            $0Loss
                from Operations
            $
                (9.139,451)
            $(5,837,739)
            $(4,294,607)
            $(3,156,938)
            $(3,005,762)Other
                expense, net
            $
                (1,046,472)
            $(1,655,088)
            $(1,032,035)
            $(548,476)
            $(1,439,069)Minority
                interest in subsidiary
            $0
            $0
            $0
            $33,366
            $0Loss
                before income tax
            $
                (10,185,923)
            $(7,492,827)
            $(5,326,642)
            $(3,672,048)
            $(4,444,831)Income
                tax provision
            $0
            $0
            $0
            $0
            $0Loss
                from continuing operations
            $
                (10,185,923)
            $(7,492,827)
            $(5,326,642)
            $(3,672,048)
            $(4,444,831)Discontinued
                operations
            $2,200
            $17,827
            $(4,457,320)
            $(692,956)
            $6,772Net
                loss
            $
                (10,183,723)
            $(7,475,000)
            $(9,783,962)
            $(4,365,004)
            $(4,438,059)Loss
                attributable to common stockholders
            $
                (14,250,446)
            $(10,827,229)
            $(10,374,417)
            $(4,613,693)
            $(4,591,637)Loss
                from continuing operations
            $(.42)
            $(.32)
            $(.26)
            $(.25)
            $(.39)Loss
                from discontinued operations
            $(.00)
            $(.00)
            $(.19)
            $(.04)
            $(.00)Loss
                attributable to commons stockholders
            $(.42)
            $(.37)
            $(.45)
            $(.29)
            $(.39)Weighted
                average shares outstanding
            33,788,217
            29,097,923
            23,307,594
            16,112,231
            11,735,095





**Balance
                Sheet Data**
            **2006**
            **2005**
            **2004**
            **2003**
            **2002**Working
                Capital (deficiency)
            ($5,294,245)
            ($971,418)
            ($8,931,414)
            $1,118,792
            ($252,870)Total
                Assets
            $17,986,056
            $26,271,405
            $26,633,712
            $13,902,885
            $10,347,316Long-Term
                Debt, net
            $2,969,764
            $3,816,536
            $3,498,657
            $2,262,891
            $3,273,350Stockholders’
                Equity
            $5,659,309
            $14,968,295
            $8,549,431
            $5,807,711
            $2,642,285


Page
          11


***Item
      7:***





***Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation***





The
      following discussion of the financial condition and results of operations of
      Multiband should be read in conjunction with the Condensed Consolidated
      Financial Statements and the Notes thereto included elsewhere in this
      report.





***Years
      Ended December 31, 2006 and December 31, 2005***





This
      discussion does not include the results of discontinued operations.





*Results
      of Operations*


The
      following table sets forth certain items.




**Revenues**
            
            **2006**
            
            **2005**Multiband
            
            
            0.00
            %
            
            0.00
            %MCS
            
            
            41.96
            %
            
            48.10
            %MDU
            
            
            58.04
            %
            
            51.90
            %Total
                Revenues
            
            
            100.00
            %
            
            100.00
            %




**Cost
                of Products and Services (exclusive of depreciation and
                amortization)**Multiband
            
            
            0.00
            %
            
            0.00
            %MCS
            
            
            22.56
            %
            
            26.23
            %MDU
            
            
            23.31
            %
            
            21.30
            %Total
                Cost of Products and Services (exclusive of depreciation
              and
                amortization)
            
            
            45.87
            %
            
            47.53
            %**Selling,
                General and Administrative Expenses**
            
            
            63.60
            %
            
            58.87
            %**Impairment
                of Assets**
            
            
            12.53
            %
            
            -**Loss
                from Continuing Operations**
            
            
            (56.42
            %)
            
            (45.37
            %)**Gain(Loss)
                from Discontinued Operations**
            
            
            .01
            %
            
            .11
            %**Net
                Loss**
            
            
            (56.41
            %)
            
            (45.26
            %)





*Revenues:*


Total
      revenues from continuing operations increased 9.3% from $16,515,426 in 2005
      to
      $18,051,601 in 2006. Revenue from the MCS segment decreased to $7,573,799 in
      2006 from $7,943,266 in 2005. In 2007, MCS revenues will most likely continue
      to
      decrease due to sales of subscribers in the MCS portfolio. The MDU segment
      had
      revenues of $10,477,802 in 2006 and $8,572,160 in 2005, in an increase of 22.2%.
      This overall increase in revenues is primarily due to an increase in agent
      fees
      and revenue generating subscriptions during the comparable periods.





*Costs
      of Products and Services (exclusive of depreciation and
      amortization)*


Total
      costs of products and services were $8,280,666 in 2006 compared to $7,849,597
      in
      2005. MCS segment cost of products and services were $4,073,165 in 2006 and
      $4,332,111 in 2005. MDU segment costs of products and services were $4,207,501
      in 2006 and $3,517,486 in 2005. The significant increase in costs of products
      and services in the MDU segment resulted directly from a material increase
      in
      revenues in 2006 over 2005. The Company expects costs of products and services
      as a percentage of revenue to remain comparable in future periods due to the
      predictability of costs and the ability to pass costs through to
      customers.





*Selling,
      General and Administrative Expense:*


Selling,
      general and administrative expenses from continuing operations increased 18.08%
      to $11,480,677 in 2006, compared to $9,723,132 in 2005. Selling, general and
      administrative expenses were, as a percentage of revenues, 63.6% for 2006 and
      58.9% for 2005. This increase is primarily a result of increased payroll
      expenses related to an increase in revenue and due to stock option expense
      of
      $821,757 required to be recognized in the current year versus $0 of stock option
      expense in the comparable period last year. The Company anticipates that total
      selling, general and administrative expenses, exclusive of stock option
      expenses, will decrease in 2007 due to reduced payroll expenses from the sale
      of
      subscribers in the MCS portfolio (see Note 17).




Page
          12




*Impairment
      of Assets:*


Pursuant
      to the sale of video assets to Consolidated Smart Broadband Systems, LLC.,(CSBS)
      (see Note 17), the Company recorded an impairment charge of $2,261,500 for
      the
      year ended December 31, 2006. This charge was determined based upon the excess
      net book value of assets sold over the known proceeds from the sale as of March
      1, 2007. The impairment charge was allocated in the amount of $417,465 to
      goodwill, $1,539,633 to intangible assets and $304,402 to fixed assets.





*Loss
      from Operations*


The
      Company, in 2006, incurred a loss from operations for its combined operating
      business segments of $9,139,451 compared to a loss of $5,837,739 during 2005.
      The MDU segment showed a profit from operations of $4,066,850 in 2006 compared
      to profits of $2,691,921 in 2005. In 2006, the MCS segment showed a loss from
      operations of $8,492,405 included an impairment charge of $2,261,500, compared
      to a loss of $5,458,620 for the prior year. The Multiband Corporation segment,
      which has no revenues, showed a loss from operations of $4,713,896 in 2006
      compared to a loss of $3,071,040 for the same period last year. The Multiband
      Corporation loss is expected to continue in future periods as corporate overhead
      is expected to remain consistent with current levels. The Company expects the
      MDU segment profitability in future periods to remain steady or improve as
      that
      segment continues to experience growth. In addition to the sale of subscribers,
      the Company hopes that it can mitigate its loss in the MCS segment by reducing
      related payroll expenses. At the same time, the Company will look to add
      subscribers in its MDU division since the on-going selling, general and
      administrative expenses to service those subscribers can be more variable than
      fixed.





*Interest
      Expense*


Interest
      expense was $1,206,196 for 2006 versus $1,882,910 for 2005, reflecting primarily
      a decrease in original issue discount expense.





*Net
      Loss*


The
      Company showed a net loss of $10,183,723 and $7,475,000 in 2006 and 2005,
      respectively. The increase in net loss in 2006 over 2005 was primarily due
      to an
      impairment charge of $2,261,500, incurred due to the sale of video assets
      located in California (see Note 17).





***Years
      Ended December 31, 2005 and December 31, 2004***





This
      discussion does not include the results of discontinued operations.





*Results
      of Operations*


The
      following table sets forth certain items.




**Revenues**
            
            **2005**
            
            **2004**Multiband
            
            
            0.00
            %
            
            0.00
            %MCS
            
            
            48.10
            %
            
            47.23
            %MDU
            
            
            51.90
            %
            
            52.77
            %Total
                Revenues
            
            
            100.00
            %
            
            100.00
            %




**Cost
                of Products and Services (exclusive of depreciation and
                amortization)**Multiband
            
            
            0.00
            %
            
            0.00
            %MCS
            
            
            26.23
            %
            
            24.68
            %MDU
            
            
            21.30
            %
            
            29.02
            %Total
                Cost of Products and Services (exclusive of depreciation
              and
                amortization)
            
            
            47.53
            %
            
            53.70
            %**Selling,
                General and Administrative Expenses**
            
            
            58.87
            %
            
            54.09
            %**Loss
                from Continuing Operations**
            
            
            (45.37
            %)
            
            (48.12
            %)**Loss
                from Discontinued Operations**
            
            
            .11
            %
            
            (40.27
            %)**Net
                Loss**
            
            
            (45.26
            %)
            
            (88.40
            %)




Page
          13





*Revenues*


Total
      revenues from continuing operations increased 49.2% from $11,067,834 in 2004
      to
      $16,515,426 in 2005. Revenue from the MCS segment increased to $7,943,266 in
      2005 from $5,227,696 in 2004. The MDU segment had revenues of $8,572,160 in
      2005
      and $5,840,138 in 2004. This significant increase in revenues is primarily
      due
      to the Company experiencing a full twelve months of revenues in 2005 related
      to
      material acquisitions made during the middle of 2004. The Company anticipates
      any revenue growth in 2006 will primarily come from adding services to new
      and
      existing properties verses further acquisitions.





*Cost
      of Products and Services*


The
      cost
      of products and services was $7,849,597 in 2005 compared to $5,943,395 in 2004.
      MCS segment cost of products and services were $4,332,111 in 2005 and $2,731,585
      in 2004. MDU segment costs of products and services were $3,517,486 in 2005
      and
      $3,211,810 in 2004. The significant increase in costs of products and services
      resulted directly from a material increase in revenues in 2005 over 2004. The
      Company expects costs of products and services as a percentage of revenue to
      remain stable in future periods due to the relative predictability of the costs.





*Selling,
      General and Administrative Expenses*


Selling,
      general and administrative expenses from continuing operations increased 62.4%
      to $9,723,132 in 2005, compared to $5,986,267 in 2004. The increase in expenses
      was directly related to the Company's increase in revenues. Furthermore, the
      Company's integration of various accounting, information technology and customer
      service activities from its 2004 acquisitions produced material start up and
      additional expense. Selling, general and administrative expenses were, as a
      percentage of revenues, 58.9% for 2005 and 54.1% for 2004. The Company expects
      these expenses to decline as a percentage of revenues throughout 2006 as the
      aforementioned integration expenses should be mitigated.





*Interest
      Expense*


Interest
      expense was $1,882,910 for 2005 versus $1,055,488 for 2004, reflecting primarily
      an increase in original issue discount expense.





*Net
      Loss*


The
      Company, in 2005, showed a net loss of $7,475,000, inclusive of a gain from
      discontinued operations, which totaled $17,827. The Company's net loss in 2004
      totaled $9,783,962 which included a discontinued operations loss of $4,457,320.
      Included in the loss from discontinued operations was an impairment of goodwill
      of $2,748,879 for the year ended December 31, 2004 (see Note 1 to the
      consolidated financial statements for further detail).





***Un-audited
      Quarterly Results***


The
      following table sets forth certain un-audited quarterly operating information
      for each of the eight quarters in the two-year period ending December 31, 2006.
      This data includes, in the opinion of management, all normal recurring
      adjustments necessary for the fair presentation of the information for the
      periods presented when read in conjunction with the Company's consolidated
      financial statements and related notes thereto. Results for any previous fiscal
      quarter are not necessarily indicative of results for the full year or for
      any
      future quarter. The Company has historically experienced a seasonal fluctuation
      in its operating results, with a larger proportion of its revenues in the third
      quarter of the fiscal year.





Dec.
                31,
              2006
            Sept.
                30,
              2006
            June
                30,
              2006
            March
                31,
              2006
            Dec.
                31,
              2005
            Sept.
                30,
              2005
            June
                30,
              2005
            March
                31,
              2005Revenues:Multiband
            -
            -
            -
            -
            -
            -
            -
            -MCS
            $1,928,821
            $1,894,586
            $1,858,520
            $1,891,872
            $1,817,584
            $2,166,218
            $2,081,147
            $1,878,317MDU
            $2,692,114
            $2,630,299
            $2,643,217
            $2,512,172
            $2,549,700
            $2,091,442
            $2,102,459
            $1,828,559Total
                Revenues
            $4,620,935
            $4,524,885
            $4,501,737
            $4,404,044
            $4,367,284
            $4,257,660
            $4,183,606
            $3,706,876Cost
                of Products & services (exclusive of depreciation and amortization
                shown separately below)
            $2,198,598
            $2,087,643
            $1,937,898
            $2,056,527
            $1,963,215
            $2,303,357
            $1,703,517
            $1,879,508SG&A
                Expense
            $2,683,953
            $2,915,463
            $2,909,038
            $2,972,223
            $2,745,235
            $2,453,410
            $2,377,575
            $2,146,912Depreciation
                & Amortization
            $1,152,284
            $1,404,855
            $1,308,614
            $1,302,456
            $1,157,514
            $1,255,188
            $1,218,867
            $1,148,867Impairment
                of assets
            $2,261,500
            -
            -
            -Operating
                Loss
            $(3,675,400)
            $(1,883,076)
            $(1,653,813)
            $(1,927,162)
            $(1,498,680)
            $(1,754,295)
            $(1,116,353)
            $(1,468,411)Interest
                Expense
            $(269,320)
            $(306,672)
            $(325,523)
            $(304,681)
            $(288,196)
            $(536,000)
            $(373,013)
            $(685,701)Other
                Income (Expenses)
            $55,118
            $27,220
            $35,949
            $41,437
            $67,793
            $77,737
            $70,120
            $12,172Net
                Loss Before Taxes
            $(3,889,602)
            $(2,162,528)
            $(1,943,387)
            $(2,190,406)
            $(1,719,083)
            $(2,212,558)
            $(1,419,246)
            $(2,141,940)Income
                Tax (Benefit) Provision
            -
            -
            -
            -
            -
            -
            -
            -Loss
                from continuing operations
            $(3,889,602)
            $(2,162,528)
            $(1,943,387)
            $(2,190,406)
            $(1,719,083)
            $(2,212,558)
            $(1,419,246)
            $(2,141,940)Discontinued
                Operations
            -
            -
            -
            $2,200
            $87,954
            $248,249
            $122,892
            $(441,268)Net
                Loss
            $(3,889,602)
            $(2,162,528)
            $(1,943,387)
            $(2,188,206)
            $(1,631,129)
            $(1,964,309)
            $(1,296,354)
            $(2,583,208)Loss
                attributable to commons stockholders
            $(4,867,887)
            $(2,465,518)
            $(4,465,729)
            $(2,451,312)
            $(2,018,460)
            $(3,328,489)
            $(1,965,988)
            $(3,514,292)Loss
                from continuing operations
            $(.14)
            $(.07)
            $(.13)
            $(.08)
            $(.06)
            $(.10)
            $(.07)
            $(.12)Loss
                from discontinued operations
            $(.00)
            $(.00)
            $(.00)
            $(.00)
            $(.00)
            $(.01)
            $(.00)
            $(.01)Loss
                attributable to commons stockholders
            $(.14)
            $(.07)
            $(.13)
            $(.08)
            $(.06)
            $(.11)
            $(.07)
            $(.13)Weighted
                average shares outstanding
            34,974,681
            34,468,510
            33,515,351
            32,155,873
            31,142,424
            29,352,257
            29,634,502
            27,216,574





Page
          14





***Liquidity
      and Capital Resources***





***Year
      Ended December 31, 2006***





Working
      capital deficit for 2006 increased to $5,494,245 primarily due to increase
      in
      current portion of long term debt and operating losses. Accounts receivable,
      net, decreased by $347,812 in 2006 primarily due to improved collections
      procedures and related bad debt write-offs. Current liabilities increased in
      2006 by $1,956,386 due primarily to the increases in accounts payables and
      accrued liabilities. Current maturities of long-term debt increased by $639,734
      as of December 31, 2006 versus December 31, 2005 due to scheduled pay down
      of
      debt. Inventories increased slightly from year to year due to inventory on
      hand
      at year end being staged for impending installations.





Total
      long term debt and capital lease obligations increased by $96,974 during the
      year ended December 31, 2006. Multiband paid out $235,517 related to capital
      lease obligations and $871,076 related to long term debt during the year ended
      December 31, 2006 versus $2,907,349 paid out in 2005.





The
      Company used $993,108 for capital expenditures during 2006, as compared to
      $976,477 in 2005. This increase was related to additional purchases required
      and
      additional build out of video and internet services to MDU properties as a
      result of the business acquisitions made during 2005. Capital expenditures
      in
      2007 are expected to decrease significantly as the Company is intending to
      build
      out fewer services in 2007 than in 2006.





Net
      cash
      used by operations in 2006 was $649,986 as compared to cash used by operations
      in 2005 of $3,817,058. This differential in the use of cash between years
      largely reflects the payoff of a wholesale line of credit in 2005, related
      to
      the sale of the Company’s MBS division and related reductions in accounts
      payables. During the years ended December 31, 2006 and December 31, 2005, the
      Company incurred significant net losses. Although the majority of the 2006
      loss
      was due to non-cash expenses, in 2006, the Company continued to incur cash
      losses primarily due to general corporate expense. However, those cash operating
      losses decreased significantly in 2006 versus 2005 due to increases in agent
      fees and the on-going additions of MDU properties in the Company's portfolio
      which provided improved cash flows.





The
      Company continues to experience overall growth, primarily due to increased
      agent
      fees and due to increased subscriber related recurring revenues acquired from
      the various transactions previously mentioned herein. However, the Company
      is
      growing in its MDU segment while the MCS segment is shrinking due, in part,
      to
      sales of subscribers in that division during 2006. The Company is continuing
      to
      analyze the values the equity capital marketplace is providing to its MCS
      directly owned subscribers in future periods, both to establish values for
      those
      subscribers and to provide additional liquidity. Between August 1, 2006 and
      March 1, 2007, the Company has raised approximately $1.8 million dollars in
      gross proceeds related to sales of subscriber related assets.





Management
      of Multiband believes that the cash on hand, combined with capital resources
      and
      the potential ability to monetize intangible subscriber assets, is adequate
      to
      meet the anticipated liquidity and capital resource requirements for the next
      12
      months.





***Year
      Ended December 31, 2005***





Available
      working capital deficit for 2005 decreased to $971,418 primarily due to payment
      of acquisition related debt load. Accounts receivable decreased by $239,910
      in
      2005 primarily due to the Company’s asset sale of its MBS division and the
      liquidation of MBS receivables. Current liabilities decreased in 2005 by
      $7,195,450 due primarily to the aforementioned MBS sale and retirement of
      short-term debt. In addition, current maturities of long-term debt decreased
      by
      $908,267 as of December 31, 2005 versus December 31, 2004 due to continued
      scheduled pay down of debt. Inventories decreased from year to year due to
      the
      Company's need to carry fewer inventories in its consumer services division
      versus its discontinued business services division.





Total
      long term debt and capital lease obligations decreased by $640,586 during the
      year ended December 31, 2005. Multiband paid out $216,583 related to capital
      lease obligations and $2,690,766 related to long term debt during the year
      ended
      December 31, 2005 versus $420,480 paid out in 2004.





The
      Company used $976,477 for capital expenditures during 2005, as compared to
      $748,704 in 2004. This increase was related to additional purchases required
      and
      additional build out of video and internet services to MDU properties as a
      result of the business acquisitions made during 2005. Capital expenditures
      in
      2006 are dependent on the Company obtaining debt or equity financings in
      2006.




