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, 2007ORo
            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, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer”, “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
      accelerated filer o Accelerated
      filer o Non-accelerated filer x
      Smaller reporting company o





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




As
      of
      June 30, 2007, (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 $11,840,200.





As
      of
      March 25, 2008, there were 9,534,024 outstanding shares of the registrant's
      common stock, no par value stock.












Table
                of Contents
            PagePart
                I
            Item
                1.
            Business
            2Item
                1A.
            Risk
                Factors
            4Item
                1B.
            Unresolved
                Staff Comments
            7Item
                2.
            Properties
            7Item
                3.
            Legal
                Proceedings
            8Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            8Part
                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
            21Item
                8.
            Consolidated
                Financial Statements and Supplementary Data
            21Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            21Item
                9A.
            Controls
                and Procedures
            22Item
                9B.
            Other
                Information
            23Part
                IIIItem
                10.
            Directors,
                Executive Officers, and Corporate Governance
            23Item
                11.
            Executive
                Compensation
            26Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management
            30Item
                13.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            30Item
                14.
            Principal
                Accountant Fees and Services
            31Item
                15.
            Exhibits
                and Financial Statement Schedules
            31Signatures
            34




Page
          1




***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. Our 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. During 2006
      and
      2007 the Company strategically sold certain assets at MDU properties where
      only
      video services were primarily deployed. The Company continued to operate
      properties where multiple services were deployed. To remain competitive, the
      Company in future periods intends to continue to own and operate properties
      at
      locations where multiple services can be deployed and manage properties where
      one or more services are deployed. Consistent with that strategy the Company
      during 2006 and 2007, expanded its servicing of third party clients (other
      system operators) through its call center.





***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:




Page
          2





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
      2005, the Company began to use its internal support center and billing platform
      to service third party clients.





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





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
      Minnesota, 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.




Page
          3




***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.





***Market
      Description***





We
      are
      currently marketing Multiband services to MDU properties primarily throughout
      Minnesota, North Dakota and Missouri. 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
      15, 2008, the Company had approximately 95,300 owned and managed subscriptions,
      with an additional 19,000 subscribers supported by the support
      center.





***Employees***





As
      of
      February 28, 2008, Multiband employed three full-time management employees,
      ten
      accounting personnel, seven information technology employees and four in
      administrative positions. As of that same date, MCS had 51 full-time employees,
      consisting of four in sales and marketing, seven in technical positions,
      thirty-nine in customer service and related support, and one in management.
      MDU
      had one management employee, one administrative personnel and six 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.




Page
          4




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 evolving business model.





***Net
      Losses***





The
      Company had net losses of $6,088,353 for the year ended December 31, 2007,
      $10,183,723 for the year ended December 31, 2006, and, $7,475,000 for the year
      ended December 31, 2005. 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:


oour
      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 ($5,018,177) and ($5,294,245),
      as of
      December 31, 2007 and December 31, 2006, 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***





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. 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 2). As of December
      31, 2007, the Company had remaining recorded goodwill of $16,757 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. As of December 31, 2007, the Company believes that its system operator
      network has been activating new subscribers at a pace sufficient to achieve
      an
      automatic renewal of the aforementioned Master System Operator agreement when
      it
      expires. However, there is no guarantee that said agreement will be renewed.
      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. Prices
      for
      our common stock are determined in the marketplace and may be influenced by
      many
      factors, including variations in our financial results, changes in earnings
      estimates by industry research analysts, investors' perceptions of us and
      general economic, industry and market conditions.




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.





***National
      Market for Stock***





There
      is
      no assurance that the Company’s common stock will continue to trade on the
      Nasdaq Stock Market or other national stock exchange due to ongoing listing
      criteria for such exchanges. At December 31, 2007 the Company lacked sufficient
      equity to maintain the ongoing Nasdaq listing criteria for minimum
      equity.





***Competition***





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





***Uncertain
      Effects Of The Merger***





During
      the fourth quarter of 2007, the Company announced its intent to merge with
      Directech Holding Company, Inc. (DTHC) pursuant to a signed merger agreement.
      The announcement of the merger may produce an uncertain effect on Multiband’s
      and DTHC’s business relationships, operating results and business generally,
      including their ability to retain key employees, suppliers and customers. Even
      if the Merger is consummated, the DTHC business as merged into the Multiband
      business may not achieve the operating results and growth anticipated by
      management in structuring the transaction.





***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 11,300 square feet. The Fargo base rent ranges from $9,424
      to $10,257 per month. The New Hope office lease expires in 2013 and covers
      approximately 47,000 square feet. The New Hope base rent ranges from $16,186
      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.




Page
          7




***Item
      3:***





***Legal
      Proceedings***





The
      Company is involved in legal actions in the ordinary course of business.
      However, as of December 31, 2007, 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.





***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 Capital 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, 2007 and December 31, 2006 as
      provided by NASDAQ (as adjusted for the 1 for 5 reverse stock split issued
      August 2007).





**Quarter
                Ended**
            
            **High
                Bid**
            
            **Low
                Bid**March
                31, 2007
            
            4.10
            
            2.00June
                30, 2007
            
            
            3.90
            
            
            1.10September
                30, 2007
            
            
            5.05
            
            
            2.39December
                31, 2007
            
            
            4.20
            
            
            2.26March
                31, 2006
            
            
            7.25
            
            
            5.50June
                30, 2006
            
            
            6.50
            
            
            4.10September
                30, 2006
            
            
            5.05
            
            
            3.30December
                31, 2006
            
            
            4.45
            
            
            2.65





As
      of
      March 25, 2008, Multiband had 954 shareholders of record of its common stock
      and
      9,534,024 shares of common stock outstanding. As of that date, seven
      shareholders held a total of 24,728 of Class A Preferred, one shareholders
      held
      3,470 shares of Class B Preferred, four shareholders held a total of 118,650
      shares of Class C Preferred, one shareholder held a total of 150,000 shares
      of
      Class F Preferred, six shareholders held a total of 19,095 shares of Class
      G
      Preferred, and six shareholders held a total of 2 shares of Class H Preferred.





***Recent
      Sales of Unregistered Securities***





In
      December 2007, the Company issued 14,500 shares of common stock worth $116,000
      in connection with the conversion of Class G preferred stock from various
      investors.





In
      November 2007, the Company issued 30,000 shares of common stock worth $84,000
      in
      connection with the acquisition of equipment.





In
      August
      2007, the Company issued 27,000 shares of common stock worth $51,837 in lieu
      of
      payment for consulting services.




Page
          8




In
      July
      2007, the Company issued 240,000 shares of common stock worth $1,706,400 in
      connection with a conversion of Class I preferred stock.





In
      June
      2007, the Company issued 15,000 shares of common stock worth $112,500 in lieu
      of
      payment for investor relations services.





In
      July
      2006, the Company issued 32,500 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
      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***





During
      the fourth quarter of 2007, $116,000 worth of Class G preferred stock from
      various stockholders was converted into common stock at a price of $10.00 per
      share.





During
      the third quarter of 2007, $1,800,000 worth of Class I preferred stock was
      converted into common stock at a price of $100.00 per share. On March 18, 2008,
      the remaining $3,950,000 worth of preferred stock value was converted into
      526,667 shares of common stock.





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





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




Page
          9




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 22,026 Class F Preferred Shares (the equivalent of $220,256 worth as
      of
      December 31, 2007). 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).
      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 has been derived from our consolidated financial
      statements and accompanying notes included elsewhere in this report. The
      Statement of Operations Data for the years ended December 31, 2004 and 2003
      and
      the Balance Sheet data at December 31, 2005, 2004 and 2003 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**
            
            **2007**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003**Revenues
            
            $
            15,085,604
            
            $
            18,051,601
            
            $
            16,515,426
            
            $
            11,067,834
            
            $
            1,441,118Cost
                of products and services (exclusive of depreciation and amortization
                listed separately below)
            
            $
            8,339,933
            
            $
            8,280,666
            
            $
            7,849,597
            
            $
            5,943,395
            
            $
            884,536Cost
                of products and services as % of revenue
            
            
            55.3
            %
            
            45.9
            %
            
            47.5
            %
            
            53.7
            %
            
            61.4
            %Selling,
                general and administrative expenses
            
            $
            8,887,883
            
            $
            11,480,677
            
            $
            9,723,132
            
            $
            5,986,267
            
            $
            2,647,870Selling,
                general and administrative as % of revenues
            
            
            58.9
            %
            
            63.6
            %
            
            58.9
            %
            
            54.1
            %
            
            183.7
            %Depreciation
                and amortization
            
            $
            3,623,903
            
            $
            5,168,209
            
            $
            4,780,436
            
            $
            3,432,779
            
            $
            1,065,650Impairment
                of assets
            
            $
            0
            
            $
            2,261,500
            
            $
            0
            
            $
            0
            
            $
            0Loss
                from Operations
            
            $
            (5,766,115
            )
            $
            (9,139,451
            )
            $
            (5,837,739
            )
            $
            (4,294,607
            )
            $
            (3,156,938
            )Other
                expense, net
            
            $
            (322,238
            )
            $
            (1,046,472
            )
            $
            (1,655,088
            )
            $
            (1,032,035
            )
            $
            (548,476
            )Minority
                interest in subsidiary
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            33,366Loss
                before income tax
            
            $
            (6,088,353
            )
            $
            (10,185,923
            )
            $
            (7,492,827
            )
            $
            (5,326,642
            )
            $
            (3,672,048
            )Income
                tax provision
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0Loss
                from continuing operations
            
            $
            (6,088,353
            )
            $
            (10,185,923
            )
            $
            (7,492,827
            )
            $
            (5,326,642
            )
            $
            (3,672,048
            )Discontinued
                operations
            
            $
            0
            
            $
            2,200
            
            $
            17,827
            
            $
            (4,457,320
            )
            $
            (692,956
            )Net
                loss
            
            $
            (6,088,353
            )
            $
            (10,183,723
            )
            $
            (7,475,000
            )
            $
            (9,783,962
            )
            $
            (4,365,004
            )Loss
                attributable to common stockholders
            
            $
            (8,388,855
            )
            $
            (14,250,446
            )
            $
            (10,827,229
            )
            $
            (10,374,417
            )
            $
            (4,613,693
            )Loss
                from continuing operations
            
            $
            (1.16
            )
            $
            (2.11
            )
            $
            (1.86
            )
            $
            (1.27
            )
            $
            (1.21
            )Loss
                from discontinued operations
            
            $
            (.00
            )
            $
            (.00
            )
            $
            (.00
            )
            $
            (.96
            )
            $
            (.22
            )Loss
                attributable to commons stockholders
            
            $
            (1.16
            )
            $
            (2.11
            )
            $
            (1.86
            )
            $
            (2.23
            )
            $
            (1.43
            )Weighted
                average shares outstanding
            
            
            7,237,473
            
            
            6,757,643
            
            
            5,819,585
            
            
            4,661,519
            
            
            3,222,446





**Balance
                Sheet Data**
            
            **2007**
            
            **2006**
            
            **2005**
            
            **2004**
            
            **2003**Working
                Capital (deficiency)
            
            $
            (5,018,177
            )
            $
            (5,294,245
            )
            $
            (971,418
            )
            $
            (8,931,414
            )
            $
            1,118,792Total
                Assets
            
            $
            8,893,429
            
            $
            17,986,056
            
            $
            26,271,405
            
            $
            26,633,712
            
            $
            13,902,885Mandatory
                Redeemable Preferred Stock(1)
            
            $
            220,256
            
            $
            280,000
            
            $
            333,334
            
            $
            500,000
            
            $
            -Long-Term
                Debt, net(2)
            
            $
            118,924
            
            $
            2,969,764
            
            $
            3,816,536
            
            $
            3,498,657
            
            $
            2,262,891Capital
                Lease Obligations, net(2)
            
            $
            249,469
            
            $
            491,672
            
            $
            452,649
            
            $
            481,249
            
            $
            142,898Stockholders’
                Equity
            
            $
            673,838
            
            $
            5,659,309
            
            $
            14,968,295
            
            $
            8,549,431
            
            $
            5,807,711




(1) –
      mandatory redeemable preferred stock is included in working capital
      (deficiency)


(2)
–
      current portion of long-term debt and capital lease obligations is included
      in
      working capital (deficiency)




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 Consolidated Financial
      Statements and the Notes thereto included elsewhere in this report.





***Years
      Ended December 31, 2007 and December 31, 2006***





This
      discussion does not include the results of discontinued operations.





*Results
      of Operations*


The
      following table sets forth certain items.




**2007**
            
            
            **2006****Revenues**Multiband
            
            
            0.00
            %
            
            0.00
            %MCS
            
            
            34.06
            %
            
            41.96
            %MDU
            
            
            65.94
            %
            
            58.04
            %Total
                Revenues
            
            
            100.00
            %
            
            100.00
            %**Cost
                of Products and Services (exclusive of depreciation and
                amortization)**Multiband
            
            
            0.00
            %
            
            0.00
            %MCS
            
            
            23.09
            %
            
            22.56
            %MDU
            
            
            32.19
            %
            
            23.31
            %Total
                Cost of Products and Services (exclusive of depreciation and
                amortization)
            
            
            55.28
            %
            
            45.87
            %**Selling,
                General and Administrative Expenses**
            
            
            58.92
            %
            
            63.60
            %**Impairment
                of Assets**
            
            
            0.00
            %
            
            12.53
            %**Loss
                from Continuing Operations**
            
            
            (40.36
            %)
            
            (56.42
            %)**Gain(Loss)
                from Discontinued Operations**
            
            
            0.00
            %
            
            0.01
            %**Net
                Loss**
            
            
            (40.36
            %)
            
            (56.41
            %)





*Revenues:*


Total
      revenues from continuing operations decreased 16.4% from $18,051,601 in 2006
      to
      $15,085,604 in 2007. This overall decrease in revenues is primarily due to
      sales
      of approximately 23,000 owned subscriptions which occurred throughout 2007
      in
      efforts to strategically sell unprofitable owned assets as prudent and redeploy
      the proceeds from those assets into facilitating growth in the Company’s managed
      subscriber services including our support center and our master system operator
      program. Revenue from the MCS segment decreased to $5,137,756 in 2007 from
      $7,573,799 in 2006 due to the aforementioned sales of owned subscriptions offset
      by an increase in call center revenue. In 2008, MCS revenues will continue
      to
      decrease due to the 2007 sales of subscribers in the MCS portfolio. The MDU
      segment had revenues of $9,947,848 in 2007 and $10,477,802 in 2006, at a
      decrease of 5.1%. This overall decrease of approximately $530,000 in the MDU
      segment is primarily due to the aforementioned decrease in the number of owned
      subscribers which reduced revenue approximately $1,100,000. The aforementioned
      revenue decrease was partially offset by an approximate increase of $570,000
      generated by the system operators including a related decrease in DTV prepaid
      commissions rates. The Company believes it can ultimately increase revenues
      by
      selling its support center services to its network of system operators and
      by
      providing ancillary programs for voice and data services to that same network.





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


Total
      costs of products and services were $8,339,933 in 2007 compared to $8,280,666
      in
      2006. Overall costs of products and services as a percentage of revenue did
      increase between 2006 and 2007 due to specific vendor price increases without
      a
      corresponding increase in price to customers, certain commission payments,
      and
      allocation of certain support center costs to cost of products and services.
      In
      2006, those support center costs were immaterial due to the small number of
      subscribers supported by the call center. MCS segment cost of products and
      services were $3,483,153 in 2007 and $4,073,165 in 2006. The decrease in cost
      of
      products and services in the MCS segment is directly related to a decrease
      in
      programming and circuit charges between the comparable periods due to a
      decreased subscriber number. MDU segment costs of products and services were
      $4,856,780 in 2007 and $4,207,501 in 2006. The increase in costs of products
      and
      services in the MDU segment is primarily related to an increase in revenue
      generated by the system operators. The Company expects costs of products and
      services as a percentage of revenue to increase slightly in future periods
      due
      to the change in revenue mix.




Page
          12




*Selling,
      General and Administrative Expense:*


Selling,
      general and administrative expenses from continuing operations decreased 22.7%
      to $8,887,883 in 2007, compared to $11,480,677 in 2006. Selling, general and
      administrative expenses were, as a percentage of revenues, 58.9% for 2007 and
      63.6% for 2006. This decrease is primarily due to decreases in payroll and
      employee expenses, property maintenance expenses, and stock option expense
      between the comparable periods. The Company anticipates that selling, general
      and administrative expenses, exclusive of stock option expenses, will continue
      to decrease in 2008 due to reduced payroll expenses from the sale of subscribers
      throughout 2007, subject, however, to potential acquisition activity in
      2008.





*Impairment
      of Assets:*


Pursuant
      to the sale of video assets to Consolidated Smart Broadband Systems, LLC.,(CSBS)
      (see Note 2), 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 2007, incurred a loss from operations for its combined operating
      business segments of $5,766,115 compared to a loss of $9,139,451 during 2006.
      The MDU segment showed a profit from operations of $2,953,736 in 2007 compared
      to profits of $4,066,850 in 2006. In 2007, the MCS segment showed a loss from
      operations of $4,399,150 compared to a loss of $8,492,405, including an
      impairment charge of $2,261,500 for the prior year. The Multiband Corporation
      segment, which has no revenues, showed a loss from operations of $4,320,701
      in
      2007 compared to a loss of $4,713,896 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 stabilize
      as
      the year to date reduction in profits for this segment has been significantly
      impacted by agent fees paid for owned subscriber sales. These sales have now
      been completed. In addition to the sale of subscribers, the Company hopes that
      it can continue to 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 $503,887 for 2007 versus $1,206,196 for 2006, reflecting primarily
      a
      decrease in the Company’s debt and original issue discount expense. Amortization
      of original issue discount was $30,413 and $436,106 for the years ended December
      31, 2007 and 2006, respectively.





*Net
      Loss*


The
      Company incurred a net loss of $6,088,353 in 2007. The Company’s net loss in
      2006 totaled $10,183,723, which included an impairment charge of $2,261,500
      incurred due to the sale of video assets located in California (see Note
      2).




*Total
      Assets*


The
      following table sets forth certain items.




**2007**
            
            **2006****Total
                Assets**Multiband
            
            $
            1,272,271
            
            $
            2,478,638MCS
            
            
            2,968,249
            
            
            9,063,793MDU
            
            
            4,652,909
            
            
            6,443,625**Total
                Assets**
            
            $
            8,893,429
            
            $
            17,986,056




Page
          13


***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.




**2006**
            
            **2005****Revenues**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).





*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.




Page
          14




*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 2).





*Total
      Assets*


The
      following table sets forth certain items.




**2006**
            
            **2005****Total
                Assets**Multiband
            
            $
            2,478,638
            
            $
            4,273,913MCS
            
            
            9,063,793
            
            
            14,013,410MDU
            
            
            6,443,625
            
            
            7,984,082**Total
                Assets**
            
            $
            17,986,056
            
            $
            26,271,405




Page
          15




***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, 2007.
      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,
              2007
            
            Sept.
                30,
              2007
            
            June
                30,
              2007
            
            March
                31,
              2007
            
            Dec.
                31,
              2006
            
            Sept.
                30,
              2006
            
            June
                30,
              2006
            
            March
                31,
              2006Revenues:Multiband
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -MCS
            
            $
            797,164
            
            $
            1,084,114
            
            $
            1,404,398
            
            $
            1,852,080
            
            $
            1,928,821
            
            $
            1,894,586
            
            $
            1,858,520
            
            $
            1,891,872MDU
            
            $
            2,328,159
            
            $
            2,569,486
            
            $
            2,517,328
            
            $
            2,532,875
            
            $
            2,692,114
            
            $
            2,630,299
            
            $
            2,643,217
            
            $
            2,512,172Total
                Revenues
            
            $
            3,125,323
            
            $
            3,653,600
            
            $
            3,921,726
            
            $
            4,384,955
            
            $
            4,620,935
            
            $
            4,524,885
            
            $
            4,501,737
            
            $
            4,404,044Cost
                of Products & services (exclusive of depreciation and amortization
                shown separately below)
            
            $
            1,944,754
            
            $
            2,345,895
            
            $
            1,871,238
            
            $
            2,178,046
            
            $
            2,198,598
            
            $
            2,087,643
            
            $
            1,937,898
            
            $
            2,056,527SG&A
                Expense
            
            $
            1,829,947
            
            $
            2,360,254
            
            $
            2,308,426
            
            $
            2,389,256
            
            $
            2,683,953
            
            $
            2,915,463
            
            $
            2,909,038
            
            $
            2,972,223Depreciation
                & Amortization
            
            $
            808,922
            
            $
            770,215
            
            $
            995,068
            
            $
            1,049,698
            
            $
            1,152,284
            
            $
            1,404,855
            
            $
            1,308,614
            
            $
            1,302,456Impairment
                of assets
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            $
            2,261,500
            
            
            -
            
            
            -
            
            
            -Operating
                Loss
            
            $
            (1,458,300
            )
            $
            (1,822,764
            )
            $
            (1,253,006
            )
            $
            (1,232,045
            )
            $
            (3,675,400
            )
            $
            (1,883,076
            )
            $
            (1,653,813
            )
            $
            (1,927,162
            )Interest
                Expense
            
            $
            (73,623
            )
            $
            (108,847
            )
            $
            (168,010
            )
            $
            (153,407
            )
            $
            (269,320
            )
            $
            (306,672
            )
            $
            (325,523
            )
            $
            (304,681
            )Other
                Income (Expenses)
            
            $
            4,288
            
            $
            13,267
            
            $
            141,037
            
            $
            23,057
            
            $
            55,118
            
            $
            27,220
            
            $
            35,949
            
            $
            41,437Net
                Loss Before Taxes
            
            $
            (1,527,635
            )
            $
            (1,918,344
            )
            $
            (1,279,979
            )
            $
            (1,362,395
            )
            $
            (3,889,602
            )
            $
            (2,162,528
            )
            $
            (1,943,387
            )
            $
            (2,190,406
            )Income
                Tax (Benefit) Provision
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Loss
                from continuing operations
            
            $
            (1,527,635
            )
            $
            (1,918,344
            )
            $
            (1,279,979
            )
            $
            (1,362,395
            )
            $
            (3,889,602
            )
            $
            (2,162,528
            )
            $
            (1,943,387
            )
            $
            (2,190,406
            )Discontinued
                Operations
            
            
            -
            
            
            -
            
            
            -
            
            
            
            
            $
            -
            
            
            -
            
            
            -
            
            $
            2,200Net
                Loss
            
            $
            (1,527,635
            )
            $
            (1,918,344
            )
            $
            (1,279,979
            )
            $
            (1,362,395
            )
            $
            (3,889,602
            )
            $
            (2,162,528
            )
            $
            (1,943,387
            )
            $
            (2,188,206
            )Loss
                attributable to commons stockholders
            
            $
            (1,674,439
            )
            $
            (3,711,641
            )
            $
            (1,400,453
            )
            $
            (1,602,322
            )
            $
            (4,867,887
            )
            $
            (2,465,518
            )
            $
            (4,465,729
            )
            $
            (2,451,312
            )Loss
                from continuing operations
            
            $
            (0.23
            )
            $
            (.50
            )
            $
            (.20
            )
            $
            (.23
            )
            $
            (.70
            )
            $
            (.36
            )
            $
            (.67
            )
            $
            (.38
            )Loss
                from discontinued operations
            
            $
            (.00
            )
            $
            (.00
            )
            $
            (.00
            )
            $
            (.00
            )
            $
            (.00
            )
            $
            (.00
            )
            $
            (.00
            )
            $
            (.00
            )Loss
                attributable to commons stockholders
            
            $
            (0.23
            )
            $
            (.50
            )
            $
            (.20
            )
            $
            (.23
            )
            $
            (.70
            )
            $
            (.36
            )
            $
            (.67
            )
            $
            (.38
            )Weighted
                average shares outstanding
            
            
            7,415,629
            
            
            7,356,413
            
            
            7,093,071
            
            
            7,079,781
            
            
            6,994,936
            
            
            6,893,702
            
            
            6,703,070
            
            
            6,431,175




Page
          16




***Liquidity
      and Capital Resources***





***Year
      Ended December 31, 2007***





During
      the twelve months ended December 31, 2007 and 2006, the Company recorded a
      net
      loss of $ 6,088,353
      and $10,183,723 respectively. Net cash used by operations in 2007 was $1,390,996
      as compared to net cash used by operations in 2006 of $649,986. Principal
      payments on current long-term debt over the next 12 months are expected to
      total
      $158,342. As of December 31, 2007, the Company failed to meet the compliance
      covenants of its lender, Convergent Capital, with respect to having minimum
      net
      worth of three million dollars and positive EBITDA for the quarter ended
      December 31, 2007 of $150,000. Convergent Capital provided the company with
      a
      waiver for both covenants for the quarter ended December 31, 2007. The Company’s
      management believes it is probable that the violation will not be cured at
      measurement dates that are within the next twelve months. In accordance with
      EITF 86-30 “Classification of obligations when a violation is waived by the
      creditor”, the Company has classified the debt as current as of December 31,
      2007.





Cash
      and
      cash equivalents totaled $944,456 at December 31, 2007 versus $1,020,975 at
      December 31, 2006. Working capital deficit for the twelve months ended December
      31, 2007 decreased to $5,018,177 as compared to $5,294,245, at December 31,
      2006, primarily due to net proceeds received from the sale of video assets
      to
      CSBS, Dtech and MDUC(see Note 2), during 2007. Total debt and capital lease
      obligations were reduced by $2,910,325 in the twelve months ended December
      31,
      2007 as the Company continued to retire financing debt as certain notes were
      paid off in conjunction with asset sales. The Company had a material decrease
      in
      accounts receivable for the period ended December 31, 2007 verses the period
      ended December 31, 2006 due to sales of assets. Accounts payable and accrued
      liabilities combined remained relatively constant in total from December 31,
      2006 to December 31, 2007. Net cash flows from investing activities totaled
      $2,277,400 compared to ($335,372) for the comparable period reflecting the
      sale
      of video assets to CSBS, Dtech and MDUC, previously mentioned
      herein.





The
      Company experienced a material decrease in revenues between the year ended
      December 31, 2007 and the year ended December 31, 2006. The revenue decrease,
      as
      stated previously, resulted from the sale of unprofitable assets. In 2008,
      the
      Company intends to focus on facilitating growth of its managed subscriber
      services including its support center and its master system operator program.
      The Company believes it can increase revenues by selling its support center
      services to its network of system operators and by providing ancillary programs
      for voice and data services to that same network.





The
      Company used $383,834 for capital expenditures during 2007, as compared to
      $993,108 in 2006. Capital expenditures consisted of project build-outs and
      equipment acquired for internal use. This decrease was related to a reduction
      of
      video and internet service build outs to MDU properties made during 2007.
      Capital expenditures in 2008 are expected to remain constant with 2007 levels.





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 2008:





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


2.
            Sale
                of video 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 it can sell these assets, under certain
                circumstances, at prices at or above their current carrying value.
                However, there is no guarantee 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 a landlord-owned equipment
                program.


6.
            Delivery
                of video services to residents of single family homes. Effective
                March 1,
                2008 the Company purchased 51% of the outstanding stock of Michigan
                Microtech, Inc. (MMT), formerly a wholly owned subsidiary of DTHC.
                MMT
                installs DirecTV video services in single family homes. Historically
                MMT
                has been profitable. The Company anticipates that by combining MMT
                operations with Multiband operations that it will achieve a beneficial
                impact to its consolidated cash flows and operating results. However,
                there is no guarantee that these combined results will ultimately
                be
                favorable to the Company.


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.




Page
          17




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





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





Working
      capital deficit for 2006 increased to $5,294,245 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 at least
      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
          18




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
      improvements. At December 31, 2007, the Company had net property and equipment
      of $1,769,261, which represents approximately 19.9% of the Company's total
      assets. The estimated fair value of these assets is dependent on the Company's
      future performance. We evaluate our property, equipment, and leasehold
      improvements for impairment wherever indicators of impairment exist. 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
      2007 and 2005, the Company did not record any impairment. In 2006, an impairment
      charge of $304,402 was recorded related to the sale of video assets located
      in
      California (see Note 2).





***Impairment
      of Goodwill***





We
      annually test recorded goodwill for impairment. Our judgments regarding the
      existence of impairment is based on the estimated fair value of the reporting
      unit to which goodwill has been assigned. Future events could cause us to
      conclude that impairment indicators exist and that goodwill associated with
      our
      acquired businesses, which amounts to $16,757, as of December 31, 2007, 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 2). During the years ended December
      31, 2007 and 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, 2007, the Company had net intangibles of $4,072,076 which
      represented approximately 45.8% 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 2007 and 2005, the Company did not record an impairment related
      to
      the intangible assets.





***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.




Page
          19




***Recently
      Issued Accounting Pronouncements***





During September 2006, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements”
(“SFAS 157”).  This statement defines fair value, establishes a framework
      for measuring fair value under generally accepted accounting principles, and
      expands disclosures about fair value measurements.  SFAS 157 is effective
      for financial statements issued for fiscal years beginning after
      November 15, 2007, however, during February 2008, the FASB issued FASB
      staff position 157-2, which defers the effective date of certain provisions
      of
      SFAS 157 related to fair value measure of non-financial assets and non-financial
      liabilities until fiscal years beginning after November 15, 2008. The Company
      is
      currently assessing the effect that SFAS 157 will have on its results of
      operations and financial position.





During
      February 2007,
      the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets
      and Financial Liabilities” (“SFAS 159”). This statement permits entities to
      choose to measure many financial instruments and certain other items at fair
      value. SFAS 159 is effective for fiscal years beginning after November 15,
      2007.  The Company does not believe that the adoption of SFAS 159 will have
      a material effect on its results of operations or financial
      position.




During
      December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
      Combinations” (“SFAS 141 (Revised 2007)”). While this statement retains
      the fundamental requirement of SFAS 141 that the acquisition method of
      accounting (which SFAS 141 called the *purchase
      method* )
      be used
      for all business combinations, SFAS 141 (Revised 2007) now establishes the
      principles and requirements for how an acquirer in a business combination:
      recognizes and measures in its financial statements the identifiable assets
      acquired, the liabilities assumed, and any noncontrolling interests in the
      acquiree; recognizes and measures the goodwill acquired in the business
      combination or the gain from a bargain purchase; and determines what information
      should be disclosed in the financial statements to enable the users of the
      financial statements to evaluate the nature and financial effects of the
      business combination. **** SFAS
      141
      (Revised 2007) is effective for fiscal years beginning on or after December
      15,
      2008. The Company believes that any business acquisition transactions that
      occur
      after the adoption of SFAS 141 (Revised 2007) will have a material effect on
      its
      results of operations and financial position




During
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements and amendment of ARB No. 51” (“SFAS 160”).
      SFAS 160 establishes accounting and reporting standards for noncontrolling
      interests in subsidiaries and for the deconsolidation of subsidiaries and
      clarifies that a noncontrolling interest in a subsidiary is an ownership
      interest in the consolidated entity that should be reported as equity in the
      consolidated financial statements. SFAS 160 also requires expanded disclosures
      that clearly identify and distinguish between the interests of the parent owners
      and the interests of the noncontrolling owners of a subsidiary. SFAS 160 is
      effective for fiscal years beginning on or after December 15, 2008. The Company
      is currently assessing the effect that SFAS 160 will have on its results of
      operations and financial position.




During
      March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
      Instruments and Hedging Activities” (SFAS No. 161). SFAS No. 161 is intended to
      improve financial reporting about derivative instruments and hedging activities
      by requiring enhanced disclosures to enable investors to better understand
      their
      effects on an entity’s financial position, financial performance, and cash
      flows. SFAS No. 161 also improves transparency about the location and amounts
      of
      derivative instruments in an entity’s financial statements; how derivative
      instruments and related hedged items are accounted for under Statement 133;
      and
      how derivative instruments and related hedged items affect its financial
      position, financial performance, and cash flows.




SFAS
      No.
      161 is effective for financial statements issued for fiscal years and interim
      periods beginning after November 15, 2008, with early application encouraged.
      The Company does not believe the adoption of SFAS No. 161 will have a material
      effect on its results of operations or financial position.




Page
          20




**Disclosures
      about Contractual Obligations and Commercial Commitments**




The
      following summarizes our contractual obligations at December 31, 2007, 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
                Leases
            
            $
            2,338,000
            
            $
            365,000
            
            $
            742,000
            
            $
            1,231,000Capital
                Leases
            
            
            540,625
            
            
            265,803
            
            
            274,822
            
            
            -Long-Term
                Debt
            
            
            2,112,484
            
            
            1,890,237
            
            
            180,208
            
            
            42,038**Totals**
            
            **$**
            **4,991,109**
            
            **$**
            **2,521,040**
            
            **$**
            **1,197,030**
            
            **$**
            **1,273,038**





***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; 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.




***Item
      7A***





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





The
      Company is not subject to any material interest rate risk as any current lending
      agreements are at a fixed rate of interest except for the Convergent Capital
      note of $1,500,000, which varies from 11% to 14%, dependent on the Company’s
      common stock price. Each 1% change in interest impacts the statement of
      operations $15,000 annually.





***Item
      8.***





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





The
      consolidated financial statements of Multiband and the reports of the
      independent registered public accounting firm, listed under Item 15, are
      submitted as a separate section of this Annual Report on Form 10-K beginning
      on
      page F-1 and are incorporated herein.




**Item
      9.**





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





None.




Page
          21




**Item
      9A.**





**Disclosure
      Controls and Procedures.**





As
      required by Rule 13a-15(b) promulgated under the Exchange Act, our management,
      with the participation of our Chief Executive Officer and Chief Financial
      Officer, evaluated the design and operating effectiveness as of December 31,
      2007 of our disclosure controls and procedures, as defined in Rule 13a-15(e)
      promulgated under the Exchange Act. Based on this evaluation our Chief Executive
      Officer and Chief Financial Officer concluded that controls for financial
      reporting were deemed to be operating effectively as of December 31,
      2007.





**Changes
      in Internal Control over Financial Reporting.**





We
      have
      added, deleted, or modified certain of our internal controls over financial
      reporting. However, there have been no changes in our internal controls over
      financial reporting that occurred during the year ended December 31, 2007 that
      have materially affected, or are reasonably likely to materially affect, our
      internal control over financial reporting.





**Management’s
      Annual Report on Internal Control Over Financial Reporting**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting, as defined in Rule 13a-15(f) promulgated
      under
      the Exchange Act. Internal control over financial reporting is a process
      designed by, or under the supervision of, our Chief Executive Officer and Chief
      Financial Officer and effected by our Board of Directors, management and other
      personnel, to provide reasonable assurance regarding the reliability of
      financial reporting and the preparation of an issuer’s financial statements for
      external purposes in accordance with accounting principles generally accepted
      in
      the United States of America (“GAAP”). Internal control over financial reporting
      includes policies and procedures that: (i) pertain to the maintenance of records
      that, in reasonable detail, accurately and fairly reflect the transactions
      and
      dispositions of an issuer’s assets; (ii) provide reasonable assurance that
      transactions are recorded as necessary to permit preparation of financial
      statements in accordance with GAAP, and that an issuer’s receipts and
      expenditures are being made only in accordance with authorizations of its
      management and directors; and (iii) provide reasonable assurance regarding
      prevention or timely detection of unauthorized acquisition, use or disposition
      of an issuer’s assets that could have a material effect on the
      consolidated financial statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, the application of any evaluation of
      effectiveness to future periods is subject to the risk that controls may become
      inadequate because of changes in conditions, or that compliance with the
      policies or procedures may deteriorate.