Page
          15




Net
      cash
      used by operations in 2005 was $3,817,058 as compared to cash used by operations
      in 2004 of $2,289,645. This use of cash reflects significant reduction in
      accounts payable over the prior year and the payoff of a wholesale line of
      credit, both related to the sale of the Company’s MBS division and related
      reductions in current liabilities. During the years ended December 31, 2005
      and
      December 31, 2004, the Company incurred significant net losses. Although the
      majority of the 2005 loss was due to non-cash expenses, the Company in 2005
      still continued to incur cash losses as well due to general corporate expense.
      However, those cash operating losses decreased significantly in 2005 versus
      2004
      due to the increase in non-cash depreciation, amortization, and amortization
      of
      original issue discount as well as by the on-going additions of MCS properties
      in the Company's portfolio which provided improved cash flows.





In
      February 2005, the Company sold ten million dollars worth of Class I convertible
      preferred stock. Proceeds from this financing were used to secure ownership
      of
      previous acquisitions, perform new acquisitions and build out additional
      services to MDU properties. All these activities improved the Company’s
      operating performance. Continued improvement of Company operating performance
      and execution of our business strategy will require additional funding in 2006.
      The Company’s operating performance indicates that performance on a MDU property
      level improves when the Company offers two or three services at a property
      versus a single service. Although the Company believes it is possible to obtain
      additional financing to build infrastructure and add services in 2006 by
      leveraging its asset base, there is no assurance this financing will be
      obtained. Thus, the lack of additional funding combined with continued operating
      losses in 2006 may restrict our ability to continue to improve our operating
      performance by adding services at MDU properties. However as of December 31,
      2005, even without additional funding, based on current operating results,
      management believes existing cash and capital resources are adequate to meet
      anticipated liquidity requirements during 2006.





***Critical
      Accounting Policies***





***Impairment
      of Long-Lived Assets***





The
      Company's long-lived assets include property, equipment and leasehold
      improvement. At December 31, 2006, the Company had net property and equipment
      of
      $3,359,842, which represents approximately 18.8% of the Company's total assets.
      The estimated fair value of these assets is dependent on the Company's future
      performance. In assessing for potential impairment for these assets, the Company
      considers future performance. If these forecasts are not met, the Company may
      have to record an impairment charge not previously recognized, which may be
      material. In 2005 and 2004, the Company did not record any impairment. In 2006,
      an impairment charge of $304,402 was recorded due to the sale of video assets
      located in California (see Note 17).





***Impairment
      of Goodwill***





We
      periodically evaluate acquired businesses for potential impairment indicators.
      Our judgments regarding the existence of impairment indicators are based on
      legal factors, market conditions and operational performance of our acquired
      businesses. Future events could cause us to conclude that impairment indicators
      exist and that goodwill associated with our acquired businesses, which amounts
      to $509,086, as of December 31, 2006, may be impaired. Any resulting impairment
      loss could have a material adverse impact on our financial condition and results
      of operations. In 2006, the Company recorded an impairment charge to goodwill
      of
      $417,465 (see Note 1), due to the sale of video assets located in California
      (see Note 17). In 2004, the Company recorded an impairment charge to goodwill
      of
      $2,748,879 (see Note 1) related to Multiband Business Services which is included
      in discontinued operations at December 31, 2004. During the year ended December
      31, 2005, the Company did not record any impairment losses related to
      goodwill.





***Impairment
      of Intangible Assets***





The
      intangible assets consist of rights of entry contracts, customer cable lists,
      debt issuance costs, domain name and access contracts. These intangibles are
      being amortized over their estimated useful lives ranging from 18 to 180 months.
      If significant changes would occur to the estimated future cash flow associated
      with these intangibles, the Company would determine if there is impairment
      and
      reduce the value of the intangibles based on the reduction of such cash flows.
      At December 31, 2006, the Company had net intangibles of $9,124,980 which
      represented approximately 51% of the Company’s total assets. In 2006, the
      Company recorded an impairment charge to intangible assets of $1,539,633 (see
      Note 1). In 2005 and 2004, the Company did not record an impairment related
      to
      the intangible assets.


Page
          16





***Inventories***





We
      value
      our inventory at the lower of the actual cost or the current estimated market
      value of the inventory. We regularly review inventory quantities on hand and
      record a provision for excess and obsolete inventory. 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.





***Stock-Based
      Compensation***





Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting
      Standard 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 is based on the date of grant using an
      option-pricing model which incorporates a number of highly complex and
      subjective variables. These variables include, but are not limited to, the
      Company’s expected stock price volatility and estimates regarding projected
      employee stock option exercise behaviors and forfeitures. The Company recognizes
      the expense related to the fair value of the award straight-line over the
      vesting period.





***Recently
      Issued Accounting Pronouncements***





The
      Financial Accounting Standards Board has published FASB Interpretation (FIN)
      No.
      48 (FIN No. 48), “Accounting for Uncertainty in Income Taxes”, to address the
      noncomparability in reporting tax assets and liabilities resulting from a lack
      of specific guidance in FASB Statement of Financial Accounting Standards (SFAS)
      No. 109 (SFAS 109), “Accounting for Income Taxes”, on the uncertainty in income
      taxes recognized in an enterprise’s financial statements. Specifically, FIN No.
      48 prescribes (a) a consistent recognition threshold and (b) a measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return, and provides related
      guidance on derecognition, classification, interest and penalties, accounting
      interim periods, disclosure and transition. FIN No. 48 will apply to fiscal
      years beginning after December 15, 2006, with earlier adoption permitted. The
      Company does not expect the adoption of FIN No. 48 to have a material impact
      on
      the consolidated financial statements.





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





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





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





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




Page
          17




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








**Disclosures
      about Contractual Obligations and Commercial Commitments**


The
      following summarizes our contractual obligations at December 31, 2006, and
      the
      effect these 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
                Lease
            $2,561,000
            $422,000
            $776,000
            $1,363,000Capital
                Leases
            1,088,935
            518,686
            393,037
            177,212Long-Term
                Debt
            5,465,881
            1,806,449
            3,551,503
            107,929Note
                Payable Stockholder
            24,739
            24,739
            -
            -**Totals**
            $**9,140,555**
            $**2,771,874**
            $**4,720,540**
            $**1,648,141**





***Off-Balance
      Sheet Arrangements***





The
      Company has no off-balance sheet arrangements.





***Forward
      Looking Statements***





From
      time
      to time, the Company may publish forward-looking statements relating to such
      matters as anticipated financial performance, business prospects, technological
      developments, new products, and similar matters. The Private Securities
      Litigation Reform Act of 1995 provides a safe harbor for forward-looking
      statements including those made in this document. In order to comply with the
      terms of the Private Securities Litigation Reform Act, the Company notes that
      a
      variety of factors could cause the Company's actual results and experience
      to
      differ materially from the anticipated results or other expectations expressed
      in the Company's forward-looking statements. The risks and uncertainties that
      may affect the operations, performance, developments and results of the
      Company's business include the following: national and regional economic
      conditions; pending and future legislation affecting the IT and
      telecommunications industry; stability of foreign governments; market acceptance
      of the Company's products and services; the Company's continued ability to
      provide integrated communication solutions for customers in a dynamic industry;
      the Company’s ability to raise additional financing and other competitive
      factors. Because these and other factors could affect the Company's operating
      results, past financial performance should not necessarily be considered as
      a
      reliable indicator of future performance, and investors should not use
      historical trends to anticipate future period results.


Page
          18





***Item
      7A***





***Quantitative
      and Qualitative Disclosure About Market Risk***





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





***Item
      8.***





***Consolidated
      Financial Statements and Supplementary Data***








***MULTIBAND
      CORPORATION AND SUBSIDIARIES***





***TABLE
      OF CONTENTS***











Report
                of Independent Registered Public Accounting Firm
            20Financial
                StatementsConsolidated
                Balance Sheets
            21-22Consolidated
                Statements of Operations
            23Consolidated
                Statements of Stockholders' Equity
            24
                - 32Consolidated
                Statements of Cash Flows
            33Notes
                to Consolidated Financial Statements
            34
                - 66Supplemental
                InformationReport
                of Independent Registered Public Accounting Firm on Supplementary
                Information
            67Valuation
                and Qualifying Accounts
            68





Page
          19





***REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM***








To
      Stockholders, Board of Directors, and Audit Committee


Multiband
      Corporation and subsidiaries





We
      have
      audited the accompanying consolidated balance sheets of Multiband Corporation
      and subsidiaries as of December 31, 2006 and 2005, and the related consolidated
      statements of operations, stockholders' equity and cash flows for each of the
      three years in the period ended December 31, 2006. These consolidated financial
      statements are the responsibility of the Company's management. Our
      responsibility is to express an opinion on these consolidated financial
      statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. The Company
      is not required to have, nor were we engaged to perform, an audit of its
      internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over the financial reporting. An audit includes examining, on a test basis,
      evidence supporting the amounts and disclosures in the consolidated financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





As
      discussed in Note 1 to the consolidated financial statements, effective January
      1, 2006, the Company adopted Financial Accounting Standards Board Statement
      No.
      123(R), “Share-Based Payment.”





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Multiband
      Corporation and subsidiaries as of December 31, 2006 and 2005, and the results
      of their operations and their cash flows for each of the three years in the
      period ended December 31, 2006, in conformity with accounting principles
      generally accepted in the United States of America.





/s/
      VIRCHOW, KRAUSE & COMPANY, LLP


Minneapolis,
      Minnesota


March
      23,
      2007








Page
          20


**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


**DECEMBER
      31, 2006 AND 2005**





***ASSETS***


**2006**
            
            **2005****CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            1,020,975
            
            $
            3,100,427Accounts
                receivable, net
            
            
            2,018,393
            
            
            2,367,864Inventories
            
            
            343,815
            
            
            241,015Prepaid
                expenses and other
            
            
            181,767
            
            
            216,885Current
                portion of notes receivable
            
            
            6,116
            
            
            11,316Total
                Current Assets
            
            
            3,571,066
            
            
            5,937,507**PROPERTY
                AND EQUIPMENT, NET**
            
            
            3,359,842
            
            
            5,247,240**OTHER
                ASSETS**Goodwill
            
            
            509,086
            
            
            954,871Intangible
                assets, net
            
            
            9,124,980
            
            
            13,923,542Assets
                held for sale
            
            
            1,244,236
            
            
            -Notes
                receivable - long-term, net
            
            
            63,740
            
            
            61,341Other
                assets
            
            
            113,106
            
            
            146,904Total
                Other Assets
            
            
            11,055,148
            
            
            15,086,658**TOTAL
                ASSETS**
            
            $
            17,986,056
            
            $
            26,271,405





See
      accompanying notes to the consolidated financial statements







Page
          21




**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


**DECEMBER
      31, 2006 AND 2005**





***LIABILITIES
      AND STOCKHOLDERS' EQUITY***


**2006**
            
            **2005****CURRENT
                LIABILITIES**Checks
                issued in excess of cash in bank
            
            $
            319,244
            
            $
            93,005Mandatory
                redeemable preferred stock, 28,000 and 33,334 Class F preferred
                shares
            
            
            280,000
            
            
            333,334Current
                portion of long-term debt
            
            
            1,255,994
            
            
            616,260Current
                portion of capital lease obligations
            
            
            444,921
            
            
            179,932Note
                payable - stockholder
            
            
            24,739
            
            
            32,837Accounts
                payable
            
            
            2,557,409
            
            
            1,761,249Accrued
                liabilities
            
            
            2,977,356
            
            
            2,741,054Customer
                deposits
            
            
            61,332
            
            
            64,161Current
                liabilities of discontinued operations
            
            
            125,000
            
            
            500,000Deferred
                service obligations and revenue
            
            
            819,316
            
            
            587,093Total
                Current Liabilities
            
            
            8,865,311
            
            
            6,908,925**LONG-TERM
                LIABILITIES**Long-term
                debt, net
            
            
            2,969,764
            
            
            3,816,536Capital
                lease obligations, net of current portion
            
            
            491,672
            
            
            452,649Long-term
                liabilities of discontinued operations
            
            
            -
            
            
            125,000Total
                Liabilities
            
            
            12,326,747
            
            
            11,303,110**COMMITMENTS
                AND CONTINGENCIES****STOCKHOLDERS'
                EQUITY**Cumulative
                convertible preferred stock, no par value:8%
                Class A (26,658 and 27,931 shares issued and outstanding, $279,909
                and
                $293,276 liquidation preference)
            
            
            400,657
            
            
            419,75210%
                Class B (7,470 and 8,390 shares issued and outstanding, $78,435 and
                $88,095 liquidation preference)
            
            
            49,700
            
            
            58,90010%
                Class C (124,130 and 125,050 shares issued and outstanding, $1,241,300
                and
                $1,250,500 liquidation preference)
            
            
            1,593,476
            
            
            1,607,60510%
                Class F (150,000 and 150,000 shares issued and outstanding, $1,500,000
                and
                $1,500,000 liquidation preference)
            
            
            1,500,000
            
            
            1,500,0008%
                Class G (38,195 and 45,245 shares issued and outstanding, $381,950
                and
                $452,450 liquidation preference)
            
            
            161,431
            
            
            179,8976%
                Class H (2.0 and 2.0 shares issued and outstanding, $200,000 and
                $200,000
                liquidation preference)
            
            
            -
            
            
            -Variable
                rate % Class I (57,500 and 90,000 shares issued and outstanding,
                $5,750,000 and $9,000,000 liquidation preference)
            
            
            -
            
            
            -Common
                stock, no par value (35,168,161 and 32,134,558 shares issued and
                outstanding)
            
            
            26,873,255
            
            
            22,801,405Stock
                subscriptions receivable
            
            
            (229,927
            )
            
            (297,105
            )Options
                and warrants
            
            
            45,093,001
            
            
            44,259,540Unamortized
                compensation
            
            
            -
            
            
            (29,861
            )Accumulated
                deficit
            
            
            (69,782,284
            )
            
            (55,531,838
            )Total
                Stockholders' Equity
            
            
            5,659,309
            
            
            14,968,295**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY**
            
            $
            17,986,056
            
            $
            26,271,405


See
      accompanying notes to the consolidated financial statements




Page
          22


**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**YEARS
      ENDED DECEMBER 31, 2006, 2005 AND 2004**





**200****6**
            
            **2005**
            
            **2004****REVENUES**
            
            $
            18,051,601
            
            $
            16,515,426
            
            $
            11,067,834**COST****S
                AND EXPENSES**Cost
                of products and services(exclusive of depreciation and amortization shown separately
                below)
            
            
            8,280,666
            
            
            7,849,597
            
            
            5,943,395Selling,
                general and administrative
            
            
            11,480,677
            
            
            9,723,132
            
            
            5,986,267Depreciation
                and amortization
            
            
            5,168,209
            
            
            4,780,436
            
            
            3,432,779Impairment
                of assets
            
            
            2,261,500
            
            
            -
            
            
            -Total
                costs and expenses
            
            
            27,191,052
            
            
            22,353,165
            
            
            15,362,441**LOSS
                FROM OPERATIONS**
            
            
            (9,139,451
            )
            
            (5,837,739
            )
            
            (4,294,607
            )**OTHER
                INCOME (EXPENSE)**Interest
                expense
            
            
            (1,206,196
            )
            
            (1,882,910
            )
            
            (1,055,488
            )Interest
                income
            
            
            67,796
            
            
            126,158
            
            
            8,805Other
                income
            
            
            91,928
            
            
            101,664
            
            
            14,648Total
                Other Expense
            
            
            (1,046,472
            )
            
            (1,655,088
            )
            
            (1,032,035
            )**LOSS
                FROM CONTINUING OPERATIONS**
            
            
            (10,185,923
            )
            
            (7,492,827
            )
            
            (5,326,642
            )**GAIN
                (****LOSS)
                FROM DISCONTINUED OPERATIONS**
            
            
            2,200
            
            
            17,827
            
            
            (4,457,320
            )**NET
                LOSS**
            
            
            (10,183,723
            )
            
            (7,475,000
            )
            
            (9,783,962
            )Preferred
                stock dividends
            
            
            4,066,723
            
            
            3,352,229
            
            
            590,455**LOSS
                ATTRIBUTABLE TO COMMON STOCKHOLDERS**
            
            $
            (14,250,446
            )
            $
            (10,827,229
            )
            $
            (10,374,417
            )**BASIC
                AND DILUTED LOSS PER COMMON SHARE:****LOSS
                FROM CONTINUING OPERATIONS**
            
            $
            (.42
            )
            $
            (.37
            )
            $
            (.26
            )**GAIN
                (LOSS) FROM DISCONTINUED OPERATIONS**
            
            $
            -
            
            $
            -
            
            $
            (.19
            )**LOSS
                ATTRIBUTABLE TO COMMON**
              **STOCKHOLDERS**
            
            $
            (.42
            )
            $
            (.37
            )
            $
            (.45
            )**WEIGHTED
                AVERAGE COMMON SHARES OUTSTANDING - BASIC AND
                DILUTED**
            
            
            33,788,217
            
            
            29,097,923
            
            
            23,307,594





See
      accompanying notes to the consolidated financial statements





Page
          23




**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY**


**YEARS
      ENDED DECEMBER 31, 2006, 2005 AND 2004**







8%
                  Class A
              
              10%
                  Class B
              
              10%
                  Class C
              
              15%
                  Class EShares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              AmountBALANCES,
                  December 31, 2003
              
              
              27,931
              
              $
              419,752
              
              
              8,700
              
              $
              62,000
              
              
              125,400
              
              $
              1,611,105
              
              
              77,650
              
              $
              438,964Stock
                  issued:Cash
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Exercise
                  of warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Cashless
                  exercise of warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Reduction
                  of stock subscriptions receivable for fees related to equity
                  transactions
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of assets - remaining 50% ownership of MBUSA
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of assets - URON, Inc.
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of assets - Satellite Broadcasting Corporation and
                  affiliates
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of assets - Minnesota Digital Universe, Inc.
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of assets - Rainbow Satellite Group, LLC.
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of assets - 21stCentury
                  Satellite Communications
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Property
                  and equipment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of notes payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of accrued interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (77,650
              )
              
              (438,964
              )Conversion
                  of dividends payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -In
                  lieu of cash for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -In
                  lieu of cash for other current assets
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Stock
                  repurchase
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of preferred stock into mandatory redeemable preferred
                  stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Intrinsic
                  value of convertible feature
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Discount
                  on preferred stock related to warrants issued
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Stock
                  subscriptions receivable:Cash
                  received
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest
                  collected
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Warrants
                  issued for debt modification
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Deferred
                  compensation expense related to stock options issued below fair
                  market
                  value
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Deferred
                  compensation expense
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Restricted
                  stock:Forfeited
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Amortization
                  expense
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Preferred
                  stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -BALANCES,
                  December 31, 2004
              
              
              27,931
              
              $
              419,752
              
              
              8,700
              
              $
              62,000
              
              
              125,400
              
              $
              1,611,105
              
              
              -
              
              $
              -





Page
          24


8%
                  Class A
              
              10%
                  Class B
              
              10%
                  Class C
              
              15%
                  Class EShares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              AmountStock
                  issued:Cash
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -Exercise
                  of warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Cashless
                  exercise of warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Exercise
                  of options
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Reduction
                  of stock subscriptions receivable for fees related to equity
                  transactions
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of assets - Dinamo Entertainment, LLC.
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of assets - Satellite Broadcasting Corporation and
                  affiliates
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of notes payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of accrued interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of dividends payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -In
                  lieu of cash for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -In
                  lieu of cash for other current assets
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -In
                  lieu of cash for deferred financing costs
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Redemption
                  of preferred stock
              
              
              -
              
              
              -
              
              
              (310
              )
              
              (3,100
              )
              
              (350
              )
              
              (3,500
              )
              
              -
              
              
              -Discount
                  on preferred stock related to warrants issued
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Stock
                  subscriptions receivable:Cash
                  received
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest
                  collected
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Increase
                  in reserve
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Warrants
                  issued for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Warrants
                  issued in connection with deferred compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Restricted
                  stock forfeited
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Preferred
                  stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -BALANCES,
                  December 31, 2005
              
              
              27,931
              
              $
              419,752
              
              
              8,390
              
              $
              58,900
              
              
              125,050
              
              $
              1,607,605
              
              
              -
              
              $
              -


See
      accompanying notes to the consolidated
      financial statements




Page
          25




8%
                  Class A
              
              10%
                  Class B
              
              10%
                  Class C
              
              15%
                  Class EShares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              AmountStock
                  issued:Cash
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -Exercise
                  of options
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of assets - Extreme Video
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of notes payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of accrued interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of dividends payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -In
                  lieu of cash for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -In
                  lieu of cash for revenue share payments
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Redemption
                  of preferred stock
              
              
              (1,273
              )
              
              (12,730
              )
              
              (920
              )
              
              (9,200
              )
              
              (920
              )
              
              (9,200
              )
              
              -
              
              
              -Intrinsic
                  value of convertible feature
              
              
              -
              
              
              (6,365
              )
              
              -
              
              
              -
              
              
              -
              
              
              (4,929
              )
              
              -
              
              
              -Adjustment
                  in Dinamo purchase price
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Stock
                  subscriptions receivable:Cash
                  received
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest
                  collected
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest
                  earned
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Increase
                  in reserve
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Warrants
                  issued for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Options
                  expense
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Amortization
                  of deferred compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Restricted
                  stock forfeited
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Common
                  stock dividends related to spin-off of URON (see Note 10)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Preferred
                  stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -BALANCES,
                  December 31, 2006
              
              
              26,658
              
              $
              400,657
              
              
              7,470
              
              $
              49,700
              
              
              124,130
              
              $
              1,593,476
              
              
              -
              
              $
              -
 Page
            26





**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY**


**YEARS
      ENDED DECEMBER 31, 2006, 2005 AND 2004**




10%
                    Class F
                
                8%
                  Class G
                
                6%
                  Class H
                
                %
                    Class IShares
                
                Amount
                
                Shares
                
                Amount
                
                Shares
                
                Amount
                
                Shares
                
                AmountBALANCES,
                    December 31, 2003
                
                
                -
                
                $
                -
                
                
                -
                
                $
                -
                
                
                -
                
                $
                -
                
                
                -
                
                $
                -Stock
                    issued:
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Cash
                
                
                -
                
                
                -
                
                
                40,245
                
                
                353,382
                
                
                11.5
                
                
                984,173
                
                
                -
                
                
                -Exercise
                    of warrants
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Cashless
                    exercise of warrants
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Reduction
                    of stock subscriptions receivable for fees related to equity
                    transactions
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Acquisition
                    of assets - remaining 50% ownership of MBUSA
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Acquisition
                    of assets - URON, Inc.
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Acquisition
                    of assets - Satellite Broadcasting Corporation and
                    affiliates
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Acquisition
                    of assets - Minnesota Digital Universe, Inc.
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Acquisition
                    of assets - Rainbow Satellite Group, LLC.
                
                
                200,000
                
                
                2,000,000
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Acquisition
                    of assets - 21stCentury Satellite Communications
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Property
                    and equipment
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Conversion
                    of notes payable
                
                
                -
                
                
                -
                
                
                5,000
                
                
                50,000
                
                
                -
                
                
                -
                
                
                -
                
                
                -Conversion
                    of accrued interest
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Conversion
                    of preferred stock
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Conversion
                    of dividends payable
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -In
                    lieu of cash for services
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -In
                    lieu of cash for other current assets
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Stock
                    repurchase
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Conversion
                    of preferred stock intomandatory
                    redeemable preferred stock
                
                
                (50,000
                )
                
                (500,000
                )
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Intrinsic
                    value of convertible feature
                
                
                -
                
                
                -
                
                
                -
                
                
                (54,182
                )
                
                -
                
                
                -
                
                
                -
                
                
                -Discount
                    on preferred stock related to warrants issued
                
                
                -
                
                
                -
                
                
                -
                
                
                (169,303
                )
                
                -
                
                
                (984,173
                )
                
                -
                
                
                -Stock
                    subscriptions receivable:Cash
                    payments
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Interest
                    collected
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Warrants
                    issued for debt modification
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Deferred
                    compensation expense related to stock options issued below fair
                    market
                    value
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Deferred
                    compensation expense
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Restricted
                    stock:
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Forfeited
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Amortization
                    expense
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Preferred
                    stock dividends
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -BALANCES,
                    December 31, 2004
                
                
                150,000
                
                $
                1,500,000
                
                
                45,245
                
                $
                179,897
                
                
                11.5
                
                $
                -
                
                
                -
                
                $
                -
  Page
            27
  10%
                    Class F
                
                8%
                    Class G
                
                6%
                    Class H
                
                %
                    Class IShares
                
                Amount
                
                Shares
                
                Amount
                
                Shares
                
                Amount
                
                Shares
                
                AmountStock
                    issued:Cash
                
                
                -
                
                $
                -
                
                
                -
                
                $
                -
                    -
                
                
                -
                
                $
                -
                    -
                
                
                100,000
                
                $
                9,480,000Exercise
                    of warrants
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Cashless
                    exercise of warrants
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Exercise
                    of options
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Reduction
                    of stock subscriptions receivable for fees related to equity
                    transactions
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Acquisition
                    of assets - Dinamo Entertainment, LLC.
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Acquisition
                    of assets - Satellite Broadcasting Corporation and
                    affiliates
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Conversion
                    of notes payable
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Conversion
                    of accrued interest
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Conversion
                    of preferred stock
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (9.5
                )
                
                -
                
                
                (10,000
                )
                
                -Conversion
                    of dividends payable
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -In
                    lieu of cash for services
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -In
                    lieu of cash for other current assets
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -In
                    lieu of cash for deferred financing costs
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Redemption
                    of preferred stock
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Discount
                    on preferred stock related to warrants issued
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (9,480,000
                )Stock
                    subscriptions receivable:Cash
                    payments
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Interest
                    collected
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Increase
                    in reserve
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Warrants
                    issued for services
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Warrants
                    issued in connection with deferred compensation
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Restricted
                    stock forfeited
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Preferred
                    stock dividends
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -BALANCES,
                    December 31, 2005
                
                
                150,000
                
                $
                1,500,000
                
                
                45,245
                
                $
                179,897
                
                
                2
                
                $
                -
                
                
                90,000
                
                $
                -


See
      accompanying notes to the consolidated financial statements




Page
          28




10%
                    Class F
              
              8%
                  Class G
              
              6%
                  Class H
              
              %
                  Class IShares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              AmountStock
                  issued:Cash
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -Exercise
                  of options
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of assets - Extreme Video
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of notes payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of accrued interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Conversion
                  of preferred stock
              
              
              -
              
              
              -
              
              
              (7,050
              )
              
              (70,500
              )
              
              -
              
              
              -
              
              
              (32,500
              )
              
              -Conversion
                  of dividends payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -In
                  lieu of cash for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -In
                  lieu of cash for revenue share payments
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Redemption
                  of preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Intrinsic
                  value of convertible feature
              
              
              -
              
              
              -
              
              
              -
              
              
              52,034
              
              
              -
              
              
              -
              
              
              -
              
              
              -Adjustment
                  in Dinamo purchase price
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Stock
                  subscriptions receivable:
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Cash
                  payments
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest
                  collected
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest
                  earned
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Increase
                  in reserve
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Warrants
                  issued for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Options
                  expense
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Amortization
                  of deferred compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Restricted
                  stock forfeited
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Common
                  stock dividends related to spin-off of URON (see Note 10)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Preferred
                  stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -BALANCES,
                  December 31, 2006
              
              
              150,000
              
              $
              1,500,000
              
              
              38,195
              
              $
              161,431
              
              
              2
              
              $
              -
              
              
              57,500
              
              $
              -


Page
          29




**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY**


**YEARS
      ENDED DECEMBER 31, 2006, 2005 AND 2004**





Common
                    Stock
              
              Stock
                Subscriptions
              
              Options
                  and
              
              Unamortized
              
              AccumulatedShares
              
              Amount
              
              Receivable
              
              Warrants
              
              Compensation
              
              Deficit
              
              TotalBALANCES,
                  December 31, 2003
              
              
              19,036,805
              
              $
              7,726,505
              
              $
              (418,085
              )
              $
              30,514,872
              
              $
              (217,210
              )
              $
              (34,330,192
              )
              $
              5,807,711Stock
                  issued:Cash
              
              
              2,001,832
              
              
              2,059,093
              
              
              -
              
              
              791,483
              
              
              -
              
              
              -
                  -
              
              
              4,188,131Exercise
                  of warrants
              
              
              273,403
              
              
              390,279
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              390,279Cashless
                  exercise of warrants
              
              
              133,742
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Reduction
                  of stock subscriptions receivable for fees related to equity
                  transactions
              
              
              -
              
              
              (17,320
              )
              
              17,320
              
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of assets - remaining 50% ownership of MBUSA
              
              
              30,000
              
              
              39,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              39,000Acquisition
                  of assets - URON, Inc.
              
              
              180,000
              
              
              235,800
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              235,800Acquisition
                  of assets - Satellite Broadcasting Corporation and
                  affiliates
              
              
              135,076
              
              
              270,152
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              270,152Acquisition
                  of assets - Minnesota Digital Universe, Inc.
              
              
              2,300,000
              
              
              3,960,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              3,960,000Acquisition
                  of assets - Rainbow Satellite Group, LLC.
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,000,000Acquisition
                  of assets - 21stCentury Satellite Communications
              
              
              230,333
              
              
              364,584
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              364,584Property
                  and equipment
              
              
              11,800
              
              
              15,530
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              15,530Conversion
                  of notes payable
              
              
              407,051
              
              
              580,909
              
              
              -
              
              
              -
                  -
              
              
              -
                  -
              
              
              -
              
              
              630,909Conversion
                  of accrued interest
              
              
              47,393
              
              
              56,687
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              56,687Conversion
                  of preferred stock
              
              
              621,200
              
              
              776,500
              
              
              -
              
              
              -
              
              
              -
                  -
              
              
              (337,536
              )
              
              -Conversion
                  of dividends payable
              
              
              156,110
              
              
              124,618
              
              
              -
              
              
              -
                  -
              
              
              -
                  -
              
              
              -
                  -
              
              
              124,618In
                  lieu of cash for services
              
              
              213,464
              
              
              329,581
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              329,581In
                  lieu of cash for other current assets
              
              
              36,000
              
              
              42,120
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              42,120Stock
                  repurchase
              
              
              (27,500
              )
              
              (62,975
              )
              
              -
              
              
              -
                  --
              
              
              -
                  -
              
              
              -
                  -
              
              
              (62,975
              )Conversion
                  of preferred stock into mandatory redeemable preferred
                  stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (500,000
              )Intrinsic
                  value of convertible feature
              
              
              -
              
              
              -
              
              
              -
              
              
              457,500
              
              
              -
                  -
              
              
              54,182
              
              
              457,500Discount
                  on preferred stock related to warrants issued
              
              
              -
              
              
              -
              
              
              -
              
              
              1,153,476
              
              
              -
              
              
              -
              
              
              -Stock
                  subscriptions receivable:Cash
                  payments
              
              
              -
              
              
              -
                  -
              
              
              6,731
              
              
              -
              
              
              -
              
              
              -
              
              
              6,731Interest
                  collected
              
              
              -
              
              
              -
                  -
              
              
              2,770
              
              
              -
              
              
              -
              
              
              -
              
              
              2,770Warrants
                  issued for debt modification
              
              
              -
              
              
              -
                  -
              
              
              -
              
              
              68,652
              
              
              -
              
              
              -
              
              
              68,652Deferred
                  compensation expense related to stock options issued below fair
                  market
                  value
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              115
              
              
              -
              
              
              115Deferred
                  compensation expense
              
              
              -
              
              
              -
                  -
              
              
              -
              
              
              -
              
              
              12,599
              
              
              -
              
              
              12,599Restricted
                  stock:Forfeited
              
              
              (2,219
              )
              
              (2,772
              )
              
              -
                  -
              
              
              -
              
              
              2,772
              
              
              -
              
              
              -Amortization
                  expense
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              200,000
              
              
              -
              
              
              200,000Preferred
                  stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (307,101
              )
              
              (307,101
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (9,783,962
              )
              
              (9,783,962
              )BALANCES,
                  December 31, 2004
              
              
              25,784,490
              
              $
              16,888,291
              
              $
              (391,264
              )
              $
              32,985,983
              
              $
              (1,724
              )
              $
              (44,704,609
              )
              $
              8,549,431





Page
          30





Common
                  Stock
              
              Stock
                Subscriptions
              
              Options
                and
              
              Unamortized
              
              AccumulatedShares
              
              Amount
              
              Receivable
              
              Warrants
              
              Compensation
              
              Deficit
              
              TotalStock
                  issued:Cash
              
              
              1,281,614
              
              $
              -
              
              $
              -
              
              $
              1,606,848
              
              $
              -
              
              $
              -
              
              $
              11,086,848Exercise
                  of warrants
              
              
              23,000
              
              
              23,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              23,000Cashless
                  exercise of warrants
              
              
              101,383
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Exercise
                  of options
              
              
              2,000
              
              
              1,960
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,960Reduction
                  of stock subscriptions receivable for fees related to equity
                  transactions
              
              
              -
              
              
              (15,400
              )
              
              15,400
              
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of assets - Dinamo Entertainment, LLC
              
              
              475,000
              
              
              702,500
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              702,500Acquisition
                  of assets - Satellite Broadcasting Corporation and
                  affiliates
              
              
              70,000
              
              
              105,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              105,000Conversion
                  of notes payable
              
              
              1,513,996
              
              
              1,541,996
              
              
              -
              
              
              -
                  -
              
              
              -
              
              
              -
              
              
              1,541,996Conversion
                  of accrued interest
              
              
              96,754
              
              
              104,194
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              104,194Conversion
                  of preferred stock
              
              
              1,616,668
              
              
              1,898,001
              
              
              -
              
              
              -
              
              
              -
                  -
              
              
              (1,898,001
              )
              
              -Conversion
                  of dividends payable
              
              
              924,989
              
              
              1,278,625
              
              
              -
              
              
              -
              
              
              -
                  -
              
              
              -
              
              
              1,278,625In
                  lieu of cash for services
              
              
              13,000
              
              
              20,580
              
              
              -
              
              
              -
              
              
              -
                  -
              
              
              -
              
              
              20,580In
                  lieu of cash for other current assets
              
              
              200,000
              
              
              218,000
              
              
              -
              
              
              -
              
              
              -
                  -
              
              
              -
              
              
              218,000In
                  lieu of cash for deferred financing costs
              
              
              33,334
              
              
              36,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              36,000Redemption
                  of preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (6,600Discount
                  on preferred stock related to warrants issued
              
              
              -
              
              
              -
              
              
              -
              
              
              9,480,000
              
              
              -
              
              
              -
              
              
              -Stock
                  subscriptions receivable:Cash
                  payments
              
              
              -
              
              
              -
                  -
              
              
              21,750
              
              
              -
              
              
              -
              
              
              -
              
              
              21,750Interest
                  collected
              
              
              -
              
              
              -
                  -
              
              
              30,000
              
              
              -
              
              
              -
              
              
              -
              
              
              30,000Increase
                  in reserve
              
              
              -
              
              
              -
              
              
              27,009
              
              
              -
              
              
              -
              
              
              -
              
              
              27,009Warrants
                  issued for services
              
              
              -
              
              
              -
              
              
              -
              
              
              9,829
              
              
              -
              
              
              -
              
              
              9,829Warrants
                  issued in connection with deferred compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              176,880
              
              
              (29,479
              )
              
              -
              
              
              147,401Restricted
                  stock forfeited
              
              
              (1,670
              )
              
              (1,342
              )
              
              -
                  -
              
              
              -
              
              
              1,342
              
              
              -
              
              
              -Preferred
                  stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,454,228
              )
              
              (1,454,228Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (7,475,000
              )
              
              (7,475,000BALANCES,
                  December 31, 2005
              
              
              32,134,558
              
              $
              22,801,405
              
              $
              (297,105
              )
              $
              44,259,540
              
              $
              (29,861
              )
              $
              (55,531,838
              )
              $
              14,968,295







See
      accompanying notes to the consolidated financial statements


Page
 Page
          31


Common
                  Stock
              
              Stock
                Subscriptions
              
              Options
                and
              
              Unamortized
              
              AccumulatedShares
              
              Amount
              
              Receivable
              
              Warrants
              
              Compensation
              
              Deficit
              
              TotalStock
                  issued:Cash
              
              
              -
              
              $
              (23,840
              )
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              (23,840
              )Exercise
                  of options
              
              
              30,000
              
              
              18,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              18,000Acquisition
                  of assets - Extreme Video
              
              
              162,500
              
              
              162,500
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              162,500Conversion
                  of notes payable
              
              
              200,000
              
              
              200,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              200,000Conversion
                  of accrued interest
              
              
              44,333
              
              
              44,333
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              44,333Conversion
                  of preferred stock
              
              
              2,210,730
              
              
              3,151,500
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,081,000
              )
              
              -Conversion
                  of dividends payable
              
              
              305,076
              
              
              473,001
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              473,001In
                  lieu of cash for services
              
              
              80,000
              
              
              57,600
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              57,600In
                  lieu of cash for revenue share payments
              
              
              964
              
              
              1,156
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,156Redemption
                  of preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (31,130
              )Intrinsic
                  value of convertible feature
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (40,740
              )
              
              -Adjustment
                  in Dinamo purchase price
              
              
              -
              
              
              (12,400
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (12,400
              )Stock
                  subscriptions receivable:Cash
                  payments
              
              
              -
              
              
              -
              
              
              5,938
              
              
              -
              
              
              -
              
              
              -
              
              
              5,938Interest
                  collected
              
              
              -
              
              
              -
              
              
              2,062
              
              
              -
              
              
              -
              
              
              -
              
              
              2,062Interest
                  earned
              
              
              -
              
              
              -
              
              
              (2,257
              )
              
              -
              
              
              -
              
              
              -
              
              
              (2,257
              )Increase
                  in reserve
              
              
              -
              
              
              -
              
              
              61,435
              
              
              -
              
              
              -
              
              
              -
              
              
              61,435Warrants
                  issued for services
              
              
              -
              
              
              -
              
              
              -
              
              
              12,085
              
              
              -
              
              
              -
              
              
              12,085Options
                  expense
              
              
              -
              
              
              -
              
              
              -
              
              
              821,757
              
              
              -
              
              
              -
              
              
              821,757Amortization
                  of deferred compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              29,480
              
              
              -
              
              
              29,480Restricted
                  stock forfeited
              
              
              -
              
              
              -
              
              
              -
              
              
              (381
              )
              
              381
              
              
              -
              
              
              -Common
                  stock dividends related to spin-off of URON (see Note 10)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (46,989
              )
              
              (46,989
              )Preferred
                  stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (897,994
              )
              
              (897,994
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (10,183,723
              )
              
              (10,183,723
              )BALANCES,
                  December 31, 2006
              
              
              35,168,161
              
              $
              26,873,255
              
              $
              (229,927
              )
              $
              45,093,001
              
              $
              -
              
              $
              (69,782,284
              )
              $
              5,659,309








Page
          32


**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**YEARS
      ENDED DECEMBER 31, 2006, 2005 AND 2004**


**2006**
            
            **2005**
            
            **2004****OPERATING
                ACTIVITIES**Net
                loss
            
            $
            (10,183,723
            )
            $
            (7,475,000
            )
            $
            (9,783,962
            )Adjustments
                to reconcile net loss to cash flows from operating
                activities:Depreciation
                and amortization
            
            
            5,347,251
            
            
            5,095,561
            
            
            3,610,057Amortization
                of deferred compensation
            
            
            29,480
            
            
            147,401
            
            
            212,714Amortization
                of original issue discount
            
            
            436,108
            
            
            1,042,374
            
            
            718,166Gain
                on sale of business segment
            
            
            -
            
            
            (253,356
            )
            
            -Common
                stock issued for services and revenue share payments
            
            
            58,756
            
            
            20,580
            
            
            329,581Warrants
                issued for services
            
            
            12,085
            
            
            9,829
            
            
            -Impairment
                of goodwill, intangibles and property and equipment
            
            
            2,261,500
            
            
            -
            
            
            2,748,879Loss
                (gain) on sale of property and equipment
            
            
            (105,139
            )
            
            (94,277
            )
            
            26,217Gain
                on sale of URON Inc. subsidiary
            
            
            (26,669
            )
            
            -
            
            
            -Change
                in allowance for doubtful accounts on accounts receivable
            
            
            (155,130
            )
            
            161,000
            
            
            2,000Change
                in reserve for stock subscriptions and interest receivable
            
            
            61,434
            
            
            27,009
            
            
            -Stock
                based compensation expense
            
            
            821,757
            
            
            -
            
            
            -Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            502,942
            
            
            239,910
            
            
            (1,160,198
            )Inventories
            
            
            (102,800
            )
            
            (240,472
            )
            
            1,105,372Prepaid
                expenses and other
            
            
            34,924
            
            
            222,236
            
            
            (7,664
            )Other
                assets
            
            
            33,798
            
            
            (14,439
            )
            
            (13,675
            )Wholesale
                line of credit
            
            
            -
            
            
            (1,000,987
            )
            
            (50,113
            )Accounts
                payable and accrued liabilities
            
            
            707,265
            
            
            (1,482,170
            )
            
            (229,855
            )Customer
                deposits
            
            
            (2,829
            )
            
            4,286
            
            
            4,475Liabilities
                of discontinued operations
            
            
            (500,000
            )
            
            (375,000
            )
            
            -Deferred
                service obligations and revenue
            
            
            119,004
            
            
            148,457
            
            
            198,361Net
                cash flows from operating activities
            
            
            (649,986
            )
            
            (3,817,058
            )
            
            (2,289,645
            )**INVESTING
                ACTIVITIES**Purchases
                of property and equipment
            
            
            (993,108
            )
            
            (976,477
            )
            
            (748,704
            )Purchases
                of intangible assets
            
            
            (31,159
            )
            
            (244,894
            )
            
            -Purchase
                of Dinamo Entertainment, LLC
            
            
            -
            
            
            (726,525
            )
            
            -Purchase
                of Ultravision
            
            
            -
            
            
            (287,050
            )
            
            -Purchase
                of Satellite Broadcasting Corporation
            
            
            -
            
            
            (200,000
            )
            
            (221,624
            )Purchase
                of Minnesota Digital Universe, Inc.
            