As
      required by Rule 13a-15(c) promulgated under the Exchange Act, our management,
      with the participation of our Chief Executive Officer and Chief Financial
      Officer, evaluated the effectiveness of our internal control over financial
      reporting as of December 31, 2007. Management’s assessment was based on criteria
      set forth by the Committee of Sponsoring Organizations of the Treadway
      Commission in *Internal
      Control — Integrated Framework* (“COSO”).
      Our assessment did not identify any material weaknesses as of December 31,
      2007.





Under
      SEC
      rules, management may assess its internal control over financial reporting
      as
      effective if there are no identified material weaknesses at the reporting date.
      A “material weakness” is a significant deficiency (within the meaning of PCAOB
      Auditing Standard No. 2), or combination of significant deficiencies, that
      results in there being more than a remote likelihood that a material
      misstatement of the annual or interim consolidated financial statements will
      not
      be prevented or detected on a timely basis by employees in the normal course
      of
      their assigned functions. A material weakness in internal control over financial
      reporting does not imply that a material misstatement of the financial
      statements has occurred, but rather, that there is a more than a remote
      likelihood that a material misstatement could occur. Controls for financial
      reporting were in place as of year end and were found to be operating
      effectively based on management testing of key controls.





The
      certifications of the Company’s Principal Executive Officer and Principal
      Financial Officer attached as Exhibits 31.1 and 31.2 to this Annual Report
      on
      Form 10-K include, in paragraph 4 of such certifications, information concerning
      the Company’s disclosure controls and procedures and internal controls over
      financial reporting. Such certifications should be read in conjunction with
      the
      information contained in this Item 9A for a more complete understanding of
      the
      matters covered by such certifications.




Page
          22


This
      annual report does not include an attestation report of the Company’s registered
      public accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by the Company’s registered
      public accounting firm pursuant to temporary rules of the Securities and
      Exchange Commission that permit the Company to provide only management’s report
      in this annual report.





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





None.





**PART
      III**





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





Listed
      below is certain information concerning the Company’s board of directors and
      executive officers as of December 31, 2007. Each
      director is elected for a term of one year. Yearly elections are held at the
      annual meeting.




**Name of Director and/or Executive Officer**
            
            **Age**
            
            **Position**
            
            **Director Since**Steven
                Bell
            
            48
            
            President
                & Chief Financial Officer, Multiband Corporation
            
            1994Frank
                Bennett
            
            51
            
            President,
                Artesian Capital
            
            2002Jonathan
                Dodge
            
            56
            
            Partner,
                Dodge & Fox C.P.A. Firm
            
            1997Eugene
                Harris
            
            43
            
            Director,
                Flagstone Securities
            
            2004James
                L. Mandel
            
            50
            
            Chief
                Executive Officer, Multiband Corporation
            
            1998Donald
                Miller
            
            67
            
            Chairman,
                Multiband Corporation
            
            2001





**Steven
      Bell** was
      general counsel and Vice President of the Company from June 1985 through October
      1994, at which time he became Chief Financial Officer. He was also named
      President in July 1997. He is a graduate of the William Mitchell College of
      Law.





**Frank
      Bennett** has been
      a Director of Multiband Corporation since 2002 and is currently the Chairman
      of
      Multiband’s audit and nominating/governance committees. Mr. Bennett is President
      of Artesian Management, Inc., a private equity investment firm based in
      Minneapolis. Prior to founding Artesian Capital in 1989, he was a Vice President
      of Mayfield Corporation, and a Vice President of Corporate Finance of Piper
      Jaffray & Hopwood and a Vice President of Piper Jaffray Ventures,
      Inc.





**Jonathan
      Dodge** has been
      the Senior Partner of the C.P.A. firm of Dodge & Fox since its inception in
      March 1997. Prior to that, he was a partner in the CPA firm of Misukanis and
      Dodge from 1992 to March 1997. Mr. Dodge is a member of both the AICPA
      and the Minnesota Society of CPA’s. Mr. Dodge is a member of the audit
      committee.





**Eugene
      Harris** is
      currently managing director for Fulcrum Securities. From 2004 to 2007 he was
      Senior Managing Director of Flagstone Securities. Mr. Harris, joined Flagstone
      in 2004 after 10 years as the majority shareholder of Eidelman, Finger, Harris
      & Co., a registered investment advisor. Prior to joining Eidelman, Finger,
      Harris & Co., Mr. Harris held positions in general management and new
      business development for the Monsanto Company from 1990 to 1994. He also was
      an
      Associate Consultant with Bain and Co. from 1986 to 1988. Mr. Harris received
      a
      B.S. in Industrial Engineering from Stanford University in 1986 and an M.S.
      in
      Management from the Sloan School of Management at the Massachusetts Institute
      of
      Technology in 1990. He is a Charted Financial Analyst and a member of the
      Financial Analysts Federation. Mr. Harris was appointed to the Company’s Board
      of Directors in April 2004. Mr Harris is also Chairman of the Company’s
      compensation committee.





**James
      Mandel** has been
      the Chief Executive Officer and a Director of the Company since October 1,
      1998. From October 1991 to October 1996, he was Vice President of
      Systems for Grand Casinos, Inc., where his duties included managing the design,
      development, installation and on-going maintenance for the 2,000 room,
      $507 million Stratosphere Hotel, Casino and Tower in Las Vegas.
      Mr. Mandel also managed the systems development of Grand Casino Mille Lacs,
      in Onamia, Minnesota, Grand Casino Hinckley in Hinckley, Minnesota and six
      other
      casinos nationwide.





**Donald
      Miller** worked
      for Schwan’s enterprises between 1962 and 2001, primarily as Chief Financial
      Officer. He was appointed to the Company’s Board of Directors in September 2001
      and was elected Chairman of the Board in April 2002. He is currently also on
      the
      Board of Directors at Schwan’s enterprises and a member of their Audit
      Committee, Risk Committee and Strategy Committee. Mr. Miller is a member of
      Multiband’s audit committee.




Page
          23





The
      Company knows of no arrangements or understandings between a Director or nominee
      and any other person pursuant to which any person has been selected as a
      Director or nominee. There is no family relationship between any of the
      nominees, Directors or executive officers of the company.




***Board
      of Directors and its Committees***




The
      Board
      has determined that a majority of its members are “independent” as defined by
      the listing standards of the NASDAQ Stock Market. The independent Directors
      are
      Messrs. Frank Bennett, Jonathan Dodge, Eugene Harris and Donald Miller.





The
      Board
      of Directors met four times in 2007. As permitted by Minnesota Law, the Board
      of
      Directors also acted from time to time during 2007 by unanimous written consent
      in lieu of conducting formal meetings. Last year, there were four such actions
      and accompanying Board Resolutions passed. The Board has designated an audit
      committee consisting of Jonathan
      Dodge ,
      Donald
      Miller and Frank Bennett. The Board also designated a compensation committee
      consisting of Frank Bennett, Eugene Harris, and Donald Miller.





**Shareholder
      communication with the Board**





Our
      Board
      welcomes your questions and comments. If you would like to communicate directly
      to our Board, or if you have a concern related to the Company’s business ethics
      or conduct, financial statements, accounting practices or internal controls,
      then you may contact our website via www.multibandusa.com ,
      section
      Investor Relations. ****** All
      communications will be forwarded to our audit committee.





Directors’
      attendance at Annual Meetings can provide shareholders with an opportunity
      to
      communicate with Directors about issues affecting the Company. The Company
      does
      not have a policy regarding director attendance, but all Directors are
      encouraged to attend the Annual Meeting of Shareholders. Six of our directors
      attended our Annual Meeting in 2007.





**Audit
      Committee**





Our
      audit
      committee:





·
            recommends
                to our Board of Directors the independent auditors to conduct the
                annual
                audit of our books and records;


·
            reviews
                the proposed scope and results of the
                audit;


·
            approves
                the audit fees to be paid;


·
            reviews
                accounting and financial controls with the independent registered
                public
                accountants and our financial and accounting staff;
                and


·
            reviews
                and approves transactions between us and our Directors, officers
                and
                affiliates.





Our
      audit
      committee has a formal charter.





Our
      Audit
      Committee met four times during 2007. The Audit Committee is comprised entirely
      of individuals who meet the independence and financial literacy requirements
      of
      NASDAQ listing standards. Our Board has determined that all three members,
      Jonathan Dodge, Donald Miller, and Frank Bennett qualify as an "audit committee
      financial expert" independent from management as defined by Item 401(h)(2)
      of
      Regulation S-K under the Securities Act of 1933, as amended. The Company
      acknowledges that the designation of the members of the audit committee as
      financial experts does not impose on them any duties, obligations or liability
      that are greater than the duties, obligations and liability imposed on them
      as a
      member of the audit committee and the Board of Directors in the absence of
      such
      designation.





**Report
      of the Audit Committee**





In
      accordance with its written charter adopted by the Board of Directors, the
      Audit
      Committee assists the Board in fulfilling its responsibility for oversight
      of
      the quality and integrity of the accounting, auditing, and financial reporting
      practices of the Company. During the year ended December 31, 2007, the committee
      met four times, and Frank Bennett, as the Audit Committee chair and
      representative of the Audit Committee, discussed the interim financial
      information contained in quarterly and annual filings on Forms 10K and 10Q,
      respectively, with the Company’s Chief Financial Officer and the Company’s
      independent auditors prior to public release.




Page
          24


In
      discharging its oversight responsibility as to the audit process, the audit
      committee obtained from the independent auditors a formal written statement
      describing all relationships between the auditors and the Company that might
      bear on the auditors’ independence consistent with Independence Standards Board
      Standard No. 1, “Independence Discussions with Audit Committees,” discussed with
      the auditors any relationships that may affect their objectivity and
      independence and satisfied itself as to the auditors’ independence. The audit
      committee also discussed with management and the independent auditors the
      quality and adequacy of the Company’s internal controls. The audit committee
      reviewed with the independent auditors their audit plans, audit scope, and
      identification of audit risks.





The
      audit
      committee discussed and reviewed with the Company’s independent auditors all
      communications required by generally accepted auditing standards, including
      those described in Statement on Auditing Standards No. 61, as amended,
“Communication with Audit Committees” and, both with and without management
      present, discussed and reviewed the results of the independent auditors’
examination of the Company’s consolidated financial statements. The audit
      committee reviewed the audited consolidated financial statements of the Company
      as of and for the fiscal year ended December 31, 2007 with management and the
      independent auditors. Management has the responsibility for the preparation
      of
      the Company’s consolidated financial statements and the Company’s independent
      auditors have the responsibility for the examination of those
      statements.





Based
      on
      the review referred to above and discussions with management and the independent
      auditors, the Audit Committee recommended to the Board of Directors that the
      Company’s audited consolidated financial statements be included in its Annual
      Report on Form 10-K for the fiscal year ended December 31, 2007 for filing
      with
      the Securities and Exchange Commission. The Audit Committee also recommended
      the
      reappointment, subject to shareholder approval, of the independent auditors
      and
      the Board of Directors concurred in such recommendation.





**Nominating
      Committee**





The
      Nominating Committee was formed by our Board in April 2004 and consists of
      Frank
      Bennett and Eugene Harris. The Nominating Committee's duties include adopting
      criteria for recommending candidates for election or re-election to our Board
      and its committees, considering issues and making recommendations considering
      the size and composition of our Board. The Nominating Committee will also
      consider nominees for Director suggested by shareholders in written submissions
      to the Company's Secretary.





**Director
      Nomination Procedures**





DIRECTOR
      MANAGER QUALIFICATIONS. The Company's Nominating Committee has established
      policies for the desired attributes of our Board as a whole. The Board will
      seek
      to ensure that a majority of its members are independent as defined in the
      NASDAQ listing standards. Each member of our Board must possess the individual
      qualities of integrity and accountability, informed judgment, financial
      literacy, high performance standards and must be committed to representing
      the
      long-term interests of the Company and the shareholders. In addition, Directors
      must be committed to devoting the time and effort necessary to be responsible
      and productive members of our Board. Our Board values diversity, in its broadest
      sense, reflecting, but not limited to, profession, geography, gender, ethnicity,
      skills and experience.





IDENTIFYING
      AND EVALUATING NOMINEES. The Nominating Committee regularly assesses the
      appropriate number of Directors comprising our Board, and whether any vacancies
      on our Board are expected due to retirement or otherwise. The Nominating
      Committee may consider those factors it deems appropriate in evaluating Director
      candidates including judgment, skill, diversity, strength of character,
      experience with businesses and organizations comparable in size or scope to
      the
      Company, experience and skill relative to other Board members, and specialized
      knowledge or experience. Depending upon the current needs of our Board, certain
      factors may be weighed more or less heavily by the Nominating Committee. In
      considering candidates for our Board, the Nominating Committee evaluates the
      entirety of each candidate's credentials and, other than the eligibility
      requirements established by the Nominating Committee, does not have any specific
      minimum qualifications that must be met by a nominee. The Nominating Committee
      considers candidates for the Board from any reasonable source, including current
      Board members, shareholders, professional search firms or other persons. The
      Nominating Committee does not evaluate candidates differently based on who
      has
      made the recommendation. The Nominating Committee has the authority under its
      charter to hire and pay a fee to consultants or search firms to assist in the
      process of identifying and evaluating candidates.





CHARTER
      OF THE NOMINATING COMMITTEE. A copy of the charter of the Nominating Committee
      is available on our website at www.multibandusa.com.





Page
          25


**Code
      of Ethics for Senior Financial Management**





Our
      Code
      of Ethics for Senior Financial Management applies to all of our executive
      officers, including our president and our chief financial officer, and meets
      the
      requirements of the Securities and Exchange Commission. We have posted our
      Code
      of Ethics for Senior Financial Management on our website at www.multibandusa.com .
      We
      intend to disclose any amendments to and any waivers from a provision of our
      Code of Ethics for Senior Financial Management on our website within four
      business days following the amendment or waiver.





**Compensation
      Discussion and Analysis**





Our
      compensation committee





·
            reviews
                and recommends the compensation arrangements for management, including
                the
                compensation for our chief executive officer;
                and


·
            establishes
                and reviews general compensation policies with the objective to attract
                and retain superior talent, to reward individual performance and
                to
                achieve our financial goals.





We
      are
      committed to attracting, hiring and retaining an experienced management team
      that can successfully sell and operate our services. The fundamental policy
      of
      our compensation committee is to provide our executive officers with competitive
      compensation opportunities based upon their contribution to our development
      and
      financial success and long-term shareholder interest, as well as each officer’s
      personal performance. The compensation package for each executive officer is
      comprised of three elements (i) base salary which reflects individual
      performance and is designed primarily to be competitive with salary levels
      in
      the industry; (ii) potential for cash bonus payments contingent upon specific
      corporate and individual milestones; and (iii) long-term stock-based incentive
      awards which strengthen the mutuality of interests between the executive
      officers and our shareholders.





At
      the
      beginning of each year, certain performance objectives are set by the
      compensation committee for management. 2007 Corporate objectives included goals
      based on subscriber sales and certain financial metrics. By year end, the
      compensation committee reviews the performance of the company against the
      corporate objectives and reviews the performance of each executive officer
      against their individual objectives. Based upon results achieved, the executive
      officers may receive part or all of a targeted bonus award.





Our
      compensation committee met four times during 2007. The compensation committee
      is
      comprised entirely of non-employee Directors who meet the independence
      requirements of the NASDAQ listing standards. The compensation committee is
      comprised of Frank Bennett, Eugene Harris, and Donald Miller.




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




The
      following table sets forth certain information relating to the remuneration
      paid
      by the Company to its executive officers whose aggregate cash and
      cash-equivalent remuneration approximated or exceeded $100,000 during the
      Company’s fiscal year ended December 31, 2007.




**SUMMARY
      COMPENSATION TABLE**


Name and principal
                position
              
              Year
              
              Salary
              
              Bonus
              
              Stock
                Awards
              
              Option
                Awards
              
              Non equity
                incentive plan
                compensation
              
              Change in pension
                value and non
                qualified deferred
                compensation
                earnings
              
              All Other
                Compensation
              
              TotalJames
                  Mandel
                Chief
                  Executive Officer
              
              
              2007
              
              $
              250,000
              
              $
              9,000
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              6,000
              
              $
              265,000Steven
                  Bell
                Chief
                  Financial Officer
              
              
              2007
              
              
              195,000
              
              
              12,000
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              6,000
              
              
              213,000Dave
                  Ekman
                Chief
                  Information Officer
              
              
              2007
              
              
              150,000
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              5,000
              
              
              155,000Kent
                  Whitney
                VP
                  Operations
              
              
              2007
              
              
              110,000
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              110,000





Page
          26




**Director
      Compensation**




Outside
      Directors were each paid a cash fee of $10,000 annually in 2007. Outside
      Directors receive a stock option of 30,000 shares at market price upon joining
      the Company’s Board. Additional awards or options to Directors are determined by
      the Board's Compensation Committee. Each Director is entitled to reimbursement
      for his reasonable out of pocket expenses incurred in relation to travel to
      and
      from and attendance at board meetings.




**DIRECTOR
      COMPENSATION**


Name
              
              Fees earned
                or paid in
                cash
              
              Stock awards
              
              (1)
                Option
                awards
              
              Non-equity
                incentive plan
                compensation
              
              Change in
                pension value
                and nonqualified
                deferred
                compensation
                earnings
              
              (2)
                All other
                compensation
              
              TotalF
                  Bennett
              
              $
              10,000
              
              $
              0
              
              $
              15,248
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              25,248J
                  Dodge
              
              
              10,000
              
              
              0
              
              
              15,248
              
              
              0
              
              
              0
              
              
              0
              
              
              25,248E
                  Harris
              
              
              10,000
              
              
              0
              
              
              15,248
              
              
              0
              
              
              0
              
              
              1,406
              
              
              26,654D
                  Miller
              
              
              10,000
              
              
              0
              
              
              30,495
              
              
              0
              
              
              0
              
              
              812
              
              
              41,307




(1)
            The
                amounts in this column are calculated based on FAS 123R and equal
                the
                financial statement compensation expense as reported in our 2007
                consolidated statement of operations for the fiscal year. Total board
                of
                directors options outstanding at December 31, 2007 are
                139,400.


(2)
            Represents
                payment of expenses incurred in conjunction with attending board
                meetings.




**Stock
      Option Grants During 2007**




There
      were no stock options granted during fiscal 2007 to any executive officers.




Page
          27




**Outstanding
      Equity Awards at Fiscal Year-End**




The
      following table sets forth information regarding the outstanding equity awards
      held by our named executive officers as of December 31, 2007.


**Option
                  Awards**
              
              
              
              
              
              **Stock
                  Awards****Name**
              
              **Number of**
                **Securities**
                **Underlying**
                **Unexercised**
                **Options**
                **Exercisable (#)**
              
              **Number of**
                **Securities**
                **Underlying**
                **Unexercised**
                **Options**
                **Unexercisable (#)**
              
              **Equity**
                **Incentive**
                **Plan Awards:**
                **Number of**
                **Securities**
                **Underlying**
                **Unexercised**
                **Unearned**
                **Options (#)**
              
              **Option**
                **Exercise**
                **Price ($)**
              
              **Option**
                **Expiration**
                **Date**
              
              **Number of**
                **Shares or**
                **Units of**
                **Stock That**
                **Have Not**
                **Vested (#)**
              
              **Market**
                **Value of**
                **Shares or**
                **Units of**
                **Stock That**
                **Have Not**
                **Vested ($)**
              
              **Equity**
                **Incentive**
                **Plan Awards:**
                **Number of**
                **Unearned**
                **Shares, Units**
                **or Other**
                **Rights That**
                **Have Not**
                **Vested (#)**
              
              **Equity**
                **Incentive**
                **Plan Awards:**
                **Market or**
                **Payout Value**
                **of Unearned**
                **Shares, Units**
                **or Other**
                **Rights That**
                **Have Not**
                **Vested ($)**Steven
                  M. Bell
              
              
              2,000
                100
                10,000
                5,000
                10,000
                53,334
              (1)
                (2)
                (3)
                (4)
                (5)
                (6)
              
              0
                0
                0
                0
                0
                26,666
              
              
              0
                0
                0
                0
                0
                0
              
              $
              22.00
                7.50
                5.50
                9.45
                7.25
                7.35
              
              
              1/31/2011
                8/28/2011
                1/8/2013
                4/23/2014
                6/18/2014
                1/16/2015
              
              
              0
              
              $
              0
              
              
              0
              
              $
              0David
                  Ekman
              
              
              30,000
                100
                26,667
              (7)
                (8)
                (9)
              
              0
                0
                13,333
              
              
              0
                0
                0
              
              
              10.00
                7.50
                6.75
              
              
              12/29/2009
                8/28/2011
                4/27/2015
              
              
              0
              
              
              0
              
              
              0
              
              
              0James
                  L. Mandel
              
              
              30,000
                100
                60,000
                20,000
                80,000
              (10)
                (11)
                (12)
                (13)
                (14)
              
              0
                0
                0
                0
                40,000
              
              
              0
                0
                0
                0
                0
              
              
              3.00
                7.50
                7.50
                7.25
                7.35
              
              
              9/15/2008
                8/28/2011
                1/8/2013
                6/18/2014
                1/6/2015
              
              
              0
              
              
              0
              
              
              0
              
              
              0Kent
                  Whitney
              
              
              200
              (15)
              
              100
              
              
              0
              
              
              7.65
              
              
              1/3/2015
              
              
              0
              
              
              0
              
              
              0
              
              
              0




(1)
            The
                stock option was granted January 31, 2001 and is fully
                vested.


(2)
            The
                stock option was granted August 28, 2001 and is fully
                vested.


(3)
            The
                stock option was granted January 8, 2003 and is fully
                vested.


(4)
            The
                stock option was granted April 23, 2004 and is fully
                vested.


(5)
            The
                stock option was granted June 18, 2004 and is fully
                vested.


(6)
            The
                stock option was granted January 6, 2005. Subject to the continued
                service
                of the executive officer, the option shall vest with respect to 1/3
                on
                1/6/2006, 1/3 on 1/6/2007, and the final vesting on
                1/6/2008.


(7)
            The
                stock option was granted 12/29/1999 and is fully
                vested.


(8)
            The
                stock option was granted 8/28/2001 and is fully
                vested.


(9)
            The
                stock option was granted 4/27/2005. Subject to the continued service
                of
                the executive officer, the option shall vest with respect to 1/3
                at
                4/27/2006, 1/3 at 4/27/2007, and the final vesting on
                4/27/2008.


(10)
            The
                stock option was granted September 15, 1998 and is fully
                vested.


(11)
            The
                stock option was granted August 28, 2001 and is fully
                vested.


(12)
            The
                stock option was granted January 8, 2003 and is fully
                vested.


(13)
            The
                stock option was granted June 18, 2004 and is fully
                vested.


(14)
            The
                stock option was granted January 6, 2005. Subject to the continued
                service
                of the executive officer, the option shall vest with respect to 1/3
                on
                1/6/2006, 1/3 on 1/6/2007, and the final vesting on
                1/6/2008.


(15)
            The
                stock option was granted January 3, 2005. Subject to the continued
                service
                of the executive officer, the option shall vest with respect to 1/3
                on
                1/3/06, and 1/3 on 1/3/07, and the remainder on
                1/3/08.





**Option
      Exercises and Stock Vested**





None
      of
      our named Executive Officers exercised any options or had restricted stock
      vest
      in 2007.




***Other
      Compensation and Long-Term Incentive Plans***




The
      Company has no deferred compensation plans or long-term incentive plans and
      issued no long-term incentive awards during 2007.




Page
          28


The
      Company has an employment agreement with Mr. Steven Bell, President, for
      the term beginning January 2005 and expiring September 2008. Mr. Bell’s
      compensation is not directly tied to the Company’s performance. The agreement
      states that annual base salary for Mr. Bell will be $195,000 per year. Other
      key
      provisions of the contract include an agreement by Mr. Bell to keep
      confidential information secret both during and after employment by the Company
      and covenants not to compete with the Company for one year from the date of
      termination of employment. The contract also provides Mr. Bell with 400,000
      stock options at $1.47, vested over a three year period.





The
      Company maintains key man life insurance policies on the lives of James Mandel
      and Steven Bell in the amounts of $5,000,000 and $3,000,000, respectively.
      The
      Company is the beneficiary of these policies. The Company also maintains key
      man
      life insurance policies in the amount of $1,000,000 each on the lives of Steven
      Bell and Marvin Frieman, former Director. The Company is the beneficiary of
      these policies and has adopted a plan to pay fifty percent of all life insurance
      proceeds to the spouse or surviving children of each such
      individual.





The
      Company also has a three year employment agreement, from January 2005 to
      December 2007, with James L. Mandel, Chief Executive Officer, the terms of
      which involve an annual base salary of $250,000 and a stock option of
      600,000 shares at $1.47 per share, vested over a three year period.
      Mr. Mandel’s job responsibilities involve developing company business
      plans, developing expansion and growth opportunities and directing other
      executive officers.





**SECTION 16(a)
      BENEFICIAL OWNERSHIP REPORTING COMPLIANCE**




Section
      16(a) of the Securities Exchange Act of 1934 requires the Company’s executive
      officers and directors, and persons who beneficially own more than 10% of the
      Company’s common stock to file reports of ownership and changes in ownership
      with the SEC. These persons are required to provide us with copies of all
      Section 16(a) reports that they file. Based solely upon a review these reports
      and written representations from our directors and executive officers, we
      believe that our directors, executive officers and 10% owners complied with
      all
      Section 16(a) filing requirements applicable to them during the year ended
      December 31, 2007.




Page
          29




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




**VOTING
      SECURITIES AND PRINCIPAL HOLDERS THEREOF**





On
      March
      25, 2008, the Company had 9,534,024 shares of common stock issued and
      outstanding.





The
      following table sets forth certain information as of March 25, 2008 with respect
      to each person known by the Company to be the beneficial owner of more than
      5
      percent of its common stock, each Director of the Company, and all officers
      and
      Directors of the Company as a group. Except as indicated, each of the persons
      listed in the following table has sole voting and investment power with respect
      to the shares set forth opposite his name.


**Name
                  and Address of Beneficial Owners**
              
              **Number of Shares****1**
                **Beneficially Owned**
                **(adjusted for 1 for 5**
                **stock split)**
              
              **Percent of Common**
                **Shares Outstanding**Steven
                  Bell
                9449
                  Science Center Drive
                New
                  Hope, MN 55428
              
              
              217,813
              2
              
              2.3
              %Frank
                  Bennett
                301
                  Carlson Parkway – Suite 120
                Minnetonka,
                  Minnesota 55305
              
              
              108,000
              3
              
              1.1
              %Jonathan
                  Dodge
                715
                  Florida Avenue South – Suite 402
                Golden
                  Valley, MN 55426
              
              
              36,100
              4
              
              
              *David
                  Ekman
                200
                  44th Street SW
                Fargo,
                  ND 58103
              
              
              420,584
              5
              
              4.4
              %Eugene
                  Harris
                7773
                  Forsyth Blvd
                Clayton,
                  MO 63105
              
              
              39,540
              6
              
              
              *James
                  L. Mandel
                9449
                  Science Center Drive
                New
                  Hope, MN 55428
              
              
              262,826
              7
              
              2.8
              %Donald
                  Miller
                1924
                  Cocoplum Way
                Naples,
                  FL 34105
              
              
              317,021
              8
              
              3.3
              %Special
                  Situations Fund II QP, LP
                527
                  Madison Avenue
                New
                  York, NY 10022
              
              
              1,023,634
              9
              
              10.7
              %All
                  Directors and executive officers as a group (seven
                  persons)
              
              
              1,401,884
              
              
              14.7
              %




*Less
      than one percent


1 Each
      person has sole voting and sole dispositive power with respect to all
      outstanding shares, except as noted. Based on an average of 9,534,024 shares
      outstanding at March 25, 2008. Shares of common stock not outstanding but deemed
      beneficially owned by virtue of the individual’s right to acquire them as of
      March 25, 2008 or within 60 days of such date are treated as outstanding when
      determining the number of shares beneficially owned by each person and the
      group
      and the percent of the class owned by each individual and the group. Unless
      otherwise indicated, each person named or included in the group has sole vesting
      and investment power with respect to the shares of common stock set forth
      opposite his or her name. Unless otherwise indicated, the information in the
      table does not include any stock options and/or warrants outstanding that cannot
      be exercised within 60 days of March 25, 2008.


2 Includes
      vested options to acquire 53,766 shares of common stock. Mr. Bell's Beneficial
      Ownership does include 6,250 shares of common stock owned by his spouse as
      to
      which Mr. Bell disclaims his beneficial ownership.


3 Includes
      vested options to purchase 26,000 shares of common stock.


4 Includes
      vested options to acquire 21,000 shares of common stock.


5 Includes
      vested options to purchase 30,099 shares of common stock and preferred shares
      convertible into 43,600 shares of common stock.


6 Includes
      vested options to purchase 20,000 shares of common stock.


7 Includes
      warrants and vested options to purchase 150,560 shares of common
      stock.


8 Includes
      warrants and vested options to purchase 97,400 shares of common
      stock.


9 Includes
      warrants to purchase 1,142,857 shares of common stock.




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




The
      Board
      has determined that a majority of its members are “independent” as defined by
      the listing standards of the NASDAQ Stock Market. The independent Directors
      are
      Messrs. Frank Bennett, Jonathan Dodge, Eugene Harris and Donald Miller.





Multiband
      and its subsidiaries lease principal offices located at 2000 44 th Street
      SW, Fargo, ND 58013. The Fargo base rate ranges from $7,621 to $8,466 per month.
      The Fargo property is owned in part by David Ekman.




Page
          30




**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, 2007, 2006 and 2005. The following table details the fees paid
      to
      Virchow Krause for the years ended December 31, 2007 and 2006.


**2007**
              
              **2006**Audit
                  Fees
              
              $
              227,996
              
              $
              186,681Audit-Related
                  Fees
              
              
              18,230
              (1)
              
              24,490
              (2)Tax
                  Fees
              
              
              20,258
              
              
              32,425Total
              
              $
              266,484
              
              $
              243,596




(1)
      Fees
      related to S-3 and S-1 filings and accounting for possible merger with the
      Form
      S-4 filings.





(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 management. 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**





(1) *Financial
      Statements.* Reference
      is made to the Index to Consolidated Financial Statements on page F-1 for a
      list
      of financial statements filed as a part of this Annual Report on Form
      10-K/A.





(2) *Financial
      Statement Schedules.* The
      following financial statement schedules are included herein and should be read
      in conjunction with the consolidated financial statements referred to
      above.





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





See
      Index
      to Exhibits on page 32 of this report.




Page
          31


**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 (1010.18
            
            Asset
                Purchase Agreement between Multiband Corporation and Consolidated
                Smart
                Broadband Systems dated March 1, 2007 (15)10.19
            
            Asset
                Purchase Agreement between Multiband Corporation and MDU Communications
                dated July 21, 2007 (16)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 (17)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
                (17)31.2
            
            Rule
                13a-14 (s) Certification of Chief Financial Officer - Steven Bell
                (17)32.1
            
            Section
                1350 of Sarbanes-Oxley Act of 2002 - James Mandel (17)32.2
            
            Section
                1350of Sarbanes-Oxley Act of 2002 - Steven Bell
                (17)




(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.




Page
          32




(15) Previously
      filed as the same exhibit to registrants form 8k filed October 19,
      2006


(16) Previously
      filed as the same exhibit to registrants form 8k filed July 25,
      2007


(17) Filed
      herewith.




Page
          33


**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
                  March 31, 2008
              By:
              /s/
                  James L. MandelJames L. Mandel
                *Chief
                  Executive Officer*Date:
                  March 31, 2008
              By:
              /s/
                  Steven M. BellSteven 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
          34







***MULTIBAND
      CORPORATION AND SUBSIDIARIES***





***TABLE
      OF CONTENTS***





Report
                of Independent Registered Public Accounting Firm
            
            F-2Financial
                StatementsConsolidated
                Balance Sheets
            
            F-3Consolidated
                Statements of Operations
            
            F-5Consolidated
                Statements of Stockholders' Equity
            
            F-6Consolidated
                Statements of Cash Flows
            
            F-15Notes
                to Consolidated Financial Statements
            
            F-16Supplemental
                InformationReport
                of Independent Registered Public Accounting Firm on Supplementary
                Information
            
            F-43Valuation
                and Qualifying Accounts
            
            F-44




F
          -
          1




***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, 2007 and 2006, and the related consolidated
      statements of operations, stockholders' equity and cash flows for each of the
      three years in the period ended December 31, 2007. 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.





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, 2007 and 2006, and the results
      of their operations and their cash flows for each of the three years in the
      period ended December 31, 2007, in conformity with accounting principles
      generally accepted in the United States of America.