            
            -
            
            
            -
            
            
            (1,009,730
            )Purchase
                of Rainbow Satellite Group, LLC
            
            
            -
            
            
            -
            
            
            (1,000,000
            )Purchase
                of 21stCentury Satellite Communication, Inc.
            
            
            -
            
            
            -
            
            
            (250,000
            )Proceeds
                from sale of URON Inc. subsidiary
            
            
            75,000
            
            
            -
            
            
            -Proceeds
                from sale of business segment
            
            
            -
            
            
            1,682,184
            
            
            -Proceeds
                from short-term note receivable
            
            
            -
            
            
            400,000
            
            
            -Proceeds
                from sale of intangible assets
            
            
            -
            
            
            91,500
            
            
            -Proceeds
                from certificate of deposit
            
            
            -
            
            
            650,000
            
            
            -Payments
                received on notes receivable
            
            
            2,801
            
            
            2,843
            
            
            -Proceeds
                from sale of property and equipment
            
            
            611,094
            
            
            -
            
            
            2,712Purchase
                of certificate of deposit
            
            
            -
            
            
            -
            
            
            (400,000
            )Net
                cash flows from investing activities
            
            
            (335,372
            )
            
            391,581
            
            
            (3,627,346
            )**FINANCING
                ACTIVITIES**Checks
                issued in excess of cash in bank
            
            
            226,239
            
            
            (141,343
            )
            
            83,558Payments
                on short-term debt
            
            
            -
            
            
            (3,981,099
            )
            
            (2,688,900
            )Payments
                on long-term debt
            
            
            (871,076
            )
            
            (2,690,766
            )
            
            (345,578
            )Payments
                on capital lease obligations
            
            
            (235,517
            )
            
            (216,583
            )
            
            (74,902
            )Payments
                on note payable to stockholder
            
            
            (8,098
            )
            
            (51,964
            )
            
            (29,590
            )Payments
                for debt issuance costs
            
            
            -
            
            
            (25,000
            )
            
            (198,337
            )Payment
                on mandatory redeemable preferred stock
            
            
            (53,334
            )
            
            (166,666
            )
            
            -Payments
                for stock issuance costs
            
            
            (23,840
            )
            
            -
            
            
            -Proceeds
                from long-term debt and warrants issued with long-term
                debt
            
            
            -
            
            
            2,000,000
            
            
            2,471,688Proceeds
                from issuance of stock and warrants
            
            
            -
            
            
            11,086,848
            
            
            4,188,131Payments
                received on stock subscriptions receivable
            
            
            5,938
            
            
            51,750
            
            
            9,501Redemption
                of common stock
            
            
            -
            
            
            (6,600
            )
            
            (62,975
            )Redemption
                of preferred stock
            
            
            (31,130
            )
            
            -
            
            
            -Exercise
                of warrants
            
            
            -
            
            
            23,000
            
            
            390,279Preferred
                stock dividends
            
            
            (121,276
            )
            
            (84,186
            )
            
            (45,291
            )Exercise
                of stock options
            
            
            18,000
            
            
            1,960
            
            
            -Net
                cash flows from financing activities
            
            
            (1,094,094
            )
            
            5,799,351
            
            
            3,697,584**INCREASE
                (DECREASE) IN CASH AND CASH EQUIVALENTS**
            
            
            (2,079,452
            )
            
            2,373,874
            
            
            (2,219,407
            )CASH
                AND CASH EQUIVALENTS - Beginning of Year
            
            
            3,100,427
            
            
            726,553
            
            
            2,945,960**CASH
                AND CASH EQUIVALENTS - END OF YEAR**
            
            $
            1,020,975
            
            $
            3,100,427
            
            $
            726,553


See
      accompanying notes to the consolidated financial statements





Page
          33


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004





**NOTE
      1 - Summary of Significant Accounting Policies**





***Nature
      of Business***





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





The
      accompanying consolidated financial statements have been prepared assuming
      the
      Company will continue as a going concern that contemplates the realization
      of
      assets and satisfaction of liabilities in the normal course of business. For
      the
      years ended December 31, 2006, 2005 and 2004, the Company incurred net losses
      of
      $10,183,723, $7,475,000 and $9,783,962, respectively. At December 31, 2006,
      the
      Company had an accumulated deficit of $69,782,284. The Company's ability to
      continue as a going concern is dependent on it ultimately achieving
      profitability and/or raising additional capital. Management intends to sell
      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 2007:





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


2.
            Sale
                  of video subscriber assets on a strategic basis. The Company, based
                  on
                  recent transactions, believes there is an active market for its
                  video
                  subscriber assets. The Company believes that it can sell these
                  assets,
                  under certain circumstances, at prices at or above their current
                  carrying
                  value. However, there is no guarantee that these sales will ultimately
                  be
                  favorable to the Company.


3.
            Solicit
                additional equity investment in the Company by either issuing preferred
                or
                common stock.


4.
            Continue
                to market Multiband services and acquire additional multi-dwelling
                unit
                customers.


5.
            Control
                capital expenditures by contracting Multiband services and equipment
                through alandlord-owned
                equipment program.


6.
            Establish
                market for wireless internet services. 7.
            Expansion
                of call center support via sales of call center services to both
                existing
                and future system operators and to buyers of the Company’s video
                subscribers.





***Principles
      of Consolidation***





The
      consolidated financial statements include the accounts of Multiband Corporation
      (MB) and its wholly owned subsidiaries, Minnesota Digital Universe, Inc. (MDU),
      Rainbow Satellite Group, LLC (Rainbow), Multiband Subscriber Services, Inc.
      (MBSS), Multiband USA, Inc. (MBUSA) and URON Inc. (URON) (see Note 10). All
      significant intercompany transactions and balances have been eliminated in
      consolidation.





On
      January 1, 2004, the Company merged Multiband, Inc. into Corporate Technologies,
      USA, Inc. (CTU) (see Note 16). In May 2005, CTU’s name was changed to Multiband
      Subscriber Services (MBSS).





In
      August
      2006, the Company completed a stock dividend and sold the remaining interest
      of
      URON (see Note 10).




Page
          34


**MULTIBAND
      CORPORATION AND SUBSIDIARIES**




NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006, 2005 and 2004





***Discontinued
      Operations***





During
      the first quarter of 2005, the Company sold certain assets and transferred
      certain liabilities related to its Multiband Business Services (a/k/a CTU).
      The
      Company began discussions and efforts to sell these assets in the fourth quarter
      of 2004. These assets met the requirements of the Financial Accounting Standards
      Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 144,
“Accounting for Impairment or Disposal of Long-Lived Assets” as being held for
      sale. Operations and cash flows were eliminated as a result of the sale and
      the
      Company will not have any significant involvement in the operations after the
      sale. In accordance with appropriate accounting rules, these results are
      presented on a historical basis as a separate line in the consolidated
      statements of operations and the consolidated balance sheets entitled
“Discontinued Operations”. All of the financial information in the notes to the
      consolidated financial statements reflects only the results of continuing
      operations (see Note 16). At December 31, 2006, the Company had current
      liabilities of discontinued operations of $125,000. The balance as of March
      31,
      2007 is $0.





***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) collectibility is reasonably assured; and (iv)
      product delivery has occurred or services have been rendered. Discontinued
      operations revenues were recognized as products were shipped based on FOB
      shipping point terms when title passes to customers.





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





Revenues
      from video and internet products, which are sold but not installed, are
      recognized when delivered and the customer has accepted the terms and has the
      ability to fulfill the terms. Product returns and customer discounts are netted
      against revenues.





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 the terms and has the ability to fulfill the terms.





Revenue
      generated from activation on video programming services is earned in the month
      of activation. According to the Company's agreement with DirecTV, in the event
      that a customer cancels within the first 12 months of service, DirecTV has
      the
      right to chargeback the Company for a portion of the activation fees received.
      In accordance with Securities Exchange Commission SAB 104, the Company has
      estimated the potential charge back of commissions received on activation fees
      during the past 12 months based on historical percentages of customer
      cancellations and has included that amount as a reduction of revenue. Residual
      income is earned as services are provided by DirecTV through its system
      operators. As a master system operator for DirecTV, the Company earns a fixed
      percentage based on net cash received by DirecTV for recurring monthly services
      and a variable amount depending on the number of activations in a given month.
      The Company’s master system operator contract with DirecTV also permits the
      Company to earn revenues through its control of other system operators who
      are
      unable to provide DirecTV video programming services without the Company’s
      performance.




Page
          35




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004





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





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





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





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





***Cash
      and Cash Equivalents***





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





***Certificate
      of Deposit***





The
      Company had a certificate of deposit which matured in December
      2005.





***Accounts
      Receivable***





The
      Company reviews customers' credit history before extending unsecured credit
      and
      establishes an allowance for uncollectible accounts based upon factors
      surrounding the credit risk of specific customers and other information. Credit
      risk on accounts receivable is minimized as a result of the large and diverse
      nature of the Company's customer base. Invoices are due 30 days after
      presentation. Accounts receivable over 30 days are considered past due. The
      Company does not accrue interest on past due accounts receivable. Receivables
      are written off only after all collection attempts have failed and are based
      on
      individual credit evaluation and specific circumstances of the customer.
      Accounts receivable are shown net of an allowance for uncollectible accounts
      of
      approximately $229,400 and $386,000 at December 31, 2006 and 2005,
      respectively.





***Inventories***





Inventories,
      consisting principally of purchased video and internet (both wireless and other)
      equipment and parts, are stated at the lower of cost or market. Cost is
      determined using the first-in, first-out (FIFO) method for such equipment.
      Non-monetary exchanges of inventory items with third parties are recorded at
      the
      net book value of the items exchanged with no gains or losses
      recognized.




Page
          36


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004





***Property
      and Equipment***





Property,
      equipment and leasehold improvements are recorded at cost. Improvements are
      capitalized while repairs and maintenance costs are charged to operations when
      incurred. Property and equipment is depreciated or amortized using the
      straight-line method over estimated useful lives ranging from three to seven
      years. Leasehold improvements are amortized using the straight-line method
      over
      the shorter of the lease term or the estimated useful life of the
      assets.





In
      October 2006, the Company entered into an agreement with Consolidated Smart
      Broadband Systems, LLC (CSBS) to sell its video assets located in California.
      Pursuant to Financial Accounting Standards Board Statement of Financial
      Accounting Standards No. 144, the Company treated these assets as “held for
      sale” effective October 31, 2006. The total amount of property and equipment
      held for sale as of December 31, 2006 amounted to $1,244,236. The Company
      recorded an impairment charge of $304,162 to property and equipment related
      to
      the sale (see Note 17).





The
      Company reviews its long-lived assets whenever events or changes in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable. Recoverability of assets to be held and used is measured by a
      comparison of the carrying amount of an asset group to future net cash flows
      expected to be generated by the asset group. If such assets are considered
      to be
      impaired, the impairment to be recognized is measured by the amount by which
      the
      carrying amount of the assets exceeds the fair value of the assets. Assets
      to be
      disposed of are reported at the lower of the carrying amount or the fair value
      less costs to sell.





***Debt
      Issuance Costs***





Debt
      issuance costs are amortized over the life of the loans of approximately 18
      to
      36 months using the straight-line method, which approximates the interest
      method.





***Goodwill
      and Other Intangible Assets***





The
      Company applies the Financial Accounting Standards Board Statement (FASB) of
      Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible
      Assets,” 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. This
      accounting standard requires that goodwill no longer be amortized but tested
      for
      impairment on a periodic basis.





The
      Company internally performed the required goodwill impairment test during the
      years ended December 31, 2006 and 2005. Pursuant to the sale of video assets
      to
      Consolidated Smart Broadband Systems, LLC.,(CSBS) (see Note 17), the Company
      recorded an impairment charge of $2,261,500 for the year ended December 31,
      2006. This charge was determined based upon the excess net book value of assets
      sold over the known proceeds from the sale as of March 1, 2007. The impairment
      charge was allocated in the amount of $417,465 to goodwill, $1,539,633 to
      intangible assets and $304,402 to property and equipment.




Page
          37




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004





For
      the
      year ended December 31, 2004, as part of compliance with this standard, the
      Company obtained an independent appraisal to assess the fair value of its
      business units to determine whether goodwill carried on its books was impaired
      and the extent of such impairment, if any for the year ended December 31, 2004.
      For the year ended December 31, 2004, the independent appraisal used the
      discounted future returns method; future benefits over a period of time are
      estimated and then discounted back to present value. Based upon this independent
      appraisal, the Company determined that it was partially impaired. The Company
      recorded an impairment of $2,748,879 related to the Corporate Technologies
      (CTU)
      acquisition during the year ended December 31, 2004 and the impairment is
      included in discontinued operations on the consolidated statement of operations.





The
      balance of goodwill at December 31, 2006 and 2005 was $509,086 and $954,871,
      respectively (see Note 2).





Components
      of intangible assets are as follows:





December
                31, 2006
            
            December
                31, 2005Gross
              Carrying
            
            Accumulated
            
            Gross
              Carrying
            
            AccumulatedAmount
            
            Amortization
            
            Amount
            
            Amortization*Intangible
                assets subject to amortization*Domain
                name
            
            $
            83,750
            
            $
            83,750
            
            $
            83,750
            
            $
            72,583Right
                of entry contracts
            
            
            8,955,558
            
            
            3,591,598
            
            
            9,129,028
            
            
            2,300,664Subscriber
                lists
            
            
            9,697,879
            
            
            4,411,865
            
            
            10,151,809
            
            
            3,261,483Debt
                issuance costs
            
            
            499,837
            
            
            485,198
            
            
            499,837
            
            
            306,152Total
            
            
            19,237,024
            
            
            8,572,411
            
            
            19,864,424
            
            
            5,940,882Impairment
                of intangibles
            
            
            -
            
            
            1,539,633
            
            
            -
            
            
            -Total
                including impairment
            
            $
            19,237,024
            
            $
            10,112,044
            
            $
            19,864,424
            
            $
            5,940,882





Amortization
      of intangible assets was $3,419,150, $3,374,723 and $2,301,016 for the years
      ended December 31, 2006, 2005 and 2004, respectively. Estimated amortization
      expense of intangible assets for the years ending December 31, 2007, 2008,
      2009
      , 2010, 2011 and thereafter is $2,680,558, $2,660,909, $2,563,028, $948,707,
      $61,751 and $210,027, respectively. The weighted average remaining life of
      the
      intangibles is 3.6 years with right of entry average life of 4.0 years and
      customer cable lists of 3.3 years. The reduction in intangible value during
      2006
      is due to a sale of subscribers to CSBS (see Note 17) whereby the Company
      recorded an impairment to intangible assets of $1,539,633. Assets held for
      sale
      do not include intangible assets or goodwill.





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





***Advertising
      Costs***





Advertising
      costs are charged to expense as incurred. Advertising costs were $101,295,
      $202,701 and $176,592, for the years ended December 31, 2006, 2005 and 2004,
      respectively, and are included in selling, general and administrative expenses
      in the consolidated statements of operations.




Page
          38




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004





***Income
      Taxes***





The
      Company utilizes the liability method of accounting for income taxes. Under
      this
      method, deferred tax assets and liabilities are recognized for the expected
      future tax consequences attributable to temporary differences between the
      financial statement and income tax reporting bases of assets and liabilities.
      Deferred tax assets are reduced by a valuation allowance to the extent that
      realization is not assured.





***Stock-Based
      Compensation***


Effective
      January 1, 2006, the Company adopted 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 year ended
      December 31, 2006 recognize compensation cost for the portion of outstanding
      awards which have vested during the period. The Company recognizes stock-based
      compensation costs on a straight-line basis over the requisite service period
      of
      the award, which is generally the option vesting term. For the year ended
      December 31, 2006, total stock-based compensation expense of $821,757 ($0.02
      per
      share) was included in selling, general and administrative expenses. Estimated
      stock based compensation expense for the years ending December 31, 2007, 2008,
      2009 , 2010, 2011 is $670,003, $653,674, $77,591, $0, $0, respectively. Estimate
      is based on options currently outstanding, could be more in the
      future.





The
      Company calculates expected volatility for stock options and awards using
      historical volatility as the Company believes the expected volatility will
      approximate historical volatility. The starting point for the historical period
      used is July 1, 2001. The Company estimates the forfeiture rate for stock
      options using 5% for all employees.




The
      risk-free rates for the expected terms of the stock options and awards and
      the
      employee stock purchase plan is based on the U.S. Treasury yield curve in effect
      at the time of grant.




Page
          39


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004







The
      following table illustrates the effect on net loss and net loss per share if
      the
      Company had applied the fair value recognition provisions of SFAS No. 123, *Accounting
      for Stock-Based Compensation* ,
      to its
      stock-based employee compensation for the years ended December 31, 2005 and
      2004.





2005
            
            2004Loss
                attributable to common stockholders
            
            $
            (10,827,229
            )
            $
            (10,374,417
            )Pro
                forma loss attributable to common shares
            
            $
            (11,277,908
            )
            $
            (10,984,354
            )Basic
                and diluted loss attributable to common shareholders:As
                reported
            
            $
            (.37
            )
            $
            (.45
            )Pro
                forma loss attributable to common shares
            
            $
            (.39
            )
            $
            (.47
            )Stock-based
                compensation:As
                reported
            
            $
            -
            
            $
            212,714Pro
                forma
            
            $
            450,679
            
            $
            609,937





In
      determining the compensation cost of the options granted during fiscal 2006,
      2005, and 2004, as specified by SFAS No. 123, the fair value of each option
      grant has been estimated on the date of grant using the Black-Scholes option
      pricing model and the weighted average assumptions used in these calculations
      are summarized as follows:




2006
            
            2005
            
            2004Risk-free
                interest rate
            
            
            4.72
            %
            
            3.91
            %
            
            3.31
            %Expected
                life of options granted
            
            
            10
                years
            
            
            10
                years
            
            
            10
                yearsExpected
                volatility range
            
            
            216
            %
            
            209
            %
            
            184
            %Expected
                dividend yield
            
            
            0
            %
            
            0
            %
            
            0
            %





***Net
      Loss per Common Share***





Basic
      net
      loss per common share is computed by dividing the loss attributable to common
      stockholders by the weighted average number of common shares outstanding for
      the
      reporting period. Diluted net loss per common share is computed by dividing
      loss
      attributable to common stockholders by the sum of the weighted average number
      of
      common shares outstanding plus all additional common stock that would have
      been
      outstanding if potentially dilutive common shares related to common share
      equivalents (stock options, stock warrants, convertible preferred shares, and
      issued but not outstanding restricted stock) had been issued. All options,
      warrants, convertible preferred shares, and restricted stock outstanding during
      the years ended December 31, 2006, 2005 and 2004 were anti-dilutive due to
      net
      losses for each of the years ended.