/s/
      VIRCHOW, KRAUSE & COMPANY, LLP


Minneapolis,
      Minnesota


March
      31,
      2008




F
          -
          2




**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


**DECEMBER
      31, 2007 AND 2006**





***ASSETS***


**2007**
              
              **2006****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              944,456
              
              $
              1,020,975Accounts
                  receivable, net
              
              
              1,560,123
              
              
              2,018,393Inventories
              
              
              132,992
              
              
              343,815Prepaid
                  expenses and other
              
              
              135,589
              
              
              181,767Current
                  portion of notes receivable
              
              
              59,861
              
              
              6,116Total
                  Current Assets
              
              
              2,833,021
              
              
              3,571,066**PROPERTY
                  AND EQUIPMENT, NET**
              
              
              1,769,261
              
              
              3,359,842**OTHER
                  ASSETS**Goodwill
              
              
              16,757
              
              
              509,086Intangible
                  assets, net
              
              
              4,072,076
              
              
              9,124,980Assets
                  held for sale
              
              
              -
              
              
              1,244,236Notes
                  receivable – long-term, net
              
              
              -
              
              
              63,740Other
                  assets
              
              
              202,314
              
              
              113,106Total
                  Other Assets
              
              
              4,291,147
              
              
              11,055,148**TOTAL
                  ASSETS**
              
              $
              8,893,429
              
              $
              17,986,056




See
      accompanying notes to the consolidated financial statements





F
          -
          3


**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


**DECEMBER
      31, 2007 AND 2006**





***LIABILITIES
      AND STOCKHOLDERS' EQUITY***


**2007**
              
              **2006****CURRENT
                  LIABILITIES**Checks
                  issued in excess of cash in bank
              
              $
              -
              
              $
              319,244Mandatory
                  redeemable preferred stock, 22,026 and 28,000 Class F preferred
                  shares
              
              
              220,256
              
              
              280,000Current
                  portion of long-term debt
              
              
              1,658,342
              
              
              1,255,994Current
                  portion of capital lease obligations
              
              
              225,291
              
              
              444,921Note
                  payable – stockholder
              
              
              -
              
              
              24,739Accounts
                  payable
              
              
              2,950,596
              
              
              2,557,409Accrued
                  liabilities
              
              
              2,531,611
              
              
              2,977,356Customer
                  deposits
              
              
              60,582
              
              
              61,332Current
                  liabilities of discontinued operations
              
              
              -
              
              
              125,000Deferred
                  service obligations and revenue
              
              
              204,520
              
              
              819,316Total
                  Current Liabilities
              
              
              7,851,198
              
              
              8,865,311**LONG-TERM
                  LIABILITIES**Long-term
                  debt, net
              
              
              118,924
              
              
              2,969,764Capital
                  lease obligations, net of current portion
              
              
              249,469
              
              
              491,672Total
                  Liabilities
              
              
              8,219,591
              
              
              12,326,747**COMMITMENTS
                  AND CONTINGENCIES****STOCKHOLDERS'
                  EQUITY**Cumulative
                  convertible preferred stock, no par value:8%
                  Class A (24,728 and 26,658 shares issued and outstanding, $259,644
                  and
                  $279,909 liquidation preference)
              
              
              371,708
              
              
              400,65710%
                  Class B (3,770 and 7,470 shares issued and outstanding, $39,585
                  and
                  $78,435 liquidation preference)
              
              
              37,700
              
              
              49,70010%
                  Class C (120,250 and 124,130 shares issued and outstanding, $1,202,500
                  and
                  $1,241,300 liquidation preference)
              
              
              1,548,352
              
              
              1,593,47610%
                  Class F (150,000 shares issued and outstanding, $1,500,000 liquidation
                  preference)
              
              
              1,500,000
              
              
              1,500,0008%
                  Class G (26,595 and 38,195 shares issued and outstanding, $265,950
                  and
                  $381,950 liquidation preference)
              
              
              111,468
              
              
              161,4316%
                  Class H (2.0 shares issued and outstanding, $200,000 liquidation
                  preference)
              
              
              -
              
              
              -Variable
                  rate % Class I (39,500 and 57,500 shares issued and outstanding,
                  $3,950,000 and $5,750,000 liquidation preference)
              
              
              -
              
              
              -Common
                  stock, no par value (7,451,891 and 7,033,632 shares issued and
                  outstanding)
              
              
              29,574,673
              
              
              26,873,255Stock
                  subscriptions receivable
              
              
              (170,888
              )
              
              (229,927
              )Options
                  and warrants
              
              
              45,871,964
              
              
              45,093,001Accumulated
                  deficit
              
              
              (78,171,139
              )
              
              (69,782,284
              )Total
                  Stockholders' Equity
              
              
              673,838
              
              
              5,659,309**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              $
              8,893,429
              
              $
              17,986,056




See
      accompanying notes to the consolidated financial statements




F
          -
          4




**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**YEARS
      ENDED DECEMBER 31, 2007, 2006 AND 2005**


**2007**
              
              **2006**
              
              **2005****REVENUES**
              
              $
              15,085,604
              
              $
              18,051,601
              
              $
              16,515,426**COSTS
                  AND EXPENSES**Cost
                  of products and services(exclusive of depreciation and amortization shown separately
                  below)
              
              
              8,339,933
              
              
              8,280,666
              
              
              7,849,597Selling,
                  general and administrative
              
              
              8,887,883
              
              
              11,480,677
              
              
              9,723,132Depreciation
                  and amortization
              
              
              3,623,903
              
              
              5,168,209
              
              
              4,780,436Impairment
                  of assets
              
              
              -
              
              
              2,261,500
              
              
              -Total
                  costs and expenses
              
              
              20,851,719
              
              
              27,191,052
              
              
              22,353,165**LOSS
                  FROM OPERATIONS**
              
              
              (5,766,115
              )
              
              (9,139,451
              )
              
              (5,837,739
              )**OTHER
                  INCOME (EXPENSE)**Interest
                  expense
              
              
              (503,887
              )
              
              (1,206,196
              )
              
              (1,882,910
              )Interest
                  income
              
              
              31,277
              
              
              67,796
              
              
              126,158Other
                  income
              
              
              150,372
              
              
              91,928
              
              
              101,664Total
                  Other Expense
              
              
              (322,238
              )
              
              (1,046,472
              )
              
              (1,655,088
              )**LOSS
                  FROM CONTINUING OPERATIONS**
              
              
              (6,088,353
              )
              
              (10,185,923
              )
              
              (7,492,827
              )**GAIN****FROM DISCONTINUED OPERATIONS**
              
              
              -
              
              
              2,200
              
              
              17,827**NET
                  LOSS**
              
              
              (6,088,353
              )
              
              (10,183,723
              )
              
              (7,475,000
              )Preferred
                  stock dividends
              
              
              2,300,502
              
              
              4,066,723
              
              
              3,352,229**LOSS
                  ATTRIBUTABLE TO COMMON STOCKHOLDERS**
              
              $
              (8,388,855
              )
              $
              (14,250,446
              )
              $
              (10,827,229
              )**BASIC
                  AND DILUTED LOSS PER COMMON SHARE:****LOSS
                  FROM CONTINUING OPERATIONS**
              
              $
              (1.16
              )
              $
              (2.11
              )
              $
              (1.86
              )**GAIN
                  FROM DISCONTINUED OPERATIONS**
              
              $
              -
              
              $
              0.0
              
              $
              0.0**LOSS
                  ATTRIBUTABLE TO COMMON STOCKHOLDERS**
              
              $
              (1.16
              )
              $
              (2.11
              )
              $
              (1.86
              )**WEIGHTED
                  AVERAGE COMMON SHARES OUTSTANDING - BASIC AND
                  DILUTED**
              
              
              7,237,473
              
              
              6,757,643
              
              
              5,819,585




See
      accompanying notes to the consolidated financial statements




F
          -
          5




**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY**


**YEARS
      ENDED DECEMBER 31, 2007, 2006 AND 2005**


8%
                  Class A
              
              10%
                  Class B
              
              10%
                  Class C
              
              10%
                  Class FShares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              AmountBALANCES,
                  December 31, 2004
              
              
              27,931
              
              $
              419,752
              
              
              8,700
              
              $
              62,000
              
              
              125,400
              
              $
              1,611,105
              
              
              150,000
              
              $
              1,500,000Stock
                  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
              
              
              150,000
              
              $
              1,500,000




F
          -
          6





8%
                Class A
            
            10%
                Class B
            
            10%
                Class C
            
            10%
                Class FShares
            
            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 9)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Preferred
                stock dividends
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -BALANCES,
                December 31, 2006
            
            
            26,658
            
            $
            400,657
            
            
            7,470
            
            $
            49,700
            
            
            124,130
            
            $
            1,593,476
            
            
            150,000
            
            $
            1,500,000





F
          -
          7


8%
                Class A
            
            10%
                Class B
            
            10%
                Class C
            
            10%
                Class FShares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            AmountStock
                issued:Cash
            
            
            -
            
            $
            -
            
            
            -
            
            $
            -
            
            
            -
            
            $
            -
            
            
            -
            
            $
            -Conversion
                of accrued interest
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Conversion
                of preferred stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Conversion
                of dividends payable
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -In
                lieu of cash for services
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -In
                lieu of cash for equipment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Redemption
                of preferred stock
            
            
            (1,930
            )
            
            (19,300
            )
            
            (3,700
            )
            
            (37,000
            )
            
            (3,880
            )
            
            (38,800
            )
            
            -
            
            
            -Intrinsic
                value of convertible feature
            
            
            -
            
            
            (9,649
            )
            
            -
            
            
            25,000
            
            
            -
            
            
            (6,324
            )
            
            -
            
            
            -Stock
                subscriptions receivable:Cash
                received
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Interest
                collected
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Interest
                earned
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Increase
                in reserve
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Warrants
                issued for services
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Options
                expense
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Preferred
                stock dividends
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -BALANCES,
                December 31, 2007
            
            
            24,728
            
            $
            371,708
            
            
            3,770
            
            $
            37,700
            
            
            120,250
            
            $
            1,548,352
            
            
            150,000
            
            $
            1,500,000





See
      accompanying notes to the consolidated financial statements




F
          -
          8


8%
                  Class G
              
              6%
                  Class H
              
              %
                  Class I
              
              Common
                  StockShares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              AmountBALANCES,
                  December 31, 2004
              
              
              45,245
              
              $
              179,897
              
              
              11.5
              
              $
              -
              
              
              -
              
              $
              -
              
              
              5,156,898
              
              $
              16,888,291Stock
                  issued:Cash
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              100,000
              
              
              9,480,000
              
              
              256,323
              
              
              -Exercise
                  of warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              4,600
              
              
              23,000Cashless
                  exercise of warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              20,276
              
              
              -Exercise
                  of options
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              400
              
              
              1,960Reduction
                  of stock subscriptions receivable for fees related to equity
                  transactions
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (15,400
              )Acquisition
                  of assets – Dinamo Entertainment, LLC.
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              95,000
              
              
              702,500Acquisition
                  of assets – Satellite Broadcasting Corporation and
                  affiliates
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              14,000
              
              
              105,000Conversion
                  of notes payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              302,799
              
              
              1,541,996Conversion
                  of accrued interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              19,351
              
              
              104,194Conversion
                  of preferred stock
              
              
              -
              
              
              -
              
              
              (9.5
              )
              
              -
              
              
              (10,000
              )
              
              -
              
              
              323,334
              
              
              1,898,001Conversion
                  of dividends payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              184,998
              
              
              1,278,625In
                  lieu of cash for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,600
              
              
              20,580In
                  lieu of cash for other current assets
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              40,000
              
              
              218,000In
                  lieu of cash for deferred financing costs
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              6,667
              
              
              36,000Redemption
                  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
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (334
              )
              
              (1,342
              )Preferred
                  stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -BALANCES,
                  December 31, 2005
              
              
              45,245
              
              $
              179,897
              
              
              2
              
              $
              -
              
              
              90,000
              
              $
              -
              
              
              6,426,912
              
              $
              22,801,405




F
          -
          9


8%
                  Class G
              
              6%
                  Class H
              
              %
                  Class I
              
              Common
                  StockShares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              Amount
              
              Shares
              
              AmountStock
                  issued:Cash
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              
              -
              
              $
              (23,840
              )Exercise
                  of options
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              6,000
              
              
              18,000Acquisition
                  of assets – Extreme Video
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              32,500
              
              
              162,500Conversion
                  of notes payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              40,000
              
              
              200,000Conversion
                  of accrued interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              8,866
              
              
              44,333Conversion
                  of preferred stock
              
              
              (7,050
              )
              
              (70,500
              )
              
              -
              
              
              -
              
              
              (32,500
              )
              
              -
              
              
              442,146
              
              
              3,151,500Conversion
                  of dividends payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              61,015
              
              
              473,001In
                  lieu of cash for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              16,000
              
              
              57,600In
                  lieu of cash for revenue share payments
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              193
              
              
              1,156Redemption
                  of preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Intrinsic
                  value of convertible feature
              
              
              -
              
              
              52,034
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Adjustment
                  in Dinamo purchase price
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (12,400
              )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 9)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Preferred
                  stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -BALANCES,
                  December 31, 2006
              
              
              38,195
              
              $
              161,431
              
              
              2
              
              $
              -
              
              
              57,500
              
              $
              -
              
              
              7,033,632
              
              $
              26,873,255




F
          -
          10


8%
                Class G
            
            6%
                Class H
            
            %
                Class I
            
            Common
                StockShares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            AmountStock
                issued:Cash
            
            
            -
            
            $
            -
            
            
            -
            
            $
            -
            
            
            -
            
            $
            -
            
            
            -
            
            $
            (24,208
            )Conversion
                of accrued interest
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            3,536
            
            
            17,680Conversion
                of preferred stock
            
            
            (11,600
            )
            
            (116,000
            )
            
            -
            
            
            -
            
            
            (18,000
            )
            
            -
            
            
            254,500
            
            
            1,822,400Conversion
                of dividends payable
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            88,223
            
            
            637,209In
                lieu of cash for services
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            42,000
            
            
            164,337In
                lieu of cash for equipment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            30,000
            
            
            84,000Redemption
                of preferred stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Intrinsic
                value of convertible feature
            
            
            -
            
            
            66,037
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Stock
                subscriptions receivable:
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Cash
                payments
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Interest
                collected
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Interest
                earned
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Increase
                in reserve
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Warrants
                issued for services
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Options
                expense
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Preferred
                stock dividends
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -BALANCES,
                December 31, 2007
            
            
            26,595
            
            $
            111,468
            
            
            2
            
            $
            -
            
            
            39,500
            
            $
            -
            
            
            7,451,891
            
            $
            29,574,673




See
      accompanying notes to the consolidated financial statements





F
          -
          11


Stock
                Subscriptions
                Receivable
              
              Options
                and
                Warrants
              
              Unamortized
                Compensation
              
              Accumulated
                Deficit
              
              TotalBALANCES,
                  December 31, 2004
              
              $
              (391,264
              )
              $
              32,985,983
              
              $
              (1,724
              )
              $
              (44,704,609
              )
              $
              8,549,431Stock
                  issued:Cash
              
              
              -
              
              
              1,606,848
              
              
              -
              
              
              -
              
              
              11,086,848Exercise
                  of warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              23,000Cashless
                  exercise of warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Exercise
                  of options
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,960Reduction
                  of stock subscriptions receivable for fees related to equity
                  transactions
              
              
              15,400
              
              
              -
              
              
              -
              
              
              -
              
              
              -Acquisition
                  of assets – Dinamo Entertainment, LLC
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              702,500Acquisition
                  of assets – Satellite Broadcasting Corporation and
                  affiliates
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              105,000Conversion
                  of notes payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,541,996Conversion
                  of accrued interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              104,194Conversion
                  of preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,898,001
              )
              
              -Conversion
                  of dividends payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,278,625In
                  lieu of cash for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              20,580In
                  lieu of cash for other current assets
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              218,000In
                  lieu of cash for deferred financing costs
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              36,000Redemption
                  of preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (6,600
              )Discount
                  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
              
              
              -
              
              
              -
              
              
              1,342
              
              
              -
              
              
              -Preferred
                  stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,454,228
              )
              
              (1,454,228
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (7,475,000
              )
              
              (7,475,000
              )BALANCES,
                  December 31, 2005
              
              $
              (297,105
              )
              $
              44,259,540
              
              $
              (29,861
              )
              $
              (55,531,838
              )
              $
              14,968,295





F
          -
          12


Stock
                Subscriptions
                Receivable
              
              Options
                and
                Warrants
              
              Unamortized
                Compensation
              
              Accumulated
                Deficit
              
              TotalStock
                  issued:Cash
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              (23,840
              )Exercise
                  of options
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              18,000Acquisition
                  of assets – Extreme Video
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              162,500Conversion
                  of notes payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              200,000Conversion
                  of accrued interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              44,333Conversion
                  of preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,081,000
              )
              
              -Conversion
                  of dividends payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              473,001In
                  lieu of cash for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              57,600In
                  lieu of cash for revenue share payments
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,156Redemption
                  of preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (31,130
              )Intrinsic
                  value of convertible feature
              
              
              -
              
              
              -
              
              
              -
              
              
              (40,740
              )
              
              -Adjustment
                  in Dinamo purchase price
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (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 9)
              
              
              -
              
              
              -
              
              
              -
              
              
              (46,989
              )
              
              (46,989
              )Preferred
                  stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              (897,994
              )
              
              (897,994
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (10,183,723
              )
              
              (10,183,723
              )BALANCES,
                  December 31, 2006
              
              $
              (229,927
              )
              $
              45,093,001
              
              $
              -
              
              $
              (69,782,284
              )
              $
              5,659,309





F
          -
          13


Stock
                Subscriptions
                Receivable
              
              Options
                and
                Warrants
              
              Unamortized
                Compensation
              
              Accumulated
                Deficit
              
              TotalStock
                  issued:Cash
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              (24,208
              )Conversion
                  of accrued interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              17,680Conversion
                  of preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,706,400
              )
              
              -Conversion
                  of dividends payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              637,209In
                  lieu of cash for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              164,337In
                  lieu of cash for equipment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              84,000Redemption
                  of preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (95,100
              )Intrinsic
                  value of convertible feature
              
              
              -
              
              
              -
              
              
              -
              
              
              (75,064
              )
              
              -Stock
                  subscriptions receivable:Cash
                  payments
              
              
              62
              
              
              -
              
              
              -
              
              
              -
              
              
              62Interest
                  collected
              
              
              1,438
              
              
              -
              
              
              -
              
              
              -
              
              
              1,438Interest
                  earned
              
              
              (2,461
              )
              
              -
              
              
              -
              
              
              -
              
              
              (2,461
              )Increase
                  in reserve
              
              
              60,000
              
              
              -
              
              
              -
              
              
              -
              
              
              60,000Warrants
                  issued for services
              
              
              -
              
              
              67,540
              
              
              -
              
              
              -
              
              
              67,540Options
                  expense
              
              
              -
              
              
              711,423
              
              
              -
              
              
              -
              
              
              711,423Preferred
                  stock dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              (519,038
              )
              
              (519,038
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (6,088,353
              )
              
              (6,088,353
              )BALANCES,
                  December 31, 2007
              
              $
              (170,888
              )
              $
              45,871,964
              
              $
              -
              
              $
              (78,171,139
              )
              $
              673,838





See
      accompanying notes to the consolidated financial statements





F
          -
          14




**MULTIBAND
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**YEARS
      ENDED DECEMBER 31, 2007, 2006 AND 2005**


**2007**
              
              **2006**
              
              **2005****OPERATING
                  ACTIVITIES**Net
                  loss
              
              $
              (6,088,353
              )
              $
              (10,183,723
              )
              $
              (7,475,000
              )Adjustments
                  to reconcile net loss to cash flows from operating
                  activities:Depreciation
                  and amortization
              
              
              3,638,543
              
              
              5,347,251
              
              
              5,095,561Amortization
                  of deferred compensation
              
              
              -
              
              
              29,480
              
              
              147,401Amortization
                  of original issue discount
              
              
              30,413
              
              
              436,108
              
              
              1,042,374Gain
                  on sale of business segment
              
              
              -
              
              
              -
              
              
              (253,356
              )Common
                  stock issued for services and revenue share payments
              
              
              164,337
              
              
              58,756
              
              
              20,580Warrants
                  issued for services
              
              
              67,540
              
              
              12,085
              
              
              9,829Gain
                  on debt extinguishment
              
              
              (131,529
              )
              
              -
              
              
              -Impairment
                  of goodwill, intangibles and property and equipment
              
              
              -
              
              
              2,261,500
              
              
              -Loss
                  (gain) on sale of property and equipment
              
              
              192,234
              
              
              (105,139
              )
              
              (94,277
              )Gain
                  on sale of URON Inc. subsidiary
              
              
              -
              
              
              (26,669
              )
              
              -Provision
                  for doubtful accounts on accounts receivable
              
              
              (154,400
              )
              
              (155,130
              )
              
              161,000Change
                  in reserve for stock subscriptions and interest receivable
              
              
              60,000
              
              
              61,434
              
              
              27,009Stock
                  based compensation expense
              
              
              711,423
              
              
              821,757
              
              
              -Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              615,241
              
              
              502,942
              
              
              239,910Inventories
              
              
              208,388
              
              
              (102,800
              )
              
              (240,472
              )Prepaid
                  expenses and other
              
              
              82,133
              
              
              34,924
              
              
              222,236Other
                  assets
              
              
              (81,778
              )
              
              33,798
              
              
              (14,439
              )Wholesale
                  line of credit
              
              
              -
              
              
              -
              
              
              (1,000,987
              )Accounts
                  payable and accrued liabilities
              
              
              27,236
              
              
              707,265
              
              
              (1,482,170
              )Customer
                  deposits
              
              
              (750
              )
              
              (2,829
              )
              
              4,286Liabilities
                  of discontinued operations
              
              
              (125,000
              )
              
              (500,000
              )
              
              (375,000
              )Deferred
                  service obligations and revenue
              
              
              (606,674
              )
              
              119,004
              
              
              148,457Net
                  cash flows from operating activities
              
              
              (1,390,996
              )
              
              (649,986
              )
              
              (3,817,058
              )**INVESTING
                  ACTIVITIES**Purchases
                  of property and equipment
              
              
              (383,834
              )
              
              (993,108
              )
              
              (976,477
              )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
              )Proceeds
                  from sale of URON Inc. subsidiary
              
              
              -
              
              
              75,000
              
              
              -Proceeds
                  from sale of business segment
              
              
              -
              
              
              -
              
              
              1,682,184Proceeds
                  from short-term note receivable
              
              
              -
              
              
              -
              
              
              400,000Proceeds
                  from sale of intangible assets and related equipment
              
              
              2,651,239
              
              
              611,094
              
              
              91,500Proceeds
                  from certificate of deposit
              
              
              -
              
              
              -
              
              
              650,000Payments
                  received on notes receivable
              
              
              9,995
              
              
              2,801
              
              
              2,843Net
                  cash flows from investing activities
              
              
              2,277,400
              
              
              (335,372
              )
              
              391,581**FINANCING
                  ACTIVITIES**Checks
                  issued in excess of cash in bank
              
              
              (319,244
              )
              
              226,239
              
              
              (141,343
              )Payments
                  on short-term debt
              
              
              -
              
              
              -
              
              
              (3,981,099
              )Payments
                  on long-term debt
              
              
              (139,209
              )
              
              (871,076
              )
              
              (2,690,766
              )Payments
                  on capital lease obligations
              
              
              (251,057
              )
              
              (235,517
              )
              
              (216,583
              )Payments
                  on note payable to stockholder
              
              
              (24,739
              )
              
              (8,098
              )
              
              (51,964
              )Payments
                  for debt issuance costs
              
              
              -
              
              
              -
              
              
              (25,000
              )Payment
                  on mandatory redeemable preferred stock
              
              
              (59,744
              )
              
              (53,334
              )
              
              (166,666
              )Payments
                  for stock issuance costs
              
              
              (24,208
              )
              
              (23,840
              )
              
              -Proceeds
                  from long-term debt and warrants issued with long-term
                  debt
              
              
              -
              
              
              -
              
              
              2,000,000Proceeds
                  from issuance of stock and warrants
              
              
              -
              
              
              -
              
              
              11,086,848Payments
                  received on stock subscriptions receivable
              
              
              62
              
              
              5,938
              
              
              51,750Redemption
                  of common stock
              
              
              -
              
              
              -
              
              
              (6,600
              )Redemption
                  of preferred stock
              
              
              (95,100
              )
              
              (31,130
              )
              
              -Exercise
                  of warrants
              
              
              -
              
              
              -
              
              
              23,000Preferred
                  stock dividends
              
              
              (49,684
              )
              
              (121,276
              )
              
              (84,186
              )Exercise
                  of stock options
              
              
              -
              
              
              18,000
              
              
              1,960Net
                  cash flows from financing activities
              
              
              (962,923
              )
              
              (1,094,094
              )
              
              5,799,351**INCREASE
                  (DECREASE) IN CASH AND CASH EQUIVALENTS**
              
              
              (76,519
              )
              
              (2,079,452
              )
              
              2,373,874CASH
                  AND CASH EQUIVALENTS - Beginning of Year
              
              
              1,020,975
              
              
              3,100,427
              
              
              726,553**CASH
                  AND CASH EQUIVALENTS - END OF YEAR**
              
              $
              944,456
              
              $
              1,020,975
              
              $
              3,100,427




See
      accompanying notes to the consolidated financial statements




F
          -
          15


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005







**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, 2007, 2006 and 2005, the Company incurred net losses
      of
      $6,088,353, $10,183,723 and $7,475,000, respectively. At December 31, 2007,
      the
      Company had an accumulated deficit of $78,171,139. 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 2008:





1.
            Reduction
                of operating expenses by controlling payroll, professional fees and
                other
                general and administrative expenses.2.
            Sale
                of video 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 it can sell these assets, under certain
                circumstances, at prices at or above their current carrying value.
                However, there is no guarantee 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 a landlord-owned equipment program.6.
            Delivery
                of video services to residents of single family homes. Effective
                March 1,
                2008 the Company purchased 51% of the outstanding stock of Michigan
                Microtech, Inc. (MMT), formerly a wholly owned subsidiary of DTHC.
                MMT
                installs DirecTV video services in single family homes. Historically
                MMT
                has been profitable. The Company anticipates that by combining MMT
                operations with Multiband operations that it will achieve a beneficial
                impact to its consolidated cash flows and operating results. However,
                there is no guarantee that these combined results will ultimately
                be
                favorable to the Company.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 9). All
      significant intercompany transactions and balances have been eliminated in
      consolidation.





In
      August
      2006, the Company completed a stock dividend and sold the remaining interest
      of
      URON (see Note 9).




F
          -
          16


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




***Discontinued
      Operations***





During
      the first quarter of 2005, the Company sold certain assets and transferred
      certain liabilities related to its Multiband Business Services (a/k/a CTU).
      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 15). At December 31, 2007 and 2006, the Company had current
      liabilities of discontinued operations of $0 and $125,000,
      respectively.





***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 four sources: 1) Voice, video and data
      communications products which are sold and installed, 2) Multiband user charges
      to multiple dwelling units, 3) MBUSA user charges to timeshares, and 4) MDU
      earns revenue primarily through the activation of and residual fees on video
      programming services.





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.





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.




F
            -
            17


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




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





In
      June
      2006, the Financial Accounting Standards Board (FASB) ratified the consensus
      of
      Emerging Issues Task Force Issue No. 06-3, “How Taxes Collected from Customers
      and Remitted to Governmental Authorities Should Be Presented in the Income
      Statement (That Is, Gross versus Net Presentation)” (EITF 06-3). EITF 06-3
      concluded that the presentation of taxes imposed on revenue-producing
      transactions (sales, use, value added and excise taxes) on either a gross
      (included in revenues and costs) or a net (excluded from revenues) basis is
      an
      accounting policy that should be disclosed. The Company adopted EITF 06-3 during
      the year ended December 31, 2007, and it did not have any impact on our results
      of operations or financial condition. The Company’s policy is to present taxes
      imposed on revenue-producing transactions 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.





***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 $75,000 and $229,400 at December 31, 2007 and 2006,
      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.




F
          -
          18


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




***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 $304,402 to property and equipment related
      to
      the sale (see Note 2).





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. Debt issuance costs are fully amortized at December 31,
      2007.





***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, 2007 and 2006. Pursuant to the sale of video assets
      to
      Consolidated Smart Broadband Systems, LLC.,(CSBS) (see Note 2), 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.




F
          -
          19


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




The
      balance of goodwill at December 31, 2007 and 2006 was $16,757 and $509,086,
      respectively (see Note 2).





Components
      of intangible assets are as follows:





December
                31, 2007
            
            December
                31, 2006Gross
              Carrying
            
            Accumulated
            
            Gross
              Carrying
            
            AccumulatedAmount
            
            Amortization
            
            Amount
            
            Amortization*Intangible
                assets subject to amortization*Domain
                name
            
            $
            83,750
            
            $
            83,750
            
            $
            83,750
            
            $
            83,750Right
                of entry contracts
            
            
            993,393
            
            
            618,027
            
            
            8,955,558
            
            
            3,591,598Subscriber
                lists
            
            
            9,697,879
            
            
            6,001,169
            
            
            9,697,879
            
            
            4,411,865Debt
                issuance costs
            
            
            499,837
            
            
            499,837
            
            
            499,837
            
            
            485,198Total
            
            
            11,274,859
            
            
            7,202,783
            
            
            19,237,024
            
            
            8,572,411Impairment
                of intangibles
            
            
            -
            
            
            -
            
            
            -
            
            
            1,539,633Total
                including impairment
            
            $
            11,274,859
            
            $
            7,202,783
            
            $
            19,237,024
            
            $
            10,112,044





Amortization
      of intangible assets was $2,352,243, $3,419,150, and $3,374,723 for the years
      ended December 31, 2007, 2006 and 2005, respectively. Estimated amortization
      expense of intangible assets for the years ending December 31, 2008, 2009,
      2010,
      2011, 2012 and thereafter is $1,678,779, $1,670,427, $586,965, $36,139, $36,139
      and $63,627, respectively. The weighted average remaining life of the
      intangibles is 2.6 years with right of entry average life of 5.2 years and
      customer cable lists of 2.3 years. The reduction in intangible value during
      2007
      is due to a sale of subscribers to Directech MDU “Directech” and MDU
      Communications “MDUC” (see Note 2). The reduction in intangible value during
      2006 is due to a sale of subscribers to CSBS (see Note 2) 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 amortized 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 120 months. Debt issuance costs were 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 $76,993,
      $101,295, and $202,701, for the years ended December 31, 2007, 2006 and 2005,
      respectively, and are included in selling, general and administrative expenses
      in the consolidated statements of operations.





***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.





F
          -
          20


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




***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 years
      ended
      December 31, 2007 and 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
      years ended December 31, 2007 and 2006, total stock-based compensation expense
      of $711,423 ($0.10 per share), and $821,757 ($0.12 per share) was included
      in
      selling, general and administrative expenses, respectively. Estimated stock
      based compensation expense for the years ending December 31, 2008, 2009, 2010,
      2011 and 2012 is $657,000, $95,000, $13,000, $0, $0, respectively. This 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 2% 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.





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 year ended December 31,
      2005.





2005Loss
                attributable to common stockholders
            
            $
            (10,827,229
            )Pro
                forma loss attributable to common shares
            
            $
            (11,277,908
            )Basic
                and diluted loss attributable to common shareholders:As
                reported
            
            $
            (.37
            )Pro
                forma loss attributable to common shares
            
            $
            (.39
            )Stock-based
                compensation:As
                reported
            
            $
            -Pro
                forma
            
            $
            450,679





In
      determining the compensation cost of the options granted during fiscal 2007,
      2006 and 2005, as specified by SFAS No. 123, the fair value of each option
      grant
      has been estimated on the date of grant using the Black-Scholes option pricing
      model and the weighted average assumptions used in these calculations are
      summarized as follows:




2007
              
              2006
              
              2005Risk-free
                  interest rate
              
              
              4.56
              %
              
              4.72
              %
              
              3.91
              %Expected
                  life of options granted
              
              
              10
                  years
              
              
              10
                  years
              
              
              10
                  yearsExpected
                  volatility range
              
              
              242
              %
              
              216
              %
              
              209
              %Expected
                  dividend yield
              
              
              0
              %
              
              0
              %
              
              0
              %




F
          -
          21


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




***Net
      Loss per Common Share***





Basic
      net
      loss per common share is computed by dividing the loss attributable to common
      stockholders by the weighted average number of common shares outstanding for
      the
      reporting period. Diluted net loss per common share is computed by dividing
      loss
      attributable to common stockholders by the sum of the weighted average number
      of
      common shares outstanding plus all additional common stock that would have
      been
      outstanding if potentially dilutive common shares related to common share
      equivalents (stock options, stock warrants and convertible preferred shares)
      had
      been issued. All options, warrants and convertible preferred shares outstanding
      during the years ended December 31, 2007, 2006 and 2005 were anti-dilutive
      due
      to net losses for each of the years then 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.





***Recently
      Issued Accounting Pronouncements***





During
      September 2006, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements”
(“SFAS 157”).  This statement defines fair value, establishes a framework
      for measuring fair value under generally accepted accounting principles, and
      expands disclosures about fair value measurements.  SFAS 157 is effective
      for financial statements issued for fiscal years beginning after
      November 15, 2007, however, during February 2008, the FASB issued FASB
      staff position 157-2, which defers the effective date of certain provisions
      of
      SFAS 157 related to fair value measure of non-financial assets and non-financial
      liabilities until fiscal years beginning after November 15, 2008. The Company
      is
      currently assessing the effect that SFAS 157 will have on its results of
      operations and financial position.





Durin g
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” (“SFAS 159”). This statement permits
      entities to choose to measure many financial instruments and certain other
      items
      at fair value. SFAS 159 is effective for fiscal years beginning after
      November 15, 2007.  The Company does not believe that the adoption of
      SFAS 159 will have a material effect on its results of operations or financial
      position.




During
      December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
      Combinations” (“SFAS 141 (Revised 2007)”). While this statement retains
      the fundamental requirement of SFAS 141 that the acquisition method of
      accounting (which SFAS 141 called the *purchase
      method* )
      be used
      for all business combinations, SFAS 141 (Revised 2007) now establishes the
      principles and requirements for how an acquirer in a business combination:
      recognizes and measures in its financial statements the identifiable assets
      acquired, the liabilities assumed, and any noncontrolling interests in the
      acquiree; recognizes and measures the goodwill acquired in the business
      combination or the gain from a bargain purchase; and determines what information
      should be disclosed in the financial statements to enable the users of the
      financial statements to evaluate the nature and financial effects of the
      business combination. **** SFAS
      141
      (Revised 2007) is effective for fiscal years beginning on or after December
      15,
      2008. The Company believes that any business acquisition transactions that
      occur
      after the adoption of SFAS 141 (Revised 2007) will have a material effect on
      its
      results of operations and financial position. The Company does not believe
      that
      the adoption of SFAS 141 (Revised 2007) will have a material effect on its
      results of operations or financial position.




F
          -
          22


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




During
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements and amendment of ARB No. 51” (“SFAS 160”).
      SFAS 160 establishes accounting and reporting standards for noncontrolling
      interests in subsidiaries and for the deconsolidation of subsidiaries and
      clarifies that a noncontrolling interest in a subsidiary is an ownership
      interest in the consolidated entity that should be reported as equity in the
      consolidated financial statements. SFAS 160 also requires expanded disclosures
      that clearly identify and distinguish between the interests of the parent owners
      and the interests of the noncontrolling owners of a subsidiary. SFAS 160 is
      effective for fiscal years beginning on or after December 15, 2008. The Company
      is currently assessing the effect that SFAS 160 will have on its results of
      operations and financial position.




During
      March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
      Instruments and Hedging Activities” (SFAS No. 161). SFAS No. 161 is intended to
      improve financial reporting about derivative instruments and hedging activities
      by requiring enhanced disclosures to enable investors to better understand
      their
      effects on an entity’s financial position, financial performance, and cash
      flows. SFAS No. 161 also improves transparency about the location and amounts
      of
      derivative instruments in an entity’s financial statements; how derivative
      instruments and related hedged items are accounted for under Statement 133;
      and
      how derivative instruments and related hedged items affect its financial
      position, financial performance, and cash flows.




SFAS
      No.
      161 is effective for financial statements issued for fiscal years and interim
      periods beginning after November 15, 2008, with early application encouraged.
      The Company does not believe the adoption of SFAS No. 161 will have a material
      effect on its results of operations or financial position.