***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, MCS, where the Company bills voice, data and video
      subscribers as a principal; and MDU where the Company as a master service
      operator for DirecTV receives net cash payments for managing video subscribers
      through its network of system operators. These video subscribers are billed
      by
      DirecTV.




Page
          40




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004





***Recently
      Issued Accounting Pronouncements***





The
      FASB
      has published FASB Interpretation (FIN) No. 48 (FIN No. 48), “Accounting for
      Uncertainty in Income Taxes”, to address the noncomparability in reporting tax
      assets and liabilities resulting from a lack of specific guidance in FASB SFAS
      No. 109 (SFAS 109), “Accounting for Income Taxes”, on the uncertainty in income
      taxes recognized in an enterprise’s financial statements. Specifically, FIN No.
      48 prescribes (a) a consistent recognition threshold and (b) a measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return, and provides related
      guidance on derecognition, classification, interest and penalties, accounting
      interim periods, disclosure and transition. FIN No. 48 will apply to fiscal
      years beginning after December 15, 2006, with earlier adoption permitted. The
      Company does not expect the adoption of FIN No. 48 to have a material impact
      on
      the consolidated financial statements.





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





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





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





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




Page
          41


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004





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





***Management's
      Use of Estimates***





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those estimates.
      Significant management estimates relate to the allowances for doubtful accounts,
      charge back of DirecTV activation fees, inventory obsolescence, stock
      subscriptions and interest receivable, property and equipment estimated useful
      lives, goodwill and intangible assets carrying value and the valuation of
      deferred income tax assets.





***Financial
      Instruments***




The
      carrying amounts for all financial instruments approximates fair value. The
      carrying amounts for cash and cash equivalents, accounts receivable, accounts
      payable, accrued liabilities, and short-term debt approximate fair value because
      of the short maturity of these instruments. The fair value of capital lease
      obligations, note payable-stockholder and long-term debt approximates the
      carrying amounts based upon the Company's expected borrowing rate for debt
      with
      similar remaining maturities and comparable risk.





***Reclassifications***





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




Page
          42


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004


***NOTE
      2 - Business Acquisitions***





On
      January 1, 2004, the Company, through MCS, entered into a stock purchase
      agreement with URON, Inc. (URON) to purchase all of the outstanding capital
      stock of URON for a total purchase price of 350,000 shares of the Company's
      common stock to be issued in installments as follows: a) 180,000 shares issued
      at closing, b) 170,000 shares held in escrow. The common shares were valued
      at
      fair market value on the date of agreement which was $1.31 per share for a
      purchase price of $458,500.




The
      terms
      of the escrow are as follows: 50,000 shares to be released upon URON providing
      the Company with documentation satisfactory to the Company of a release from
      a
      certain vendor or any related entity of all liabilities incurred to a certain
      vendor by URON; 120,000 shares to be released in 40,000 share increments upon
      the Company's receipt of distributable gross profits, generated by certain
      customers, in increments of $75,000 cash. The escrow shall be terminated 24
      months after the date of the agreement and any shares not released will be
      rescinded to the Company. The Company must register all shares issued within
      one
      year from the date of issuance. The reason for the purchase of URON is to
      continue to expand the Company's services related to voice, data, and video
      services. The purchase price of $458,500 was allocated to customer list of
      $453,930 and property and equipment of $4,570. The customer list will be
      amortized over its estimated useful lives of two years and the property and
      equipment for fifteen months. At December 31, 2004, the Company was not
      obligated to issue any of the contingent shares of common stock. At December
      31,
      2005, the 170,000 contingent shares of common stock were rescinded and retired
      into treasury stock. The value of the shares rescinded of $222,700 was recorded
      as an offset to amortization expense for the year ended December 31, 2005 (see
      Note 10).




In
      April
      2004, the Company, through MCS, purchased certain assets consisting of data
      and
      video subscribers and systems from Satellite Broadcasting Corporation and
      affiliates (SBC). The total purchase price for said assets was approximately
      $679,200.




On
      April
      2, 2004, Multiband Corporation and subsidiaries (the Company) completed its
      acquisition of Minnesota Digital Universe, Inc. (MDU segment) for approximately
      7.7 million dollars, half of which was paid for in Multiband Corporation common
      stock, valued at $1.75 per share, ($3,850,000), $1.1 million paid in cash and
      the balance in promissory notes due by January 2005. Included in the purchase
      price is $700,000 related to a finder’s fee. In December 2004, the notes with an
      outstanding balance of $990,000 were extended through May 2005, with $200,000
      of
      the outstanding note balance being extended to July 2006. These notes are
      unsecured and bear no interest. The stock value was a negotiated price between
      the Seller and the Buyer. The consideration paid was based on the Company's
      analysis of likely future net income to be generated over a six year period
      by
      the acquired company. The cash was provided by funds the Company had previously
      raised in a private placement. The assets were acquired from Pace Electronics.
      Prior to the transaction, there was no material relationship between the owners
      of MDU and the Company other than the fact that Pace Electronics previously
      owned a 50% interest in a company subsidiary, Multiband USA, Inc., which
      Multiband bought out the remaining 50% of ownership from Pace Electronics in
      January 2004 for 30,000 shares of the Company's common stock valued at $39,000.




With
      the
      MDU acquisition, the Company became a nationwide agent for DirecTV. When
      acquired, MDU serviced nearly 75,000 video subscribers through a network of
      private cable operators located throughout the United States. The purchase
      also
      permits the Company to receive ongoing residual payments from DirecTV, during
      the term of the master system operator agreement with DirecTV, which initially
      had approximately 25 months remaining at the time of purchase.




Page
          43




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004


On
      July
      9, 2004, Multiband (the Company) completed its acquisition, which had an
      acquisition date of June 1, 2004, of the outstanding membership interests of
      Rainbow Satellite Group, LLC (Rainbow) (MCS segment), a provider of Satellite
      television services to multi dwelling units, for approximately 7.5 million
      dollars, two million of which was paid for in Multiband Preferred Stock, valued
      at $2.00 per share on a conversion formula to Multiband common stock, one
      million dollars of which was paid for in cash and the balance in promissory
      notes due by January 2005. In December 2004 these notes were extended to May
      1,
      2005 and paid off in full as of that date. Included in the purchase price is
      $321,850 related to a finders’ fee. These notes are collateralized by Rainbow
      assets and bear interest at the prime rate (7.25% and 5.25% at December 31,
      2005
      and 2004.) In connection with the debt extension, the Company issued 75,000
      two
      year warrants with an exercise price of $1.35 valued at $68,652 using the Black
      Scholes pricing model. The stock value was a negotiated price between the Buyer
      and Seller. In the event Multiband defaults in the payment of said promissory
      notes, the former owners of Rainbow have certain rights to repurchase the
      aforementioned membership interests for 20% less than any sums Multiband has
      paid prior to the date of the default.




The
      consideration paid was based on the Company's analysis of likely future net
      incomes to be generated over a six year period by the acquired Company. The
      cash
      was provided by funds Multiband had previously raised in a private placement.
      The aforementioned purchase price is subject to adjustment pursuant to the
      parties’ agreement if the number of Rainbow subscribers’ increases or decreases
      as of an adjustment date. The assets were acquired from the members/owners
      of
      Rainbow. Prior to the transaction, there was no material relationship between
      the owners of sellers and the Company. With this acquisition, the Company
      acquired over 16,000 video subscribers which are primarily located in
      California, Colorado, Texas, Florida, Illinois and New York.




On
      August
      9, 2004, Multiband Corporation (the Company) completed its acquisition of
      certain assets of 21st Century Satellite Communications, Inc. (21st Century)
      (MCS segment) for $1,080,754, $333,333 of which was paid for in Company stock,
      valued at $1.60 per share, $250,000 of which was paid for in cash and the
      balance in equipment lease payments due by August 2007. The stock value was
      a
      negotiated price between the Buyer and Seller. Included in the purchase price
      is
      $86,750 related to a finder’s fee. The consideration paid was based on the
      Company's analysis of the value of the acquired video equipment and related
      video subscribers totaling approximately 5,000. The cash was provided by funds
      Multiband had previously raised in a private placement. In connection with
      the
      acquisition, the Company incurred a $125,000 finder's fee which was paid for
      in
      Company stock, valued at $1.42 for a total of $31,250, and the remaining $93,750
      was paid by December 31, 2004.




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




Page
          44




**MULTIBAND
      CORPORATION AND SUBSIDIARIES**




NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006, 2005 and 2004


With
      these acquisitions, the Company has substantially increased its subscriber
      base.




**MDU**
            
            **Rainbow**
            
            **21****st****Century**
            
            **Dinamo**Allocation
                of Purchase Price:Total
                Cash/Stock Consideration
            
            $
            7,000,000
            
            $
            7,219,999
            
            $
            987,000
            
            $
            1,727,500Add:
                Transaction Costs
            
            
            726,550
            
            
            361,850
            
            
            93,754
            
            
            176,525Add:
                Liabilities assumed
            
            
            2,030,373
            
            
            319,921
            
            
            -
            
            
            170,200Total
                Consideration
            
            
            9,756,923
            
            
            7,901,770
            
            
            1,080,754
            
            
            2,074,225Less:
                Cash and accounts receivable
            
            
            59,044
            
            
            -
            
            
            -
            
            
            -Less:
                Tangible assets
            
            
            -
            
            
            773,000
            
            
            372,420
            
            
            1,450,000Less:
                Goodwill
            
            
            -
            
            
            800,000
            
            
            -
            
            
            150,000Intangible
                assets, net
            
            $
            9,697,879
            
            $
            6,328,770
            
            $
            708,334
            
            $
            474,225





Goodwill
      was recorded on the Rainbow transaction based on a six year future projection
      of
      cash flows which indicated that those future cash flows would not equal or
      exceed total consideration paid for all intangible Rainbow assets. Goodwill
      of
      $150,000 was recorded on the Dinamo transaction based on a two year future
      projection of cash flows which indicated that those future cash flows would
      not
      equal or exceed total consideration paid for all intangible Dinamo assets.
      The
      goodwill is deductible for tax purposes.





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





Effective
      September 30, 2005, the Company sold certain video subscriber assets located
      in
      Ohio, Oklahoma and Texas to Satellite Broadcasting Corporation (SBC) (MCS
      segment). The Company sold 152 video subscribers for $167,000; $91,500 in cash
      and the balance in a three year note. Terms of this note include variable
      monthly payments at 7% with a balloon payment in October 2008. The Company
      recorded a gain on the sale of $94,277 for the year ended December 31, 2005.
      Effective the same date, the Company purchased approximately 550 video
      subscribers in Minnesota from SBC for a total purchase price of $420,125, paid
      as follows: $200,000 cash at closing; $105,000 in Company common stock valued
      at
      $1.50 per share (as negotiated by buyer and seller); and the assumption of
      a
      capital lease obligation of $105,000. Terms of this capital lease obligation
      include monthly payments of $3,223 including interest at 7% through November
      2008 and is collateralized by assets purchased. Included in the purchase price
      is $10,125 related to a finder’s fee. The purchase price was allocated to the
      acquired assets based on the estimated fair values as of the acquisition date.
      The Company allocated the purchase price to intangibles of a right of entry
      contracts with a value of $315,125 and equipment of $105,000. The rights of
      entry contract will be amortized over its estimated useful life of 108
      months.





Effective
      July 1, 2006, the Company acquired the video assets and rights of entry of
      Extreme Video Enterprise, LLC for a total purchase price of $578,125 which
      includes imputed interest of $95,066. The assets included 5,567 homes under
      rights of entry and 928 subscribers. The reason for the purchase is to continue
      to expand the Company’s services related to multi-users of voice, data and video
      services. 162,500 shares of restricted common stock valued at $1.00 per share
      (fair value at the date of the agreement) were issued to the Seller as part
      of
      the consideration for the purchase. The balance of the purchase of $415,625
      is
      to be paid in 48 equal payments and is collateralized by the assets purchased.
      The first payment of $8,659 was paid at closing. The note bears an imputed
      interest rate of 14.0%. The agreement allows for a reduction of the purchase
      price if the annual cash flow generated is less than $94,000 in the first 3
      years and less than $7,844 per month in the final year of the repayment of
      the
      note payable. Any shortfall will be deducted from the payment dollar for dollar.
      The purchase price was allocated to the acquired assets based on the estimated
      fair values as of the acquisition date. The rights of entry will be amortized
      over its estimated useful life of 36 months. The expected life of the cable
      systems will also be 36 months.




Page
          45


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004





Effective
      September 20, 2006, the Company acquired the video assets and rights of entry
      of
      Rand’M for a total purchase price of $146,500 which includes imputed interest of
      $30,470. The assets included approximately 2,350 homes under rights of entry.
      The reason for the purchase is to continue to expand the Company’s services
      related to multi-users of voice, data, and video services. The purchase price
      of
      $146,500 is to be paid in 42 equal monthly payments of $3,250 and one payment
      of
      $10,000 on September 20, 2007, and is collateralized by the assets purchased.
      This note bears an imputed interest rate of 14.0%. The purchase price was
      allocated to the acquired assets based on the estimated fair values as of the
      acquisition date. The rights of entry will be amortized over its estimated
      useful life of 18 months. The expected life of the cable systems will also
      be
      amortized over 18 months.




Allocation
                of Purchase Price for Extreme and Rand’M:Total
                Cash/Stock/Notes Payable Consideration
            
            $
            599,089Less:
                Tangible assets
            
            
            166,760Intangible
                assets
            
            $
            432,329





Effective
      September 29, 2006, pursuant to the agreement referenced in Note 17, the Company
      sold five rights of entry agreements located in California to Consolidated
      Smart
      Broadband Systems, LLC. The Company sold the assets for $386,000 in cash subject
      to a $24,900 reserve related to a contingency. The Company recorded a gain
      on
      the sale of approximately $178,000.





Effective
      November 1, 2006, the Company sold the rights of entry agreements and related
      video assets of four properties located in Florida to HBL Communications for
      $200,000 in cash. The Company recorded a gain on the sale of approximately
      $14,000.





The
      following un-audited pro forma condensed results of operations for the year
      ended December 31, 2004 give effect to the acquisition of URON, MDU, Rainbow,
      and 21st Century as if such transactions had occurred on January 1, 2004. Pro
      forma results as of December 31, 2006 and 2005 were equal to actual
      results.




The
      un-audited pro forma information 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.




Page
          46


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004





**Consolidated
                as reported per Consolidated Statements of
                Operations**
            
            **Pro
                Forma Disclosed**Revenues
            
            $
            11,067,834
            
            $
            14,562,983Loss
                from continuing operations
            
            
            (5,326,642
            )
            
            (5,292,789
            )Gain
                (Loss) from discontinued operations
            
            
            (4,457,320
            )
            
            (4,457,320
            )Net
                loss
            
            $
            (9,783,962
            )
            $
            (9,750,109
            )Basic
                and diluted loss per share:Loss
                from continuing operations
            
            $
            (0.23
            )
            $
            (0.23
            )Loss
                from discontinued operations
            
            $
            (0.19
            )
            $
            (0.19
            )Net
                loss
            
            $
            (0.42
            )
            $
            (0.42
            )Weighted
                average shares outstanding - basic and diluted
            
            
            23,307,594
            
            
            23,307,594





The
      un-audited pro forma results of operations for the years ended December 31,
      2006
      and 2005 as a result of the SBC, Florida Cable, Ultravision, Dinamo, Extreme
      and
      Rand’m acquisitions of video subscribers and video equipment are not material to
      the historical consolidated financial statements.





**NOTE
      3 - Property and Equipment**





Property
                and equipment consisted of the following at December 31:




**2006**
            
            **2005**Leasehold
                improvements
            
            $
            816,692
            
            $
            780,924Office
                equipment and furniture
            
            
            2,808,707
            
            
            3,906,057Subscriber
                related equipment
            
            
            4,040,259
            
            
            5,888,207Property
                and equipment under capital lease obligations
            
            
            1,414,391
            
            
            932,963Total
                property and equipment
            
            
            9,080,049
            
            
            11,508,151Less
                accumulated depreciation & amortization
            
            
            (5,096,394
            )
            
            (5,904,006
            )Less
                accumulated depreciation & amortization capital leases
            
            
            (623,813
            )
            
            (356,905
            )Total
                property and equipment, net
            
            $
            3,359,842
            
            $
            5,247,240




Depreciation
      and amortization expense on property and equipment for continuing operations
      was
      $1,928,101, $1,664,651 and $959,447 for the years ended December 31, 2006,
      2005
      and 2004, respectively.





Depreciation
      and amortization expense on property and equipment for the discontinued
      operations was $0, $56,188, and $345,985 for the years ended December 31, 2006,
      2005 and 2004, respectively.




Page
          47




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004
  
 **NOTE
        4 - Notes Receivable**





Notes
      receivable consisted of the following at December 31:




**2006**
            
            
            **2005**Notes
                receivable - SBC-OK/TX, variable monthly principal payments based
                on
                revenue generated plus interest of 7%, due October 2008. Note is
                collateralized by certain assets.
            
            $
            47,449
            
            $
            47,801Notes
                receivable - SBC-Ohio, variable monthly principal payments based
                on
                revenue generated plus interest of 7%, due October 2008. Note is
                collateralized by certain assets.
            
            
            22,407
            
            
            24,856Total
                notes receivable
            
            
            69,856
            
            
            72,657Less:
                current portion
            
            
            (6,116
            )
            
            (11,316
            )Long-term
                portion of notes receivable
            
            $
            63,740
            
            $
            61,341




**NOTE
      5 - Accrued Liabilities**





Accrued
      liabilities consisted of the following at December 31:




**200****6**
            
            **2005**Payroll
                and related taxes
            
            $
            535,919
            
            $
            391,707Accrued
                preferred stock dividends
            
            
            810,249
            
            
            506,535Accrued
                liability - vendor chargeback
            
            
            1,103,414
            
            
            1,347,673Other
            
            
            527,774
            
            
            495,139$
            2,977,356
            
            $
            2,741,054





Page
          48


**MULTIBAND
          CORPORATION AND SUBSIDIARIES**
  NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 December
          31, 2006, 2005 and 2004





**NOTE
      7 - Long-term Debt**





Long-term
      debt consisted of the following at December 31:




**200****6**
            
            
            **2005**Debenture
                payable - Convergent Partners I, L.P., see terms in note
                below.
            
            $
            2,500,000
            
            $
            2,500,000Note
                payable - Lexus Tower Limited Partnership, monthly installments of
                $5,987
                including interest at 8.1%, due November 2010, collateralized by
                certain
                assets of the Company.
            
            
            239,750
            
            
            290,059Note
                payable - Laurus Master Fund LTD, net of unamortized original issue
                discount and beneficial conversion of note payable into common stock
                of $0
                and $379,929 at December 31, 2006 and 2005, monthly installments
                of
                $45,455 beginning in March 2004, including interest at prime rate
                (the
                prime rate used shall not be less than 4.00%) plus 3% (11.25% and
                10.25%
                at December 31, 2006 and 2005) (effective interest rate of 18.32%),
                collateralized by certain assets of the Company. This note was paid
                off
                January 2007.
            
            
            45,449
            
            
            165,520Notes
                payable - group of accredited institutional investors, net of original
                issue discount and beneficial conversion of note payable into common
                stock
                of $30,413 and $86,590 at December 31, 2006 and 2005. Interest is
                6%
                payable semi-annually in cash or common stock at the Company’s election,
                due in November 2007, collateralized by certain assets of the Company
                and
                subordinated.
            