***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.




F
          -
          23


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005


**NOTE
      2 –** **Business Acquisitions/Sales Transactions**







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 (pre-split) 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. 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 3,000 video subscribers. The Company recorded $1,450,000 in equipment,
      $474,225 in intangible assets and $150,000 in goodwill. Substantially all of
      the
      Dinamo acquisition assets were sold March 1, 2007 to Consolidated Smart
      Broadband Systems, LLC (complete description provided later in this footnote).





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 (pre-split) 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.





F
            -
            24


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




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 was paid in 42 equal monthly payments of $3,250 and one payment of
      $10,000 on September 20, 2007, and was 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 Company recorded $166,760 for equipment and $432,329
      for
      the value of the rights of entry. The rights of entry were being amortized
      over
      its estimated useful life of 18 months. The expected life of the cable systems
      were also being amortized over 18 months. Substantially all of the Rand’M
      acquisition assets were sold March 1, 2007 to Consolidated Smart Broadband
      Systems, LLC (complete description provided later in this
      footnote).





Effective
      September 29, 2006, pursuant to the agreement referenced in Note 2, 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
      Company had $1,244,236 of assets held for sale on December 31, 2006 related
      to
      video assets located in California. 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 at closing plus an additional
      $100,000, paid on March 30, 2007 consisting of cash proceeds of $757,731 and
      direct payments to lenders of $556,269 (including $22,338 of imputed interest).
      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 sometime in 2008 due to the
      aforementioned contingencies.





In
      accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
      Long-Lived Assets”, the Company classified the assets as held for sale, and
      recorded 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. Any consideration received for the assets during future
      accounting periods based upon the earnout formula was recognized as a gain
      on
      sale of assets in that period. The results of the sale of the California assets
      resulted in a loss of $40,110, which is included in the selling, general and
      administrative expenses of the accompanying consolidated statements of
      operations for the year ended December 31, 2007.





Effective
      March 31, 2007, the Company completed the sale of substantially all of its
      video
      assets located in Ohio to Directech MDU (“Dtech”). The purchase price paid by
      Dtech was $745,790. The purchase price consisted of the assumption of a note
      payable for the gross value of $329,036 and $416,754 cash paid at closing on
      April 20, 2007. The sale of the Ohio assets resulted in a gain on sale in the
      amount of $324,626, which is included in the selling, general and administrative
      expenses of the accompanying consolidated statements of operations for the
      year
      ended December 31, 2007. The proceeds of $683,897, including assumed liabilities
      of $267,143, less the net book value of the MCS segment assets sold amounted
      to
      a gain on sale of $324,626.




F
          -
          25


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




On
      October 16, 2007, the Company completed the sale to MDU Communications (MDUC)
      of
      approximately 9,800 subscriptions and the related assets located in 181
      multi-family properties located throughout Florida, Illinois, New York,
      Colorado, New Jersey, and Texas. Total proceeds for MCS assets sold amounted
      to
      approximately $3,325,000, consisting of cash proceeds of $1,476,753, selling
      expenses paid by MDUC of $135,000 and the remainder on debt and liabilities
      paid
      directly by MDUC. The sale resulted in a loss of $461,687 which is included
      in
      the selling, general and administrative expenses of the accompanying
      consolidated statements of operations for the year ended December 31, 2007.
      The
      aforementioned loss primarily resulted from fewer multi-family properties being
      sold to MDUC than was originally intended in the party’s asset purchase
      agreement. Certain properties could not be sold due to the Company’s inability
      to obtain some property owners consent to assignment. The difference in the
      mix
      of properties ultimately transferred to MDUC increased the loss on sale compared
      to what the Company originally estimated upon execution of the asset purchase
      agreement in July 2007.





These
      sales were 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 rights associated with the video
      subscribers.




**NOTE
        3 - Property and Equipment**







Property
      and equipment consisted of the following at December 31 :


**2007**
            
            **2006**Leasehold
                improvements
            
            $
            844,828
            
            $
            816,692Office
                equipment and furniture
            
            
            3,239,315
            
            
            2,808,707Subscriber
                related equipment
            
            
            2,916,796
            
            
            4,040,259Property
                and equipment under capital lease obligations
            
            
            467,878
            
            
            1,414,391Total
                property and equipment
            
            
            7,468,817
            
            
            9,080,049Less
                accumulated depreciation & amortization
            
            
            (5,421,422
            )
            
            (5,096,394
            )Less
                accumulated depreciation & amortization capital leases
            
            
            (278,134
            )
            
            (623,813
            )Total
                property and equipment, net
            
            $
            1,769,261
            
            $
            3,359,842





Depreciation
      and amortization expense on property and equipment for continuing operations
      was
      $1,286,300, $1,928,101, and $1,664,651 for the years ended December 31, 2007,
      2006 and 2005, respectively.





Depreciation
      and amortization expense on property and equipment for the discontinued
      operations was $0, $0 and $56,188, for the years ended December 31, 2007, 2006
      and 2005, respectively.







**NOTE
      4 – Notes Receivable**








Notes
      receivable consisted of the following at December 31:


**2007**
            
            **2006**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.
            
            $
            40,235
            
            $
            47,449Notes
                receivable – SBC-Ohio, variable monthly principal payments based on
                revenue generated plus interest of 7%, due October 2008. Note is
                collateralized by certain assets.
            
            
            19,626
            
            
            22,407Total
                notes receivable
            
            
            59,861
            
            
            69,856Less:
                current portion
            
            
            (59,861
            )
            
            (6,116
            )Long-term
                portion of notes receivable
            
            $
            -
            
            $
            63,740




F
          -
          26


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005







**NOTE
      5 - Accrued Liabilities**








Accrued
      liabilities consisted of the following at December 31:


**200****7**
              
              **2006**Payroll
                  and related taxes
              
              $
              512,960
              
              $
              535,919Accrued
                  preferred stock dividends
              
              
              642,395
              
              
              810,249Accrued
                  liability – vendor chargeback
              
              
              630,800
              
              
              1,103,414Other
              
              
              745,456
              
              
              527,774$
              2,531,611
              
              $
              2,977,356







**NOTE
      6 - Long-term Debt**








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


**2007**
            
            **2006**Debenture
                payable - Convergent Partners I, L.P., see terms in note
                below.
            
            $
            1,500,000
            
            $
            2,500,000Notes
                payable – group of accredited institutional investors, net of original
                issue discount and beneficial conversion of note payable into common
                stock
                of $0 and $30,413 at December 31, 2007 and 2006. Interest is 6% payable
                semi-annually in cash or common stock at the Company’s election, due
                November 2007, collateralized by certain assets of the Company and
                subordinated. This note payable is past due as of December 31, 2007
                (see
                Note below).
            
            
            66,666
            
            
            492,258Note
                payable – DeLage Landen Financial Services, monthly installments of
                $1,765 including interest at 10.40%, due July 2010.
            
            
            46,460
            
            
            -Note
                payable – Lexstar Tower One, LP, monthly installments of $2,737
                including interest at 4.00%, due August 2010.
            
            
            82,818
            
            
            -Note
                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. On January 18, 2008, the Company issued 7,500 shares
                of
                common stock at $2.60 per share in settlement of this debt resulting
                in a
                gain on extinguishment of debt of $29,965.
            
            
            44,446
            
            
            44,446Notes
                payable, interest at 7%, the Company’s intent is to pay this note via
                reduction of life insurance proceeds, collateralized by life insurance
                policy owned by the Company.
            
            
            36,876
            
            
            38,208Note
                payable - Lexus Tower I, Limited Partnership. This note was modified
                during 2007 (see Note 13 and Lexstar Tower One, LP note
                above)
            
            
            -
            
            
            239,750Note
                payable - Laurus Master Fund LTD. This note was paid in full during
                2007.
            
            
            -
            
            
            45,449Note
                payable – Extreme Video. This note was paid in full during
                2007.
            
            
            -
            
            
            280,888Note
                payable – Rand’M. This note was paid in full during
                2007.
            
            
            -
            
            
            108,311Note
                payable – Dell Marketing C.P. This note was paid in full during
                2007.
            
            
            -
            
            
            25,021Notes
                payable – Dinamo Entertainment. This note was paid in full during
                2007.
            
            
            -
            
            
            451,427Total
                long-term debt
            
            
            1,777,266
            
            
            4,225,758Less:
                current portion
            
            
            (1,658,342
            )
            
            (1,255,994
            )Long-term
                debt, net
            
            $
            118,924
            
            $
            2,969,764




F
          -
          27


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005


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




2008
            
            $
            1,658,3422009
            
            
            50,3292010
            
            
            31,7172011
            
            
            -Thereafter
            
            
            36,878Total
                future minimum payments
            
            $
            1,777,266





In
      June
      2005, the Company borrowed $2,000,000 from Convergent Capital Partners I, L.P.
      in connection with an amendment of an 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, 2007, the Company failed to
      meet
      the compliance covenants of its lender, Convergent Capital, with respect to
      having minimum net worth of three million dollars and positive EBITDA for the
      quarter ended December 31, 2007 of $150,000. Convergent Capital provided the
      Company with a waiver of both covenants for the year ended December 31, 2007.
      In
      accordance with EITF 86-30 “Classification of obligations when a violation is
      waived by the creditor”, the Company has classified the debt as current as of
      December 31, 2007, principally based on management’s assessment that the Company
      is unlikely to be in compliance with the covenants during 2008 .
      The
      Company paid $1,000,000 on the note during 2007. The Company is required to
      pay
      monthly interest only payments through the due date. The outstanding balance
      of
      the debenture was $1,500,000 at December 31, 2007 and $2,500,000 at December
      31,
      2006. The interest rate varies from 11% to 14% dependent on the Company’s stock
      prices (14% at December 31, 2007 and 2006). The debenture agreement is
      collateralized by substantially all of the assets of the Company.





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. 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 notes were due to be paid in full November,
      2007.
      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 was being amortized over the life of the notes 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,
      2006,
      the Company converted principal of $200,000 and accrued interest of $4,166
      into
      40,833 shares of common stock. During 2007, the Company paid $456,005 on the
      principal balance. The Company converted accrued interest of $17,680 into 3,536
      shares of common stock during the year ended December 31, 2007. The outstanding
      balance as of December 31, 2006 was $492,258, net of original issue discount
      of
      $30,413. The outstanding balance as of December 31, 2007 was $66,666. This
      note
      payable is past due as of December 31, 2007.




F
          -
          28


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005







**NOTE
      7** **- 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 13.87% and expire through June 2010. The obligations are
      collateralized by the property under lease excluding certain sold property
      items. Total cost and accumulated amortization of the leased equipment was
      $467,878 and $278,134 at December 31, 2007 and $1,414,391 and $623,813 at
      December 31, 2006. 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:





2008
            
            $
            265,8042009
            
            
            197,7552010
            
            
            77,066Less:
                amounts representing interest
            
            
            (65,865
            )Present
                value of future minimum lease payments
            
            
            474,760Less:
                current portion
            
            
            (225,291
            )Capital
                lease obligations, net of current portion
            
            $
            249,469







**NOTE
      8 - 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 was $24,739. The note was paid
      in full during 2007. Interest expense related to this note payable was $464,
      $2,289, and $3,549 for the years ended December 31, 2007, 2006 and 2005,
      respectively.








**NOTE
      9 - Stockholders' Equity**







*Capital
      Stock Authorized*





The
      articles of incorporation authorize the Company to issue 20,000,000 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
                and


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





On
      July
      18, 2007, the Company’s Board of Directors authorized a 1 for 5 reverse stock
      split of the Company’s common stock, effective August 7, 2007. In conjunction
      therewith, the Company amended its articles of incorporation to reduce its
      authorized capital shares from 100 million to 20 million to conform to Minnesota
      statutory requirements. The Company, in accordance with FAS 128 “Earning per
      Share”, gave retroactive effect of the common shares for the reverse stock split
      transaction in the accompanying balance sheet and the statement of
      operations.




F
          -
          29


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




*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 Special Situations Fund of New York, NY through its designated
      fund,
      Special Situations Fund III QP, L.P. 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 9.25%
      at December 31, 2007 and 2006, respectively). At December 31, 2007, $3,950,000
      worth of preferred stock value remains to be converted into 526,667 shares
      of
      common stock at a rate of $1.50 per share ($7.50 per share as adjusted for
      August 2007 reverse stock split). 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. In February, 2008 these warrants have expired. 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. On March 18, 2008, the remaining $3,950,000 worth of preferred stock
      value
      was converted into 526,667 shares of common stock.




F
          -
          30


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 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. The Rainbow sellers have exercised $279,745 value of the put
      option equal to 27,975 shares of preferred stock. The mandatory redeemable
      preferred stock had an outstanding balance of $220,256, and $280,000 as of
      December 31, 2007 and 2006, respectively.





*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, 2007, Multiband had
      the
      voting rights for and was holding in trust 58,161 common shares of URON for
      various contingent rights holders whose rights are tied to potential future
      warrant exercises or preferred stock conversions. As of February 4, 2008, the
      certain aforementioned contingent rights were not exercised by the various
      holders, therefore Multiband now owns 37,994 shares of URON (as adjusted for
      a 1
      for 10 reverse stock split).





*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 860,000 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 250,000 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
      80,000 shares of Company common stock to qualified employees. At December 31,
      2007 and 2006, no shares were issued under the Plan.





*Stock
      Subscriptions Receivable*





The
      Company has stock subscriptions receivable including interest receivable
      totaling $170,888 and $229,927 due to the Company at December 31, 2007 and
      2006,
      respectively, from the issuance of common stock. The agreements require monthly
      interest only payments at interest ranging from 2% to 9% on the outstanding
      receivable balances. One stock subscription is due February 2008. The second
      stock subscription receivable agreement was amended in February 2007. Subsequent
      to year end, this subscription receivable was reduced $61,333 for the 60,000
      common shares returned to the Company. At this time the due date of the
      remaining note balance of $122,667 was extended to February 2009. The
      receivables are collateralized by the common stock issued. At December 31,
      2007
      and 2006, the Company has reserved $160,761 and $100,761 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.




F
          -
          31


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




*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. No compensation expense recorded during the years
      ended December 31, 2007, 2006 and 2005, respectively in connection with the
      amortization of the award cost.





*Stock
      Options*





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





Options
            
            Weighted-Average Exercise Price2007
            
            2006
            
            2005
            
            2007
            
            2006
            
            2005Outstanding,
                January 1
            
            
            613,331
            
            
            611,986
            
            
            437,686
            
            $
            7.55
            
            $
            7.70
            
            $
            8.55Granted
            
            
            57,600
            
            
            41,300
            
            
            302,755
            
            
            2.75
            
            
            5.45
            
            
            7.15Exercised
            
            
            -
            
            
            (6,000
            )
            
            (400
            )
            
            -
            
            
            3.00
            
            
            4.90Forfeited
            
            
            (11,099
            )
            
            (33,955
            )
            
            (128,055
            )
            
            5.66
            
            
            8.60
            
            
            9.35Outstanding,
                December 31
            
            
            659,832
            
            
            613,331
            
            
            611,986
            
            $
            7.15
            
            $
            7.55
            
            $
            7.70





The
      weighted average grant date fair value of options granted during the years
      ended
      December 31, 2007, 2006, and 2005 was $2.75, $5.45 and $7.15, respectively.
      Options exercisable at December 31, 2007, 2006, and 2005 were 521,931, 420,071
      and 324,798, respectively. The weighted average price of exercisable options
      for
      the years ended December 31, 2007, 2006, and 2005 was $9.04, $11.00 and $14.50,
      respectively.





Options
      outstanding and exercisable as of December 31, 2007 are as follows:


Outstanding
              
              ExercisableWeighted - Average
              
              
              
              Weighted-Range of Exercise Prices
              
              Options
              
              Exercise
                Price
              
              Remaining
                Contractual
                Life-Years
              
              Options
              
              Average
                Exercise
                Price$2.20
              to
              $3.85
              
              87,000
              
              $
              2.84
              
              4.00
              
              55,200
              
              $
              4.48$4.25
              to
              $6.90
              
              160,980
              
              
              6.13
              
              6.80
              
              122,046
              
              
              8.08$7.00
              to
              $8.60
              
              349,018
              
              
              7.37
              
              6.50
              
              281,851
              
              
              9.13$9.25
              to
              $14.38
              
              45,100
              
              
              10.05
              
              2.40
              
              45,100
              
              
              10.05$21.57
              to
              $33.75
              
              17,734
              
              
              25.93
              
              2.10
              
              17,734
              
              
              25.93$2.20
              to
              $33.75
              
              659,832
              
              $
              7.15
              
              5.80
              
              521,931
              
              $
              9.04




Using
      the
      closing stock price of $2.71 on December 31, 2007 there were no options
      outstanding or exercisable with an intrinsic value. The intrinsic value of
      options exercised in 2007, 2006 and 2005 amounted to $0, $16,500, and $580,
      respectively.




F
          -
          32


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




*Stock
      Warrants*





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


Outstanding
              
              Weighted - Average Exercise Price2007
              
              2006
              
              2005
              
              2007
              
              2006
              
              2005Outstanding,
                  January 1
              
              
              3,488,329
              
              
              3,743,196
              
              
              2,359,128
              
              $
              8.05
              
              $
              8.40
              
              $
              8.20Granted
              
              
              24,202
              
              
              3,134
              
              
              1,808,105
              
              
              2.96
              
              
              5.25
              
              
              8.55Exercised
              
              
              -
              
              
              -
              
              
              (99,793
              )
              
              -
              
              
              -
              
              
              4.95Forfeited
              
              
              (423,658
              )
              
              (258,001
              )
              
              (324,244
              )
              
              10.62
              
              
              12.90
              
              
              9.00Outstanding,
                  December 31
              
              
              3,088,873
              
              
              3,488,329
              
              
              3,743,196
              
              $
              7.64
              
              $
              8.05
              
              $
              8.40




The
      weighted-average grant-date fair value of warrants granted during the years
      ended December 31, 2007, 2006, and 2005 was $0.96, $0.77, and $1.33,
      respectively.