            
            492,258
            
            
            636,080Note
                payable - Extreme Video, payable in 48 equal monthly installments
                of
                $8,659 beginning in July, 2006, including imputed interest at 14%
                due May
                2010. Collateralized by assets purchased.
            
            
            280,888
            
            
            -Note
                payable - Rand’M, payable in 42 equal monthly installments of $3,250
                beginning in September 2006, and one payment of $10,000 on September
                20,
                2007, including imputed interest at 14% due February 2010. Collateralized
                by assets purchased.
            
            
            108,311
            
            
            -Note
                payable - Dell Marketing C.P., monthly installments of $10,000 beginning
                in September 2004 through March 2007, with a final payment of $5,021.
                This
                note does not bear interest and is unsecured.
            
            
            25,021
            
            
            145,021Notes
                payable - Dinamo Entertainment, monthly installments of $14,091 beginning
                in November 2005, including interest at 6% due November 2007 with
                a final
                payment of $319,523. Collateralized by certain assets.
            
            
            451,427
            
            
            577,778Note
                payable - Vern Swedin, Note payable in 18 monthly installments, beginning
                January 30, 2005 with an interest rate of 6%, unsecured and due in
                July
                2006.
            
            
            44,446
            
            
            77,779




Page
          49




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004


**200****6**
            
            **2005**Notes
                payable, interest at 5.25% to 20% due through May 2007, collateralized
                by
                certain assets of the Company.
            
            
            38,208
            
            
            40,559Total
                long-term debt
            
            
            4,225,758
            
            
            4,432,796Less:
                current portion
            
            
            (1,255,994
            )
            
            (616,260
            )Long-term
                debt, net
            
            $
            2,969,764
            
            $
            3,816,536





Future
      maturities of long-term debt are as follows for the years ending December
      31:





2007
            
            $
            1,286,4072008
            
            
            169,0232009
            
            
            2,690,3822010
            
            
            110,359Thereafter
            
            
            -Total
                future minimum payments
            
            
            4,256,171Less:
                original issue discounts and beneficial conversion feature
            
            
            (30,413
            )Total
                long-term debt
            
            
            4,225,758Less:
                current portion
            
            
            (1,255,994
            )Long-term
                debt, net
            
            $
            2,969,764





In
      2000,
      the Company entered into a $2,250,000 debenture agreement with Convergent
      Capital Partners I, L.P., with interest at 14% (effective interest rate of
      18.4%) payable monthly and monthly payments of $102,273 from August 1, 2003
      through June 1, 2005. The timing of repayment was changed to August 2005 through
      May 2007 as part of the amendment made in 2002. The debenture is collateralized
      by substantially all Company assets. In connection with this debenture, the
      Company issued 150,000 five-year warrants to purchase common stock at prices
      ranging from $1.50 to $5.20 per share. The proceeds of $2,250,000 were allocated
      between the debenture and the warrant based on the relative fair values of
      the
      securities at the time of issuance. The warrants were valued using the Black
      Scholes pricing model. The resulting original issue discount, the fair value
      of
      the warrants, is being amortized over the life of the debenture using the
      straight-line method, which approximates the interest method.





In
      2002,
      the Company amended the debenture agreement with Convergent Capital Partners
      I,
      L.P., and borrowed an additional $150,000 with interest at 14% (effective
      interest rate of 18.4%) payable monthly and monthly principal payments from
      August 2005 through May 2007. In connection with this debenture, the Company
      issued an additional 500,000 seven-year warrants to purchase common stock at
      $1.10 per share. The additional warrants were valued using the Black Scholes
      pricing model. The resulting original issue discount, the fair value of the
      warrants, is being amortized over the life of the debenture using the
      straight-line method, which approximates the interest method. The Company was
      in
      violation of certain covenants of this debt agreement at December 31, 2004
      and a
      waiver was obtained from the lender.





The
      outstanding note balance at December 31, 2004 was $2,130,286, net of original
      issue discount of $269,714. The Company paid $2,000,000 on the note in March
      2005. In connection with the payment, the Company expensed the remaining
      original issue discount of $269,714 for the year ended December 31, 2005.
      Amortization expense on the original issue discount was $162,790 for the year
      ended December 31, 2004.




Page
          50




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004


In
      June
      2005, the Company borrowed $2,000,000 from Convergent Capital Partners I, L.P.
      in connection with an amendment of original debt agreement. The amendment
      extended the due date to May 2009 and the Company is required to comply with
      certain financial covenants. As of December 31, 2006 and 2005 the Company was
      in
      compliance with these financial covenants. The Company is required to pay
      monthly interest only payments through the due date. The outstanding balance
      of
      the debenture was $2,500,000 at December 31, 2006 and 2005. The interest rate
      varies from 11% to 14% dependent on the Company’s stock prices (14% at December
      31, 2006 and 2005). The debenture agreement is collateralized by substantially
      all of the assets of the Company.





In
      November 2003, the Company borrowed $1,500,000 and issued a three-year warrant
      to Laurus Master Fund, Ltd. (Laurus) to purchase 535,000 common shares at $2.21
      per share through November 2006. The debt is also convertible into common stock
      of the Company at a conversion rate of $1.40 per share through November 2006.
      The proceeds of $1,500,000 were allocated between the note, the intrinsic value
      of the conversion option, and the fair value of the warrants using the Black
      Scholes pricing model. The resulting original issue discount, the fair value
      of
      the warrant, and the beneficial conversion of the note payable into common
      stock
      as defined in EITF 00-27 is being amortized over the life of the note using
      the
      straight-line method, which approximates the interest method. During the year
      ended December 31, 2004, the Company converted principal of $230,909 into
      164,836 shares of common stock. During the year ended December 31, 2005, the
      Company converted principal of $98,000 into 70,000 shares of common stock.
      As of
      December 31, 2006, the Company owed Laurus $45,449.





In
      November 2004, the Company borrowed $2,166,667 from a group of accredited
      institutional investors. The notes are convertible into shares of common stock
      at a conversion rate of $1.00 per share through November 2007. The notes accrue
      interest at the rate of 6% per annum, which interest is payable semi-annually
      in
      cash or common stock at the Company's election. The proceeds of $2,166,667
      were
      allocated between the notes and the intrinsic value of the conversion option.
      The resulting original issue discount and the beneficial conversion of the
      note
      payable into common stock as defined in EITF 00-27 is being amortized over
      the
      life of the note using the straight-line method, which approximates the interest
      method. These notes are collateralized by certain assets and are subordinated.
      During the year ended December 31, 2005, the Company converted principal of
      $1,443,996 and accrued interest of $80,627 into 1,524,623 shares of common
      stock. During the year ended December 31, 2006, the Company converted principal
      of $200,000 and accrued interest of $4,166 into 204,166 shares of common stock.
      The outstanding balance as of December 31, 2006 was $492,258, net of original
      issue discount of $30,413.





**NOTE
      8** **- Capital Lease Obligations**





The
      Company has lease financing facilities for property, equipment and leasehold
      improvements. Leases outstanding under these agreements bear interest at an
      average rate of 16.27% and expire through July 2011. The obligations are
      collateralized by the property under lease. Total cost and accumulated
      amortization of the leased equipment was $1,414,391 and $623,813 at December
      31,
      2006 and $932,963 and $359,605 at December 31, 2005. Amortization expense
      related to these obligations is included in depreciation expense.





Future
      minimum capital lease payments are as follows for the years ending December
      31:


2007
              
              $
              518,6862008
              
              
              230,5432009
              
              
              162,4952010
              
              
              118,8722011
              
              
              58,339Less:
                  amounts representing interest
              
              
              (152,342
              )Present
                  value of future minimum lease payments
              
              
              936,593Less:
                  current portion
              
              
              (444,921
              )Capital
                  lease obligations, net of current portion
              
              $
              491,672




Page
          51


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004




**NOTE
        9 - Note Payable - Stockholder**




On
      June
      30, 2003, the Company borrowed $124,000 from a stockholder of the Company with
      monthly payments of $5,600 including interest at 7.85%, due in June 2005, and
      unsecured. The balance due at December 31, 2006 and 2005 is $24,739 and $32,837,
      respectively. Interest expense related to this note payable was $2,289, $3,549
      and $4,709 for the years ended December 31, 2006, 2005 and 2004,
      respectively.








**NOTE
      10 - Stockholders' Equity**





*Capital
      Stock Authorized*





The
      articles of incorporation authorize the Company to issue 100,000,000 shares
      of
      no par capital stock. Authorization to individual classes of stock is determined
      by a Board of Directors resolution. All shares have been allocated to common
      stock except for 2,435,015 shares reserved for preferred stock as follows:




·
            275,000
                shares of Class A cumulative convertible preferred stock,


·
            60,000
                shares of Class B cumulative convertible preferred stock,


·
            250,000
                shares of Class C cumulative convertible preferred stock


·
            250,000
                shares of Class D cumulative convertible preferred stock


·
            400,000
                shares of Class E cumulative convertible preferred stock


·
            500,000
                shares of Class F cumulative convertible preferred stock


·
            600,000
                shares of Class G cumulative convertible preferred stock


·
            15
                Shares of Class H cumulative convertible preferred
                stock


·
            100,000
                shares of Class I cumulative convertible preferred
                stock




Page
          52




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004





*Cumulative
      Convertible Preferred Stock*





Dividends
      on Class A, Class B, Class C, Class D, Class E, Class F, Class G and Class
      H
      cumulative convertible preferred stock are cumulative and payable quarterly
      at
      8%, 10%, 10%, 14%, 15%, 10%, 8%, and 6% per annum, respectively. Dividends
      on
      Class I Preferred Stock are paid at a variable rate tied to prime and are
      payable monthly. Cumulative convertible preferred stock can be converted into
      common shares at any time as follows: Class A and Class B - five shares, Class
      C
      - two shares, Class D - two and one-half shares, Class E - eight shares, Class
      F- five shares, Class G- six and one quarter shares, and Class H is convertible
      at $1.00 per share. Class I is convertible at $1.50 per share. The intrinsic
      value of any beneficial conversion option is recorded as preferred stock
      dividends at the time of preferred stock issuance. Dividends on Class B
      preferred are cumulative and payable monthly at 10% per annum. The Class B
      preferred was offered to certain note payable holders at a conversion of $10
      per
      Class B preferred share. The dividends are based on $10.00 per share for Class
      A, B, C, D, E, F and G cumulative preferred stock. Dividends for Class G stock
      are payable in common stock at a fixed rate of $1.60 per share which is higher
      rate than fair market value. Dividends for Class H cumulative preferred stock
      are based on 6% of the stated liquidation preference amount per share per annum.
      They are payable in common stock at a fixed rate of $1.00 per share which is
      higher than market value. Dividends for Class I cumulative preferred stock
      are
      based on $100 per share. **** All
      preferred stock is non-voting. Warrants to purchase shares of the Company's
      common stock were given with the issuance of Class A, Class B, Class D, Class
      E,
      Class G and Class H preferred stock and were valued at fair value using the
      Black Scholes pricing model. The Company may, but is not obligated to, redeem
      the preferred stock at $10.50 per share for Class A and Class B and $10.00
      per
      share for Class C, Class D, Class E, Class F, and Class G whenever the Company's
      common stock price exceeds certain defined criteria as defined in the preferred
      stock agreements. The Class H shares can be redeemed for $100,000 per share.
      The
      Class I shares can be redeemed for $100 per share. Upon the Company's call
      for
      redemption, the holders of the preferred stock called for redemption have the
      option to convert each preferred share into shares of the Company's common
      stock. Holders of preferred stock cannot require the Company to redeem their
      shares with the exception of the 50,000 shares of Class F converted into
      mandatory redeemable preferred stock (see below). The liquidation preference
      is
      the same as the redemption price for each class of preferred stock.





*Series
      I Convertible Preferred Stock*





On
      February 3, 2005, Multiband Corporation completed a $10 million private
      placement of the Company’s Series I Convertible Preferred Stock. The offering
      was made by Mercator Advisor Group, LLC of Los Angeles, California, through
      its
      designated funds, Monarch Pointe Fund, Ltd, Mercator Momentum Fund, LP.,
      Mercator Momentum Fund III, LP., and certain investors. Under the terms of
      the
      preferred stock offering, the Company issued 100,000 shares of its Series I
      Convertible Preferred Stock in the aggregate offering amount of $10 million.
      The
      shares of Series I Convertible Preferred Stock contain a monthly dividend that
      is payable at prime plus 10% through August 31, 2005, at prime rate from
      September 1, 2005 through August 31, 2006, and at prime rate plus 1% thereafter,
      (8.25% and 7.25% at December 31, 2006 and 2005). The preferred shares are
      convertible into 7,142,858 shares of common stock at the fixed rate of $1.50
      per
      share. At December 31, 2006, $5,750,000 worth of preferred stock value remains
      to be converted into 3,833,333 shares of common stock. In addition, the
      investors received three-year warrants to purchase shares of Common Stock at
      exercise prices of $1.57 and $1.73 per share. The Company was also required
      to
      file a registration statement providing for the resale of shares issuable upon
      the conversion of the Series I Convertible Preferred Stock and upon exercise
      of
      the warrants which was declared effective in September 2005.





*Mandatory
      Redeemable Preferred Stock*





In
      2004,
      the Company issued 50,000 shares of mandatory redeemable preferred stock valued
      at $500,000 pursuant to the purchase of Rainbow and a put option given to the
      Rainbow sellers. During 2005, the Rainbow sellers exercised $166,666 value
      of
      the put option equal to 16,666 shares of preferred stock. During 2006, an
      additional $53,334 value of preferred stock was redeemed equal to 5,334 shares
      of preferred stock. The mandatory redeemable preferred stock had an outstanding
      balance of $280,000 and $333,334 as of December 31, 2006 and 2005, respectively.




Page
          53


**MULTIBAND
          CORPORATION AND SUBSIDIARIES**
  NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 December
          31, 2006, 2005 and 2004




*Stock
      Dividend*





As
      of May
      1, 2006, certain Multiband shareholders of record and certain contingent rights
      holders became eligible for a distribution of URON common stock based on the
      holder’s ownership of Multiband shares or rights as of that date. The holders
      received .05 shares of URON common stock for each share or right to a share
      of
      Multiband common stock held on the record date. In July 2006, URON’s Form 10-SB
      was declared effective by the SEC. On August 10, 2006, the stock distribution
      occurred. In August 2006, Multiband sold its majority interest in URON to
      Lantern Advisors for $75,000 in cash. As of December 31, 2006, Multiband had
      the
      voting rights for and was holding in trust 581,609 common shares of URON for
      various contingent rights holders whose rights are tied to potential future
      warrant exercises or preferred stock conversions. It is unknown as of December
      31, 2006 as to whether the aforementioned contingent rights will ever be
      exercised in full or in part by the various holders.





*Stock
      Compensation Plans*





The
      Company has a 1999 Stock Compensation Plan, which permits the issuance of
      restricted stock and stock options to key employees and agents. All outstanding
      incentive stock options granted under the prior 1997 Stock Options Plan
      continues until all agreements have expired. There are 4,300,000 shares of
      common stock reserved for issuance through restricted stock, non-qualified
      stock
      option awards and incentive stock option awards. The Plans also provide that
      the
      term of each award be determined by the Board of Directors. Under the Plans,
      the
      exercise price of incentive stock options may not be less than the fair market
      value of the stock on the award date, and the options are exercisable for a
      period not to exceed ten years from award date.





The
      Company also has a 2000 Non-employee Director Stock Compensation Plan, which
      permits the issuance of stock options for 800,000 shares of common stock to
      non-employee directors. The exercise price of the stock options is the fair
      market value of the stock on the award date, and the options are exercisable
      for
      a period not to exceed ten years from award date.





*Employee
      Stock Purchase Plan*





The
      Company has a 2000 Employee Stock Purchase Plan, which allows for the sale
      of
      400,000 shares of Company common stock to qualified employees. At December
      31,
      2006 and 2005, no shares were issued under the Plan.





*Stock
      Subscriptions Receivable*





The
      Company has stock subscriptions receivable including interest receivable
      totaling $229,927 and $297,105 due to the Company at December 31, 2006 and
      2005,
      respectively, from the issuance of common stock. The agreements require monthly
      interest only payments at interest ranging from 2% to 10% on the outstanding
      receivable balances. One stock subscription receivable was due in December
      2003
      and is past due and has been written off during 2006. The second stock
      subscription receivable was due in March 2006. Subsequent to year end the
      Company has extended this receivable through February 2008. The third stock
      subscription receivable agreement was amended in February 2007 with the entire
      balance due on February 1, 2008. The receivables are collateralized by the
      common stock issued. At December 31, 2006 and 2005, the Company has reserved
      $100,761 and $98,000 related to stock subscriptions and interest receivable
      deemed to be uncollectible. The Company does not record interest receivable
      on
      the outstanding receivable balance once they have determined it to be
      uncollectible.







Page
          54





*Restricted
        Stock*




The
      Company awards restricted common shares to selected employees. Recipients are
      not required to provide any consideration other than services. Company share
      awards are subject to certain restrictions on transfer, and all or part of
      the
      shares awarded may be subject to forfeiture upon the occurrence of certain
      events, including employment termination. The fair value at the date of grant
      related to the shares awarded is generally amortized over three years, the
      vesting term of the awards. Compensation expense recorded during the years
      ended
      December 31, 2006, 2005, and 2004 in connection with the amortization of the
      award cost was $0, $1,342 and $8,404 respectively.





Restricted
      stock activity is as follows for the years ended December 31:





**2006**
            
            **2005**
            
            **2004**Outstanding,
                January 1
            
            
            -
            
            
            2,672
            
            
            17,019Issued
            
            
            -
            
            
            -
            
            
            -Vested
            
            
            -
            
            
            (1,002
            )
            
            (12,128
            )Forfeited
            
            
            -
            
            
            (1,670
            )
            
            (2,219
            )Outstanding,
                December 31
            
            
            -
            
            
            -
            
            
            2,672





*Stock
      Options*





Stock
      option activity is as follows for the years ended December 31:





Options
            
            Weighted-Average
                Exercise Price2006
            
            2005
            
            2004
            
            2006
            
            2005
            
            2004Outstanding,
                January 1
            
            
            3,059,932
            
            
            2,188,432
            
            
            1,657,432
            
            $
            1.54
            
            $
            1.71
            
            $
            1.81Granted
            
            
            206,500
            
            
            1,513,775
            
            
            621,500
            
            
            1.09
            
            
            1.43
            
            
            1.48Exercised
            
            
            (30,000
            )
            
            (2,000
            )
            
            -
            
            
            .60
            
            
            .98
            
            
            -Forfeited
            
            
            (169,775
            )
            
            (640,275
            )
            
            (90,500
            )
            
            1.72
            
            
            1.87
            
            
            2.21Outstanding,
                December 31
            
            
            3,066,657
            
            
            3,059,932
            
            
            2,188,432
            
            $
            1.51
            
            $
            1.54
            
            $
            1.71





The
      weighted average grant date fair value of options granted during the years
      ended
      December 31, 2006, 2005, and 2004 was $1.09, $0.48 and $1.48, respectively.
      Options exercisable at December 31, 2006, 2005 and 2004 were 2,100,356,
      1,623,990 and 1,853,998, respectively. The weighted average price of exercisable
      options for the years ended December 31, 2006, 2005, and 2004 was $2.20, $2.90
      and $1.74, respectively.





Options
      outstanding and exercisable as of December 31, 2006 are as follows:




Outstanding
            
            
            ExercisableWeighted
                - AverageRange
                of Exercise Prices
            
            
            Options
            
            
            Exercise
                Price
            
            
            Remaining
                Contractual Life-Years
            
            
            Options
            
            
            Weighted-Average
                Exercise Price$.60
            
            
            to
            
            $
            .98
            
            
            270,000
            
            $
            0.74
            
            
            4.40
            
            
            209,500
            
            $
            0.98$1.01
            
            
            to
            
            $
            1.47
            
            
            2,099,500
            
            
            1.40
            
            
            7.91
            
            
            1,205,099
            
            
            2.44$1.50
            
            
            to
            
            $
            1.89
            
            
            409,491
            
            
            1.53
            
            
            5.93
            
            
            399,991
            
            
            1.57$2.00
            
            
            to
            
            $
            2.88
            
            
            199,000
            
            
            2.03
            
            
            2.92
            
            
            197,100
            
            
            2.05$4.31
            
            
            to
            
            $
            4.75
            
            
            61,666
            
            
            4.63
            
            
            3.46
            
            
            61,666
            
            
            4.63$6.00
            
            
            to
            
            $
            6.75
            
            
            27,000
            
            
            6.44
            
            
            2.68
            
            
            27,000
            
            
            6.44$.60
            
            
            to
            
            $
            6.75
            
            
            3,066,657
            
            $
            1.51
            
            
            6.88
            
            
            2,100,356
            
            $
            2.20





Using
      the
      closing stock price of $0.57 on December 29, 2006 there were no options
      outstanding or exercisable with an intrinsic value. The intrinsic value of
      options exercised in 2006, 2005 and 2004 amounted to $16,500, $580, and $0,
      respectively.




Page
          55




*Stock
      Warrants*





Stock
      warrants activity is as follows for the years ended December 31:









Outstanding
            
            Weighted
                - Average Exercise Price2006
            
            2005
            
            2004
            
            2006
            
            2005
            
            2004Outstanding,
                January 1
            
            
            18,715,979
            
            
            11,795,641
            
            
            7,421,874
            
            $
            1.68
            
            $
            1.64
            
            $
            1.83Granted
            
            
            15,670
            
            
            9,040,523
            
            
            4,902,658
            
            
            1.05
            
            
            1.71
            
            
            1.35Exercised
            
            
            -
            
            
            (498,966
            )
            
            (528,891
            )
            
            -
            
            
            .99
            
            
            1.46Forfeited
            
            
            (1,290,005
            )
            
            (1,621,219
            )
            
            -
            
            
            2.58
            
            
            1.80
            
            
            -Outstanding,
                December 31
            
            
            17,441,644
            
            
            18,715,979
            
            
            11,795,641
            
            $
            1.61
            
            $
            1.68
            
            $
            1.64





The
      weighted-average grant-date fair value of warrants granted during the years
      ended December 31, 2006, 2005, and 2004 was $0.77, $1.33 and $1.16,
      respectively.




Page
          56




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004





Warrants
      outstanding and exercisable as of December 31, 2006, are as
      follows:




Weighted
                - AverageRange
                of Exercise Prices
            
            
            Warrants
            
            
            Remaining
                contractual life
            
            
            Exercise
                prices$.85
            
            
            to
            
            $
            1.25
            
            
            5,636,171
            
            
            2.88
            
            $
            1.18$1.30
            
            
            to
            
            $
            2.00
            
            
            9,793,570
            
            
            3.34
            
            
            1.68$2.20
            
            
            to
            
            $
            3.00
            
            
            1,840,983
            
            
            2.73
            
            
            2.23$3.56
            
            
            to
            
            $
            5.20
            
            
            170,920
            
            
            0.52
            
            
            4.36$.85
            
            
            to
            
            $
            5.20
            
            
            17,441,644
            
            
            3.10
            
            $
            1.61








Stock
      warrants issued for the years ended December 31 were awarded for:





**2006**
            
            **2005**
            
            **2004**Common
                stock
            
            
            -
            
            
            1,281,614
            
            
            579,799Services
                rendered
            
            
            15,670
            
            
            616,051
            
            
            828,278Preferred
                stock
            
            
            -
            
            
            7,142,858
            
            
            3,419,581Debt
                issuance and guarantees
            
            
            -
            
            
            -
            
            
            75,00015,670
            
            
            9,040,523
            
            
            4,902,658








During
      the year ended December 31, 2006, the Company issued 15,000 four-year warrants
      for services related to investor relations with a weighted average exercise
      price of $1.00. These warrants were valued at $11,478 using the Black Scholes
      pricing model.





During
      the year ended December 31, 2006, the Company issued 670 three-year warrants
      for
      services related to sales commissions with a weighted average exercise price
      of
      $2.20. These warrants were valued at $606 using the Black Scholes pricing model.





On
      August
      10, 2006, 42,857 warrants originally issued to an investor on September 30,
      2003, were reissued due to a related warrant agreement with the same investor
      dated November, 2004.





During
      the year ended December 31, 2005, the Company issued to common stock investors,
      1,281,614 five-year warrants with a weighted average exercise price of
      $2.00.





During
      the year ended December 31, 2005, the Company issued 458,251 five-year warrants
      for services relating to equity financing with a weighted average exercise
      price
      of $1.92.





During
      the year ended December 31, 2005, the Company issued 7,800 three year warrants
      with a weighted-average exercise price of $2.20 for services related to investor
      relations. These warrants were valued at $9,829 using the Black Scholes pricing
      model.





During
      the year ended December 31, 2005, the Company issued five-year warrants to
      purchase 150,000 shares of the Company’s common stock to consultants with an
      exercise price $1.30 per share. Pursuant to Emerging Issues Task Force 96-18
      (EITF 96-18), “Accounting for Equity Instruments that are Issued to Other Than
      Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” the
      Company will value and record an expense related to the options on the earlier
      of the date a performance commitment is met or the date the performance is
      complete. The Company recorded an expense of $147,401 for the year ended
      December 31, 2005 in accordance with EITF 96-18.




Page
          57


**MULTIBAND
          CORPORATION AND SUBSIDIARIES**
  NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 December
          31, 2006, 2005 and 2004


During
      the year ended December 31, 2005, the Company issued to preferred stock
      investors 7,142,858 three-year warrants with a weighted average exercise price
      of $1.65.





During
      the year ended December 31, 2005, 475,966 warrants were exercised with a
      weighted average exercise price of $0.99. Based on the warrant agreements,
      these
      warrants were exercised in lieu of cash with the warrant holder receiving
      101,383 shares of common stock.





During
      the year ended December 31, 2005, 23,000 warrants were exercised for cash at
      an
      exercise price of $1.00.





During
      the year ended December 31, 2004, the Company issued to common stock investors
      579,799 two to five year warrants with a weighted average exercise price of
      $2.21.





During
      the year ended December 31, 2004, The Company issued 828,278 three to five
      year
      warrants for services related to equity financing with a weighted average
      exercise price of $1.11.





During
      the year ended December 31, 2004, the Company issued to preferred stock
      investors 3,419,581 two to five year warrants with a weighted average exercise
      price of $1.26.





The
      fair
      value of stock warrants is the estimated present value at grant date using
      the
      Black Scholes pricing model with the following weighted-average
      assumptions:





2006
            
            2005
            
            2004Risk-free
                interest rate
            
            
            4.88
            %
            
            3.52
            %
            
            2.96
            %Expected
                life
            
            
            3.50
                years
            
            
            4.28
                years
            
            
            3.35
                yearsExpected
                volatility
            
            
            216
            %
            
            205
            %
            
            184
            %Expected
                dividend rate
            
            
            0
            %
            
            0
            %
            
            0
            %





**NOTE
      11 - Income Taxes**





The
      Company has generated federal and state net operating losses of approximately
      $38,776,000 and $30,982,000, respectively, which, if not used, will begin to
      expire in 2007. Future changes in the stock ownership of the Company may place
      limitations on the use of these net operating loss carryforwards.





The
      Company has recorded a full valuation allowance against its deferred tax asset
      due to the uncertainty of realizing the related benefits. The change in the
      valuation allowance was $3,292,000, $(531,000) and $3,529,000 for the years
      ended December 31, 2006, 2005 and 2004, respectively.




Page
          58





**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004


Components
      of net deferred income taxes are as follows at December 31:




**2006**
            
            **2005**Deferred
                income tax assets:Net
                operating loss carryforwards
            
            $
            15,510,000
            
            $
            13,872,000Goodwill,
                including impairment
            
            
            106,000
            
            
            347,000Amortization
                of intangibles, including impairment
            
            
            1,912,000
            
            
            737,000Stock-based
                compensation
            
            
            60,000
            
            
            -Asset
                valuation reserves
            
            
            188,000
            
            
            223,000Accrued
                liabilities
            
            
            372,000
            
            
            370,00018,148,000
            
            
            15,549,000Less
                valuation allowance
            
            
            (15,964,000
            )
            
            (12,672,000
            )2,184,000
            
            
            2,877,000Deferred
                income tax liabilities:Value
                of intangible related to stock purchase of MDU
            
            
            (2,112,000
            )
            
            (2,746,000
            )Depreciation
            
            
            (72,000
            )
            
            (131,000
            )Net
                deferred income tax assets
            
            $
            -
            
            $
            -





Income
      tax computed at the federal statutory rate reconciled to the effective tax
      rate
      is as follows for the years ended December 31:




**2006**
            
            **2005**
            
            **2004**Federal
                statutory tax rate benefits
            
            
            (34.0
            )%
            
            (34.0
            )%
            
            (34.0
            )%State
                tax, net of federal benefit
            
            
            (6.0
            )
            
            (6.0
            )
            
            (6.0
            )Change
                in valuation allowance
            
            
            32.3
            
            
            37.7
            
            
            36.1Permanent
                difference related to stock-based
              compensation
                for incentive stock options
            
            
            6.6
            
            
            -
            
            
            -Other
            
            
            1.1
            
            
            2.3
            
            
            3.9Effective
                tax rate
            
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %





The
      Company has the following net operating loss carryforwards at December 31,
      2006,
      for income tax purposes:





Year
                of Expiration
            
            Federal
                Net
              Operating
                Loss
            
            State
                Net
              Operating
                Loss2007
            
            $
            501,000
            
            $
            501,0002008
            
            
            59,000
            
            
            57,0002009
            
            
            22,000
            
            
            22,0002011
            
            
            595,000
            
            
            575,0002012
            
            
            25,000
            
            
            501,0002018
            
            
            1,122,000
            
            
            2,218,0002019
            
            
            1,585,000
            
            
            2,723,0002020
            
            
            4,839,000
            
            
            1,629,0002021
            
            
            4,726,000
            
            
            4,003,0002022
            
            
            4,353,000
            
            
            3,737,0002023
            
            
            4,275,000
            
            
            4,311,0002024
            
            
            4,933,000
            
            
            3,202,0002025
            
            
            7,181,000
            
            
            4,589,0002026
            
            
            4,560,000
            
            
            2,914,000$
            38,776,000
            
            $
            30,982,000





Under
      Internal Revenue Code Section 382, utilization of federal losses expiring prior
      to 2019 is limited to approximately $375,000 each year.




Page
          59




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004





**NOTE
      12 - Supplemental Cash Flows Information**








**2006**
            
            **2005**
            
            **2004**Cash
                paid for interest
            
            $
            368,612
            
            $
            579,449
            
            $
            1,409,095**Non-cash
                investing and financing transactions:**Note
                receivable recorded for sale of discontinued operations
            
            
            -
            
            
            400,000
            
            
            -Note
                receivable recorded on sale of intangibles to Satellite
              Broadcasting
                Corporation
            
            
            -
            
            
            75,500
            
            
            -Issuance
                of common stock for purchase of Satellite Broadcasting
              Corporation
                intangibles
            
            
            -
            
            
            105,000
            
            
            -Common
                stock issued in relation to acquisition of Dinamo
              Entertainment,
                LLC
            
            
            12,400
            
            
            702,500
            
            
            -Common
                stock issued in lieu of cash for deferred financing costs
            
            
            -
            
            
            36,000
            
            
            -Common
                stock issued in lieu of cash for other current assets
            
            
            -
            
            
            218,000
            
            
            -Warrants
                issued for deferred compensation
            
            
            -
            
            
            213,120
            
            
            -Issuance
                of accrued liabilities for debt issuance costs
            
            
            -
            
            
            125,000
            
            
            -Property
                and equipment in lieu of cash for accounts receivable
            
            
            -
            
            
            -
            
            
            61,312Issuance
                of preferred and common stock for acquisition of assets
            
            
            -
            
            
            -
            
            
            57,650Conversion
                of notes payable and accrued interest to common and
              preferred
                stock
            
            
            244,333
            
            
            1,646,190
            
            
            637,596Conversion
                of preferred stock to common stock
            
            
            3,151,500
            
            
            1,898,001
            
            
            776,500Conversion
                of note payable into preferred stock
            
            
            -
            
            
            -
            
            
            50,000Conversion
                of preferred stock into mandatory redeemable
              preferred
                stock
            
            
            -
            
            
            -
            
            
            500,000Reduction
                of stock subscription receivable related to commission
              earned
                on equity transactions
            
            
            -
            
            
            15,400
            
            
            17,320Capital
                lease obligations related to property and equipment
            
            
            539,529
            
            
            -
            
            
            -Warrants
                issued for modification of short-term debt
            
            
            -
            
            
            -
            
            
            68,652Conversion
                of preferred stock dividends into common stock
            
            
            473,001
            
            
            1,278,625
            
            
            124,618Issuance
                of common stock for acquisition of assets - SBC
            
            
            -
            
            
            -
            
            
            270,152Capital
                lease assumed in acquisition of equipment from SBC
            
            
            -
            
            
            105,000
            
            
            187,424Issuance
                of common stock, short-term debt, and long-term debt
              for
                acquisition of MDU
            
            
            -
            
            
            -
            
            
            6,660,000Issuance
                of preferred stock, short-term debt and accrued expenses
              for
                acquisition of Rainbow
            
            
            -
            
            
            -
            
            
            6,541,849Issuance
                of common stock and accrued expenses for acquisition
              of
                assets - 21stCentury
            
            
            -
            
            
            -
            
            
            364,584Capital
                lease assumed in acquisition of equipment from
              21stCentury
            
            
            -
            
            
            -
            
            
            372,420Issuance
                of common stock and contingent liability for acquisition
              of
                assets - URON, Inc.
            
            
            -
            
            
            -
            
            
            458,500Issuance
                of common stock for remaining 50% ownership of
              MBUSA
            
            
            -
            
            
            -
            
            
            39,000Purchase
                of intangible assets
            
            
            54,150
            
            
            -
            
            
            -Property
                and equipment, intangibles and goodwill transferred to
              assets
                held for sale
            
            
            1,244,236
            
            
            -
            
            
            -





Page
          60




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004


**2006**
            
            **2005**
            
            **2004**Notes
                payable issued in relation to the acquisition of Rand’M
            
            
            116,030
            
            
            -
            
            
            -Notes
                payable issued in relation to the acquisition of Extreme
              Video
            
            
            311,900
            
            
            -
            
            
            -Common
                stock issued in relation to the acquisition of Extreme
              Video
            
            
            162,500
            
            
            -
            
            
            -Distribution
                of URON, Inc common stock as stock dividends
            
            
            46,989
            
            
            -
            
            
            -Deferred
                revenue related to service agreement with URON, Inc. in
              exchange
                for other current assets
            
            
            116,500
            
            
            -
            
            
            -Note
                payable issued in relation to acquisition of Dinamo
              Entertainment,
                LLC
            
            
            -
            
            
            600,000
            
            
            -Capital
                lease assumed in acquisition of equipment from Dinamo
              Entertainment,
                LLC
            
            
            -
            
            
            45,200
            
            
            -Property
                and equipment acquired through capital lease obligation
            
            
            -
            
            
            16,185
            
            
            -







**NOTE
      13 - Retirement Savings Plan**





The
      Company has 401(k) profit sharing plan covering substantially all full-time
      employees. Employee contributions are limited to the maximum amount allowable
      by
      the Internal Revenue Code. The Company made no discretionary contributions
      for
      any of the years presented.







**NOTE
      14 - Commitments and Contingencies**





*Operating
      leases*





The
      Company has various other operating leases for its corporate office space,
      vehicles and equipment with lease terms expiring at various dates through
      August, 2017. The monthly base rents range from approximately $31,000 to
      $38,000, net of payments received from subleases. The leases contain provisions
      for payments of real estate taxes, insurance and common area costs. In July
      2003, the Company entered into an agreement to sublease a portion of their
      office space through August 2008 for approximately $5,000 per month. In March
      2006, the sublessee executed the early out option in the lease. Total amount
      of
      approximately $57,000 was paid for the early release.





Total
      rent expense for the years ended December 31, 2006, 2005 and 2004 including
      common area costs and real estate taxes was approximately $547,000, $622,000
      and
      $634,000, respectively. Rent expense is net of any rent allocation attributable
      to the space occupied by Corporate Technologies, LLC. (Note 16).




Page
          61




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004


Future
      minimum rental payments, net of payments for subleases, are as follows for
      the
      years ending December 31:




Year
            
            
            Amount2007
            
            $
            422,0002008
            
            
            385,0002009
            
            
            391,0002010
            
            
            363,0002011
            
            
            321,000Thereafter
            
            
            679,000$
            2,561,000





*Guaranty*





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





*Significant
      Relationship*





The
      Company is master agent for DirecTV pursuant to a system operator agreement
      with
      DirecTV dated August 2005. The initial term of the agreement expires in August
      2008 and provides for two additional two-year renewals if the Company has a
      minimum number of paying video subscribers in its system operator network.
      Termination of the Company’s DirecTV agreement would have a material adverse
      impact on the Company’s on-going operations. Revenues generated from DirecTV
      amounted to 58.04% and 51.90% of total revenue in 2006 and 2005, respectively.
      Accounts receivable from this customer was 63.44% and 54.36% of total accounts
      receivable as of December 31, 2006 and 2005, respectively.





*Legal
      proceedings*





The
      Company is involved in legal actions in the ordinary course of its business.
      Although the outcome of any such legal actions cannot be predicted, management
      believes that there are no pending legal proceedings against or involving the
      Company for which the outcome is likely to have a material adverse effect upon
      the Company's consolidated financial position, results of operations, or cash
      flows.





Page
          62




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004





**NOTE
      15- Business Segments**





The
      Company has the following business segments. Multiband Corp. includes corporate
      expenses (e.g. corporate administrative costs), interest income, interest
      expense, depreciation and amortization. The MDU segment represents results
      as
      the master service operator for DirecTV. The MCS segment provides voice, data
      and video services to residential multi-dwelling units as the principal to
      subscribers. The discontinued operations segment includes the Multiband Business
      Services segment (see Note 16).





Segment
      disclosures are as follows:





Year
                Ended December 31, 2006
            
            Multiband
                Corp
            
            MDU
            
            MCS
            
            Discontinued
                Operations
            
            TotalRevenues
            
            $
            -
            
            $
            10,477,802
            
            $
            7,573,799
            
            
            -
            
            $
            18,051,601Income
                (loss) from operations
            
            
            (4,713,896
            )
            
            4,066,850
            
            
            (8,492,405
            )
            
            -
            
            
            (9,139,451
            )Identifiable
                assets
            
            
            2,478,638
            
            
            6,443,625
            
            
            9,063,793
            
            
            -
            
            
            17,986,056Depreciation
                and amortization
            
            
            232,211
            
            
            1,604,313
            
            
            3,331,685
            
            
            -
            
            
            5,168,209Capital
                expenditures
            
            
            42,150
            
            
            -
            
            
            950,958
            
            
            -
            
            
            993,108Year
                Ended December 31, 2005
            
            
            Multiband
                Corp
            
            
            MDU
            
            
            MCS
            
            
            Discontinued
                Operations
            
            
            TotalRevenues
            
            $
            -
            
            $
            8,572,160
            
            $
            7,943,266
            
            
            -
            
            $
            16,515,426Income
                (loss) from operations
            
            
            (3,071,040
            )
            
            2,691,921
            
            
            (5,458,620
            )
            
            -
            
            
            (5,837,739
            )Identifiable
                assets
            
            
            4,273,913
            
            
            7,984,082
            
            
            14,013,410
            
            
            -
            
            
            26,271,405Depreciation
                and amortization
            
            
            221,885
            
            
            1,604,316
            
            
            2,954,235
            
            
            -
            
            
            4,780,436Capital
                expenditures
            
            
            29,021
            
            
            -
            
            
            904,616
            
            
            42,840
            
            
            976,477Year
                Ended December 31, 2004
            
            
            Multiband
                Corp
            
            
            MDU
            
            
            MCS
            
            
            Discontinued
                Operations
            
            
            TotalRevenues
            
            $
            -
            
            $
            5,840,138
            
            $
            5,227,696
            
            
            -
            
            $
            11,067,834Income
                (loss) from operations
            
            
            (1,842,957
            )
            
            863,149
            
            
            (3,314,799
            )
            
            -
            
            
            (4,294,607
            )Identifiable
                assets
            
            
            775,708
            
            
            9,708,448
            
            
            15,467,274
            
            
            682,282
            
            
            26,633,712Depreciation
                and amortization
            
            
            244,967
            
            
            1,203,236
            
            
            1,984,576
            
            
            -
            
            
            3,432,779Capital
                expenditures
            
            
            9,772
            
            
            -
            
            
            481,252
            
            
            257,680
            
            
            748,704





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








**NOTE
      16- Sale of Business Segment**





***Sale
      of Multiband Business Services segment***





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





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




Page
          63


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004




In
      connection with the purchase agreement, the Company entered into an interim
      services agreement whereby the Buyer is able to sublease space at no charge
      at
      the Company’s Minneapolis and Fargo locations and obtain access to certain
      aspects of the Company’s information technology resources for one year. Services
      provided will be charged by either party at fair value and is estimated by
      management to be insignificant. In addition the services agreement is explicit
      that the Company has no control over the buyer’s operations. The buyer also
      receives additional free rent for a second year due to the results of a post
      closing inventory appraisal. In conjunction with the sale, the Company reduced
      its indebtedness to Convergent Capital by $2,000,000 since part of the
      collateral of this note payable relates to the assets sold. This $2,000,000
      was
      borrowed back from Convergent in the 2 nd quarter
      of fiscal 2005. The gain on sale of MBS business services segment is as
      follows:





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


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




Page
          64




**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2006, 2005 and 2004





The
      following are condensed statements of operations of the discontinued
      operations:





**Statement
                of Operations**
            
            **2006**
            
            **2005**
            
            **2004**Revenues
            
            $
            -
            
            $
            3,699,983
            
            $
            18,604,855Cost
                of sales
            
            
            -
            
            
            2,701,664
            
            
            14,564,286Selling,
                general and administrative
            
            
            (2,200
            )
            
            1,122,220
            
            
            5,092,867Depreciation
                and amortization
            
            
            -
            
            
            56,188
            
            
            345,985Income
                (loss) from operations
            
            
            2,200
            
            
            (180,089
            )
            
            (1,398,283
            )Impairment
                of goodwill
            
            
            -
            
            
            -
            
            
            (2,748,879
            )Other
                income (expense)
            
            
            -
            
            
            (55,440
            )
            
            (310,158
            )Net
                Income (loss)
            
            $
            2,200
            
            $
            (235,529
            )
            $
            (4,457,320
            )





During
      the year ended December 31, 2005, the Company recorded a gain on the sale of
      CTU
      of $253,356. This gain was included in discontinued operations for the year
      ended December 31, 2005 resulting in a gain on discontinued operation on the
      consolidated income statement of $17,827.





The
      Company has recorded $1 million in deferred rent liability in relation to the
      sale of the MBS business segment. This liability is amortized over the 24 month
      term of the sublease. Amortization has been netted with rent expense and the
      resulting income of $64,400 and $87,587 is included in other income (expense)
      for the years ended December 31, 2006 and 2005, respectively.







**NOTE
      17 - Subsequent Event**





Effective
      March 1, 2007, the Company, pursuant to an asset purchase agreement entered
      into
      October 19, 2006 (the “agreement”), completed the sale of substantially all of
      its video assets located in California to Consolidated Smart Broadband Systems,
      LLC.(“CSBS”). The purchase price paid by CSBS was $1,214,000 cash at closing
      plus a guarantee of an additional $100,000, payable on or about March 31, 2007.
      The ultimate purchase price to be paid by the CSBS for the assets will be
      determined, in part, by an earnout formula detailed in the agreement tied to
      free subscriber cash flow and length of right of entry contracts. The ultimate
      price paid for the assets will not be known until February 2008 due to the
      aforementioned contingencies.





In
      compliance with accounting rules governing asset impairment, the Company was
      required to record an impairment charge for the year ended December 31, 2006
      that was determined based upon the excess net book value of assets sold over
      the
      known proceeds from the sale as of March 1, 2007. Any consideration received
      for
      the assets during future accounting periods based upon the earnout formula
      will
      be recognized as a gain on sale of assets in that period. The results of the
      sale of the California assets are as follows:




**Sale
                price**Cash
                proceeds on March 1, 2007
            
            $
            1,214,000Cash
                proceeds guaranteed at second closing March 30, 2007
            
            
            100,000Total
                initial sale price
            
            
            1,314,000





**Assets
                sold**Property
                and equipment
            
            
            1,244,236Goodwill
            
            
            -Rights
                of entry contracts
            
            
            -Net
                assets sold
            
            
            1,244,236




Page
          65




**MULTIBAND
          CORPORATION AND SUBSIDIARIES**
  NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 December
          31, 2006, 2005 and 2004






**Less
                costs and expenses**Broker’s
                fee
            
            
            39,420Accounting
                costs
            
            
            10,000DTV
                transfer fees
            
            
            19,500Total
                costs
            
            
            68,920Gain
                on sale of assets
            
            $
            $844







The
      sale
      was not reported as a discontinued operation because the assets sold did not
      constitute a segment or component of the Company’s business, and the Company
      retained assets and on-going service capabilities associated with the video
      subscribers.





Page
          66





REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON SUPPLEMENTARY


INFORMATION











To
      Stockholders, Board of Directors and Audit Committee


Multiband
      Corporation and subsidiaries


New
      Hope,
      Minnesota





Under
      date of March 23, 2007, we reported on the consolidated balance sheets of
      Multiband Corporation and subsidiaries as of December 31, 2006 and 2005 and
      the
      related consolidated statements of operations, stockholders’ equity, and cash
      flows for the years ended December 31, 2006, 2005 and 2004 as contained in
      the
      annual report on Form 10-K for the year ended December 31, 2006. In connection
      with our audits of the aforementioned consolidated financial statements, we
      have
      also audited the related financial statement schedule as listed in the
      accompanying index. This financial statement schedule is the responsibility
      of
      the Company’s management. Our responsibility is to express an opinion on this
      financial statement schedule based on our audits.





In
      our
      opinion, such financial statement schedule, when considered in relation to
      the
      basic consolidated financial statements taken as a whole, presents fairly,
      in
      all material respects, the information set forth therein.








/s/
      VIRCHOW, KRAUSE & COMPANY, LLP





Minneapolis,
      Minnesota


March
      23,
      2007





Page
          67


**MULTIBAND
      CORPORATION AND SUBSIDIARIES**




**VALUATION
      AND QUALIFYING ACCOUNTS**


**Years
      Ended December 31, 2006, 2005 and 2004**




Column
                A
            
            Column
                B
            
            Column
                C
            
            Column
                D
            
            
            
            Column
                EDescription
            
            Balance
                at Beginning of Year
            
            Additions
                Charged to Costs and Expenses
            
            Deductions
            
            
            
            Balance
                at End of YearALLOWANCE
                DEDUCTED FROM ASSET TO WHICH IT APPLIESAllowance
                for doubtful accounts receivable:2006
            
            $
            386,000
            
            $
            -
            
            $
            156,600
            
            
            (A
            )
            $
            229,4002005
            
            
            225,000
            
            
            161,000
            
            
            -
            
            
            
            
            
            386,0002004
            
            
            223,000
            
            
            2,000
            
            
            -
            
            
            
            
            
            225,000Notes
                receivable:2006
            
            
            -
            
            
            -
            
            
            -
            
            
            
            
            
            -2005
            
            
            -
            
            
            -
            
            
            -
            
            
            
            
            
            -2004
            
            
            -
            
            
            -
            
            
            -
            
            
            
            
            
            -Stock
                subscriptions and interest receivable2006
            
            
            98,000
            
            
            70,000
            
            
            67,239
            
            
            (A
            )
            
            100,7612005
            
            
            71,000
            
            
            27,009
            
            
            9
            
            
            
            
            
            98,0002004
            
            
            71,000
            
            
            -
            
            
            -
            
            
            
            
            
            71,000





(A)
            
            Write-off
                uncollectible receivables








Page
          68





**Item
      9.**





**Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure**





None.





**Item
      9A.**





**Controls
      and Procedures.**





The
      Company, under the supervision and with the participation of its management,
      including the Chief Executive Officer, evaluated the effectiveness of the design
      and operation of the Company’s “disclosure controls and procedures” (as defined
      in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act))
      as of the end of the period covered by this report. Based on that evaluation,
      the Chief Executive Officer concluded that the Company’s disclosure controls and
      procedures are effective in timely making known to him material information
      relating to the Company and the Company’s consolidated subsidiaries required to
      be disclosed in the Company’s reports filed or submitted under the Exchange Act.
      There has been no change in the Company’s internal control over financial
      reporting during the year ended December 31, 2006 that has materially affected,
      or is reasonably likely to materially affect, the Company’s internal control
      over financial reporting.





Management
      is aware that there is a lack of segregation of duties due to the small number
      of employees dealing with general administrative and financial matters. However,
      management has determined the risks associated with the lack of segregation
      of
      duties are insignificant based on the close involvement of management in
      day-to-day operations (i.e. tone at the top, corporate governance, officer
      oversight and involvement with daily activities, and other company level
      controls).  The potential benefits of adding employees to clearly segregate
      duties do not justify the expenses associated with such increases.





**Item
      9B.**  **Other
      Information**





None.





**PART
      III**





**Item
      10.**  **Directors,
      Executive Officers, and Corporate Governance**





Information
      with respect to the directors and executive officers of the Company set forth
      under “Information Concerning Directors, Nominees and Executive Officers” and
      under “Compliance with Section 16 (a) “in the Company’s definitive proxy
      statement for the annual meeting of shareholders to be held on or about June
      30,
      2007, is incorporated herein by reference.




**Item
      11.**  **Executive
      Compensation**




Information
      with respect to Executive Compensation set forth under “Executive Compensation”
in the Company’s definitive proxy statement for the annual meeting of
      shareholders to be held on or about June 30, 2007 is incorporated herein by
      reference.




**Item
      12.**  **Security
      Ownership of Certain Beneficial Owners and Management**





Information
      with respect to security ownership of certain beneficial owners and management,
      set forth under “Beneficial Ownership of Principal Shareholders and Management”
in the Company’s definitive proxy statement for the annual meeting of
      shareholders to be held on or about June 30, 2007, is incorporated herein by
      reference.





Page
          69




**Item
      13.**  **Certain
      Relationships and Related Transactions, and Director
      Independence**







Information
      with respect to certain relationships and related transactions, set forth under
      “Information Concerning Directors, Nominees and Executive Officers” in the
      Company’s definitive proxy statement for the annual meeting of shareholders to
      be held on or about June 30, 2007, is incorporated herein by
      reference.







**Item
      14.**  **Principal
      Accountant Fees and Services**







The
      Audit
      Committee of the Company selected Virchow, Krause & Company, LLP (“Virchow
      Krause”), certified public accountants with offices in Minneapolis, Minnesota,
      to audit the Company’s consolidated financial statements for the years ended
      December 31, 2006, 2005 and 2004. The following table details the fees paid
      to
      Virchow Krause for the years ended December 31, 2006 and 2005.





**2006**
            
            
            
            **2005**Audit
                Fees
            
            $
            186,681
            
            
            
            
            $
            191,012Audit-Related
                Fees
            
            
            24,490
            
            
            (2
            )
            
            34,755
            
            
            (1
            )Tax
                Fees
            
            
            32,425
            
            
            
            
            
            13,990Other
                fees
            
            
            -
            
            
            
            
            
            -Total
            
            $
            243,596
            
            
            
            
            $
            239,757





(1)
            Fees
                related to review of Form S-1 filings, audits of acquisition and
                pro-forma
                required by Form 8-K rules, and responding to SEC comment
                letter.


(2)
            Fees
                related to audit of URON subsidiary in connection with stock dividend
                (see
                Note 10), preliminary Sarbanes Oxley Section 404 planning and other
                audit
                related research.





The
      Company’s Audit committee consists of Frank Bennett, Jonathan Dodge and Donald
      Miller. All three are considered audit committee financial experts independent
      from managers. The Company’s current audit committee charter has been filed
      previously as exhibit 3.5. The audit committee is responsible for engaging
      the
      audit firm and fees related to their services.




The
      policy of the Company’s audit committee is to review and pre-approve both audit
      and non-audit services to be provided by the independent auditors (other than
      with *de
      minimis* exceptions
      permitted by the Sarbanes-Oxley Act of 2002). This duty may be delegated to
      one
      or more designated members of the audit committee with such approval reported
      to
      the committee at its next regularly scheduled meeting. Approval of non-audit
      services shall be disclosed to investors in periodic reports required by section
      13(a) of the Securities Exchange Act of 1934. Approximately 95% of the fees
      paid
      to Virchow Krause were pre-approved by the audit committee.





No
      services in connection with appraisal or valuations services, fairness opinions
      or contribution-in-kind reports were rendered by Virchow Krause. Furthermore,
      no
      work of Virchow Krause with respect to its services rendered to the Company
      was
      performed by anyone other than Virchow Krause.




**Item
      15.**  **Exhibits
      and Financial Statement Schedules.**




**A.**  **Exhibits**





Exhibit
      3.5 states Multiband’s code of ethics for its senior officers. A copy of said
      code will be provided upon written request. Any waivers or amendments to said
      code will be posted to Multiband’s website or disclosed in an 8K
      filing.




Exhibit
      3.6 provides Multiband’s Audit committee charter





Exhibits





See
      Index
      to Exhibits on page 51 of this report.




Page
          70






**SIGNATURES**





Pursuant
      to the requirements of Section 13 or Section 15(d) of Securities Exchange Act
      of
      1934, the registrant has duly caused this 10-K Report to be signed on its behalf
      by the undersigned, thereunto duly authorized.





MULTIBAND
                CORPORATION.
              RegistrantDate
                April 2, 2007
            By:
            /s/
                James L. Mandel
              *Chief
                Executive Officer*Date:
                April 2, 2007
            By:
            /s/
                Steven M. Bell
              *Chief
                Executive Officer*
              *(Principal
                Financial and Accounting
                Officer)*





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.





Page
          71


**INDEX
      TO EXHIBITS**





**Exhibit
                No.**
            **Description**2.1
            Asset
                Purchase Agreement and related documents with Enstar Networking
                Corporation dated December 31, 1998(1)2.2
            Agreement
                and Plan of Merger with Ekman, Inc. dated December 29,
                1999(1)2.3
            Asset
                Purchase Agreement with Vicom Systems (14)3.1
            Amended
                and Restated Articles of Incorporation of Vicom,
                Inc.(1)3.2
            Restated
                Bylaws of Vicom, Incorporated(1)3.3
            Articles
                of Incorporation of Corporate Technologies, USA,
                Inc.(1)3.5
            Audit
                Committee Charter (9)4.1
            Certificate
                of Designation of the Relative Rights, Restrictions and Preferences
                of 8%
                Class A Cumulative Convertible Preferred Stock and 10% Class B
                Cumulative Convertible Preferred Stock dated December 9,
                1998(1)4.2
            Form
                of Warrant Agreement(1)4.3
            Warrant
                Agreement with James Mandel dated December 29, 1999(1)4.4
            Warrant
                Agreement with Marvin Frieman dated December 29,
                1999(1)4.5
            Warrant
                Agreement with Pierce McNally dated December 29,
                1999(1)4.6
            Warrant
                Agreement with Enstar, Inc. dated December 29, 1999(1)4.7
            Warrant
                Agreement with David Ekman dated December 29, 1999(1)4.8
            Certificate
                of Designation of the Relative Rights, Restrictions and Preferences
                of 10%
                Class C Cumulative Convertible Stock(2)4.9
            Certificate
                of Designation of the Relative Rights, Restrictions and Preferences
                of 14%
                Class D Cumulative Convertible Stock(2)4.10
            Certificate
                of Designation of the Relative Rights, Restrictions and Preferences
                of 15%
                Class E Cumulative Convertible Stock(2)4.11
            Securities
                Purchase Agreement Dated September 18, 2003 (6)4.12
            Secured
                Convertible Note Agreement (7)4.13
            Wholesale
                Services Agreement Dated March 4, 2004 (8)4.14
            Note
                Purchase Agreement (11)4.15
            Series
                H Preferred Documents (12)4.16
            Series
                I Preferred Documents (13)5.1
            Opinion
                of Steven M. Bell, Esq.(6)10.1
            Vicom
                Lease with Marbell Realty dated June 20, 1996(1)10.2
            Employment
                Agreement with Marvin Frieman dated October 1, 1996(1)10.3
            Employment
                Agreement with Steven Bell dated October 1, 1996(1)10.4
            Employment
                Agreement with James Mandel dated August 14, 1998(1)10.5
            Vicom
                Associate Agreement with NEC America, Inc. dated June
                1999(1)10.6
            Loan
                Agreement with Wells Fargo dated June 17, 1999(1)10.7
            Employment
                Agreement with David Ekman dated December 29, 1999(1)10.8
            Debenture
                Loan Agreement with Convergent Capital dated March 9,
                2000(1)10.9
            Corporate
                Technologies, USA, Inc. lease with David Ekman dated January 19,
                2000(1)10.10
            Amendment
                dated July 11, 2000 to debenture loan agreement with Convergent Capital
                dated March 9, 2000.(2)10.11
            Corporate
                Technologies agreement with Siemens dated December 14,
                2001(4)10.12
            Note
                with Pyramid Trading, L.P. (4)10.14
            Employment
                Agreement of Steven M. Bell dated January, 1, 2002(5)10.15
            Employment
                Agreement of James Mandel dated January 1, 2002(5)10.16
            Acquisition
                Agreement of Minnesota Digital Universe (9)10.17
            Acquisition
                of Rainbow Satellite Group, LLC (10)14
            Multiband
                Code of Ethics for Senior Officers (9)19.1
            2000
                Non-Employee Director Stock Compensation Plan (3)19.2
            2000
                Employee Stock Purchase Plan (3)21.1
            List
                of subsidiaries of the registrant(1)23.1
            Consent
                of Virchow, Krause & Company, LLP (15)24.1
            Power
                of Attorney (included on signature page of original registration
                statement)31.1
            Rule
                13a-14 (s) Certification of Chief Executive Officer - James Mandel
                (15)31.2
            Rule
                13a-14 (s) Certification of Chief Financial Officer - Steven Bell
                (15)32.1
            Section
                1350 of Sarbanes-Oxley Act of 2002 - James Mandel (15)32.2
            Section
                1350of Sarbanes-Oxley Act of 2002 - Steven Bell
                (15)





(1)  Previously
      filed as the same exhibit to the Registrant's Registration Statement on
      Form 10, as amended.


(2)  Previously
      filed as the same exhibit to the original Registration Statement on
      Form S-1 filed on August 11, 2000 and declared effective on
      August 18, 2000.


(3)  Previously
      filed as the same exhibit to Registrant’s Proxy Statement on Form 14A, filed on
      July 31, 2000.


(4)  Previously
      filed as the same exhibit to the original Registration Statement on Form S-1
      filed on August 15, 2001 and declared effective on August 20, 2001.


(5)  Previously
      filed as the same exhibit to Registrant’s Form 10-Q filed May 15,
      2002


**(6)**  Previously
      filed as the same exhibit to Registrant’s Form 8-K filed September 24,
      2003.


**(7)**  **Previously
      filed as the same exhibit to Registrant’s Form 8-K filed December 16,
      2003.**


**(8)**  **Previously
      filed as the same exhibit to Registrant’s Form 8-K filed March 17,
      2004.**


**(9)**  **Previously
      filed as the same exhibit to registrants Form 8-K filed June 9,
      2004.**


**(10)**  **Previously
      filed as the same exhibit to registrants form 8-K filed July 9,
      2004.**


**(11)**  **Previously
      filed as the same exhibit to registrants form 8-K filed November 19,
      2004.**


**(12)**  **Previously
      filed as the same exhibit to registrants form 8-K filed November 24,
      2004.**


**(13)**  **Previously
      filed as the same exhibit to registrants form 8-K filed February 3,
      2005.**


**(14)**  **Previously
      filed as the same exhibit to registrants form 8K filed April 6,
      2005**


**(15)**  **Filed
      herewith**





Page
          72