Warrants
      outstanding and exercisable as of December 31, 2007, are as
      follows:


Weighted
                  - AverageRange
                  of Exercise
                Prices
              
              Warrants
              
              Remaining
                contractual
                life
              
              Exercise
                prices$2.57
              to
              $5.50
              
              337,805
              
              1.12
              
              $
              4.96$6.00
              to
              $6.50
              
              818,258
              
              2.36
              
              6.26$7.00
              to
              $8.63
              
              1,500,391
              
              2.57
              
              8.22$10.00
              to
              $11.25
              
              432,419
              
              2.75
              
              10.35$2.57
              to
              $11.25
              
              3,088,873
              
              2.38
              
              $
              7.64




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





**2007**
            
            **2006**
            
            **2005**Common
                stock
            
            
            -
            
            
            -
            
            
            256,323Services
                rendered
            
            
            24,202
            
            
            3,134
            
            
            123,210Preferred
                stock
            
            
            -
            
            
            -
            
            
            1,428,57224,202
            
            
            3,134
            
            
            1,808,105





During
      the year ended December 31, 2007, the Company issued 13,800 four-year warrants
      for services related to investor relations with a weighted average exercise
      price of $3.00. These warrants were valued at $41,400 using the Black Scholes
      pricing model.





During
      the year ended December 31, 2007, the Company issued 10,000 three-year warrants
      for services related to consulting with a weighted average exercise price of
      $2.57. These warrants were valued at $25,240 using the Black Scholes pricing
      model.





During
      the year ended December 31, 2007, the Company issued 402 three-year warrants
      for
      services related to sales commissions with a weighted average exercise price
      of
      $11.00. These warrants were valued at $900 using the Black Scholes pricing
      model.





During
      the year ended December 31, 2006, the Company issued 3,000 four-year warrants
      for services related to investor relations with a weighted average exercise
      price of $5.00. These warrants were valued at $11,478 using the Black Scholes
      pricing model.




F
          -
          33


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




During
      the year ended December 31, 2006, the Company issued 134 three-year warrants
      for
      services related to sales commissions with a weighted average exercise price
      of
      $11.00. These warrants were valued at $606 using the Black Scholes pricing
      model.





On
      August
      10, 2006, 8,571 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,
      256,323 five-year warrants with a weighted average exercise price of
      $10.00.





During
      the year ended December 31, 2005, the Company issued 91,650 five-year warrants
      for services relating to equity financing with a weighted average exercise
      price
      of $9.60.





During
      the year ended December 31, 2005, the Company issued 1,560 three year warrants
      with a weighted-average exercise price of $11.00 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 30,000 shares of the Company’s common stock to consultants with an
      exercise price $6.50 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.





During
      the year ended December 31, 2005, the Company issued to preferred stock
      investors 1,428,572 three-year warrants with a weighted average exercise price
      of $8.25.





During
      the year ended December 31, 2005, 95,193 warrants were exercised with a weighted
      average exercise price of $4.95. Based on the warrant agreements, these warrants
      were exercised in lieu of cash with the warrant holder receiving 20,277 shares
      of common stock.





During
      the year ended December 31, 2005, 4,600 warrants were exercised for cash at
      an
      exercise price of $5.00.





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:





**2007**
            
            **2006**
            
            **2005**Risk-free
                interest rate
            
            
            4.58
            %
            
            4.88
            %
            
            3.52
            %Expected
                life
            
            
            3.00
                years
            
            
            3.50
                years
            
            
            4.28
                yearsExpected
                volatility
            
            
            244
            %
            
            216
            %
            
            205
            %Expected
                dividend rate
            
            
            0
            %
            
            0
            %
            
            0
            %








**NOTE
      10 - Income Taxes**








The
      Company has generated federal and state net operating losses of approximately
      $46,762,000 and $38,608,000, respectively, which, if not used, will begin to
      expire in 2008. 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 $2,435,000, $1,823,800 and $(531,000) for the years
      ended December 31, 2007, 2006 and 2005, respectively.




F
          -
          34


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




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




**2007**
            
            **2006**Deferred
                income tax assets:Net
                operating loss carryforwards
            
            $
            18,705,000
            
            $
            16,013,000Depreciation
                of property and equipment
            
            
            -
            
            
            738,000Amortization
                of intangibles and goodwill, including impairment
            
            
            148,000
            
            
            978,000Stock-based
                compensation
            
            
            613,000
            
            
            329,000Asset
                valuation reserves
            
            
            182,000
            
            
            164,000Accrued
                liabilities
            
            
            370,000
            
            
            313,00020,018,000
            
            
            18,535,000Less
                valuation allowance
            
            
            (18,320,000
            )
            
            (15,885,000
            )1,698,000
            
            
            2,650,000Deferred
                income tax liabilities:Value
                of intangible related to stock purchase of MDU
            
            
            (1,477,000
            )
            
            (2,112,000
            )Depreciation
            
            
            (221,000
            )
            
            (538,000
            )Net
                deferred income tax assets
            
            $
            -
            
            $
            -




The
        Company reclassed certain components of the deferred tax assets for the year
        ended December 31, 2006 to conform to the presentation used for the year
        ended
        December 31, 2007.  The net effect was an increase in deferred tax assets
        of $387,000, a decrease in the valuation allowance of $79,000 and an increase
        in
        the deferred tax liabilities of $466,000. These reclassifications had no
        effect
        on the Company’s consolidated net loss for the years ended December 31, 2007 or
        stockholders’ equity at December 31, 2007 and 2006.




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


**2007**
            
            **2006**
            
            **2005**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
            
            
            40.0
            
            
            40.0
            
            
            37.7Other
            
            
            -
            
            
            -
            
            
            2.3Effective
                tax rate
            
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %





The
      Company has the following net operating loss carryforwards at December 31,
      2007,
      for income tax purposes:





Year
                of Expiration
            
            Federal
                Net
              Operating
                Loss
            
            State
                Net
              Operating
                Loss2008
            
            $
            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
            
            
            6,052,000
            
            
            3,202,0002025
            
            
            7,181,000
            
            
            4,589,0002026
            
            
            5,198,000
            
            
            3,061,0002027
            
            
            6,730,000
            
            
            7,980,000$
            46,762,000
            
            $
            38,608,000





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




F
          -
          35


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




The
      FASB
      has published FASB Interpretation (FIN) No. 48 (FIN No. 48), “Accounting for
      Uncertainty in Income Taxes”, to address the non-comparability in reporting tax
      assets and liabilities resulting from a lack of specific guidance in 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 To the extent interest and penalties
      would be assessed by taxing authorities on any underpayment of income taxes,
      such amounts would be accrued and classified as a component of selling, general
      and administrative expense in the consolidated statement of operations. 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. The Company’s
      federal and state tax returns are potentially open to examinations for fiscal
      years 2004 through 2006.





F
          -
          36


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005







**NOTE
      1** **1
      - Supplemental Cash Flows Information**








**2007**
            
            **2006**
            
            **2005**Cash
                paid for interest
            
            $
            473,601
            
            $
            368,612
            
            $
            579,449**Non-cash
                investing and financing transactions:**Note
                payable issued for prepaid lease
            
            
            44,407
            
            
            -
            
            
            -Common
                stock valued at $84,000, issued in lieu of cash for equipment, net
                of
                reduction in accounts payable of $19,665
            
            
            64,335
            
            
            -
            
            
            -Note
                receivable recorded for sale of discontinued operations
            
            
            -
            
            
            -
            
            
            400,000Note
                receivable recorded on sale of intangibles to Satellite Broadcasting
                Corporation
            
            
            -
            
            
            -
            
            
            75,500Issuance
                of common stock for purchase of Satellite Broadcasting Corporation
                intangibles
            
            
            -
            
            
            -
            
            
            105,000Common
                stock issued in relation to acquisition of Dinamo Entertainment,
                LLC
            
            
            -
            
            
            12,400
            
            
            702,500Common
                stock issued in lieu of cash for deferred financing costs
            
            
            -
            
            
            -
            
            
            36,000Common
                stock issued in lieu of cash for other current assets
            
            
            -
            
            
            -
            
            
            218,000Warrants
                issued for deferred compensation
            
            
            -
            
            
            -
            
            
            213,120Issuance
                of accrued liabilities for debt issuance costs
            
            
            -
            
            
            -
            
            
            125,000Conversion
                of notes payable and accrued interest to common and preferred
                stock
            
            
            17,680
            
            
            244,333
            
            
            1,646,190Conversion
                of preferred stock to common stock
            
            
            1,822,400
            
            
            3,151,500
            
            
            1,898,001Reduction
                of stock subscription receivable related to commission earned on
                equity
                transactions
            
            
            -
            
            
            -
            
            
            15,400Capital
                lease obligations related to property and equipment
            
            
            -
            
            
            539,529
            
            
            -Conversion
                of preferred stock dividends into common stock
            
            
            637,209
            
            
            473,001
            
            
            1,278,625Capital
                lease assumed in acquisition of equipment from SBC
            
            
            -
            
            
            -
            
            
            105,000Purchase
                of intangible assets
            
            
            -
            
            
            54,150
            
            
            -Property
                and equipment, intangibles and goodwill transferred to assets held
                for
                sale
            
            
            -
            
            
            1,244,236
            
            
            -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
            
            
            -
            
            
            -
            
            
            600,000Capital
                lease assumed in acquisition of equipment from Dinamo Entertainment,
                LLC
            
            
            -
            
            
            -
            
            
            45,200Property
                and equipment acquired through capital lease obligation
            
            
            -
            
            
            -
            
            
            16,185Reduction
                of notes payable, net of imputed interest in connection with the
                sale of
                intangible assets and related equipment
            
            
            532,015
            
            
            -
            
            
            -





F
          -
          37


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005







**NOTE
      12 - 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
      13 - 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 $26,000 to
      $35,000, 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. An amount of
      approximately $57,000 was paid by the sublessee for the early
      release.





Total
      rent expense for the years ended December 31, 2007, 2006 and 2005 including
      common area costs and real estate taxes was approximately $448,000, $368,000
      and
      $622,000, respectively.





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





Year
            
            Amount2008
            
            
            365,0002009
            
            
            385,0002010
            
            
            357,0002011
            
            
            313,0002012
            
            
            313,000Thereafter
            
            
            605,000$
            2,338,000





*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
      15). This guaranty has no effect on the Company’s consolidated financial
      statements for the years ended December 31, 2007 and 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.




F
          -
          38


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




*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. As of December 31, 2007, the
      Company believes that its system operator network has been activating new
      subscribers at a pace sufficient to achieve an automatic renewal of the
      aforementioned Master System Operator agreement when it expires. However, there
      is no guarantee that said agreement will be renewed. Revenues generated from
      DirecTV amounted to 65.94% and 58.04% of total revenue in 2007 and 2006,
      respectively. Accounts receivable from this customer was 56.30% and 61.74%
      of
      total accounts receivable as of December 31, 2007 and 2006,
      respectively.





*Bulk
      Subsidy Reserve*





Subsequent
      to year end, DTV informed the Company’s management that the Company must review
      and update the subscriber counts associated with bulk properties. The Company
      estimates that the result of this analysis will be a reduction to the subscriber
      count of approximately 750 active bulk subscribers. Bulk subsidy revenue is
      generated when bulk subscriber counts are greater than the benchmark set by
      DTV.
      The Company has recorded a bulk subsidy reserve of $150,000 at December 31,
      2007
      to reflect the anticipated impact of the decrease in subscriber count on the
      bulk subsidy revenue dollars received in 2008 related to 2007 and earlier
      subscribers. This reserve is netted against DTV estimated receivables on the
      consolidated balance sheet at December 31, 2007 and netted against revenues
      in
      the consolidated statement of operations for the year ended December 31,
      2007.





*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.





*Gain
      on Extinguishment of Debt*





Effective
      June 30, 2007, the Company revised its debt agreement with Lexus Tower I, L.P.
      to pay for certain leasehold improvements at its Fargo, ND location, resulting
      in a reduction of the outstanding principal in the amount of $118,040. The
      note
      is payable in 37 monthly installments of $2,737 including interest at 4%. This
      modification was accounted for as a gain on extinguishment of debt in accordance
      with EITF 96-19, “Debtor’s Accounting for a Modification or Exchange of Debt
      Instruments”. The gain of $118,040 for the year ended December 31, 2007 was
      included in other income in the consolidated statement of operations.




F
          -
          39
 
 **MULTIBAND
          CORPORATION AND SUBSIDIARIES**
  NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 December
          31, 2007, 2006 and 2005


**NOTE
        14– 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 15).





Segment
      disclosures are as follows:





Year
                Ended December 31, 2007
            
            Multiband Corp
            
            MDU
            
            MCS
            
            Discontinued
              Operations
            
            TotalRevenues
            
            $
            -
            
            $
            9,947,848
            
            $
            5,137,756
            
            $
            -
            
            $
            15,085,604Income
                (loss) from operations
            
            
            (4,320,701
            )
            
            2,953,736
            
            
            (4,399,150
            )
            
            -
            
            
            (5,766,115
            )Identifiable
                assets
            
            
            1,272,271
            
            
            4,652,909
            
            
            2,968,249
            
            
            -
            
            
            8,893,429Depreciation
                and amortization
            
            
            239,411
            
            
            1,604,905
            
            
            1,779,587
            
            
            -
            
            
            3,623,903Capital
                expenditures
            
            
            4,554
            
            
            5,153
            
            
            374,127
            
            
            -
            
            
            383,834Year
                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
            
            
            976,477





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
      15– 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.




F
          -
          40


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005




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




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





**Statement
                of Operations**
            
            **2007**
            
            **2006**
            
            **2005**Revenues
            
            $
            -
            
            $
            -
            
            $
            3,699,983Cost
                of sales
            
            
            -
            
            
            -
            
            
            2,701,664Selling,
                general and administrative
            
            
            -
            
            
            (2,200
            )
            
            1,122,220Depreciation
                and amortization
            
            
            -
            
            
            -
            
            
            56,188Income
                (loss) from operations
            
            
            -
            
            
            2,200
            
            
            (180,089
            )Impairment
                of goodwill
            
            
            -
            
            
            -
            
            
            -Other
                income (expense)
            
            
            -
            
            
            -
            
            
            (55,440
            )Net
                Income (loss)
            
            $
            -
            
            $
            2,200
            
            $
            (235,529
            )





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 $32,266, $64,400 and $87,587 is included in other income
      (expense) for the years ended December 31, 2007, 2006 and 2005,
      respectively.




F
          -
          41


**MULTIBAND
        CORPORATION AND SUBSIDIARIES**
  NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 December
        31, 2007, 2006 and 2005





**NOTE
      16 – Subsequent Event**








On
      February 6, 2008, the Company purchased, pursuant to a Supplemental Agreement
      and Plan of Share Exchange, 51% of the outstanding shares of Michigan Microtech,
      Inc. (MMT), previously a wholly owned subsidiary of DirecTECH Holding Company,
      Inc. which equaled 1,020,000 MMT common shares. The consideration paid for
      the
      shares was 1,490,000 shares of restricted Multiband common stock and a
      promissory note, due in February 2013, for $2,246,000. The Multiband shares
      via
      negotiation and mutual agreement between buyer and seller were valued at $2.60
      per share. The seller received certain piggyback registration rights with
      regards to the Multiband shares. The Company has not yet finalized the purchase
      price allocation as it is waiting for financial reports from the seller. The
      Company purchased MMT to enter the market of installing video services in single
      family homes. Also, all signing parties to the October 31, 2007 Plan of Merger
      Agreement involving Multiband Corporation and DirecTECH Holding Company, Inc.
      have agreed to extend the time to reach a definitive agreement in the matter
      from March 31, 2008 to December 31, 2008.





In
      February 2008, the Company signed an asset purchase agreement with US Install
      LLC. to acquire 100% of its assets in exchange for $95,000 in cash plus 37,879
      shares of restricted Multiband common stock to be issued in August, 2008. In
      addition, the parties executed employment agreements with US Install’s two
      principals. The parties also executed noncompetition and nonsolicitation
      agreements with each principal in exchange for cash consideration of $2,500
      per
      agreement. The Company has not yet finalized the purchase price allocation.
      Funding for the acquisition was secured under a promissory note in the amount
      of
      $100,000 between Multiband and Bas Mattingly Master, LLC. The note carries
      an
      interest rate of 7% per annum and is due August 20, 2009. The effective date
      of
      this transaction is March 1, 2008. The Company purchased US Install LLC to
      diversify revenue sources.




F
          -
          42




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 31, 2008, we reported on the consolidated balance sheets of
      Multiband Corporation and subsidiaries as of December 31, 2007 and 2006 and
      the
      related consolidated statements of operations, stockholders’ equity, and cash
      flows for the years ended December 31, 2007, 2006 and 2005 as contained in
      the
      annual report on Form 10-K for the year ended December 31, 2007. 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
      31,
      2008




F
          -
          43




**MULTIBAND
      CORPORATION AND SUBSIDIARIES**




**VALUATION
      AND QUALIFYING ACCOUNTS**


**Years
      Ended December 31, 2007, 2006 and 2005**







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 Year
            ****ALLOWANCE
                DEDUCTED FROM ASSET TO WHICH IT APPLIES
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****Allowance
                for doubtful accounts receivable:2007
            
            $
            229,400
            
            $
            -
            
            $
            154,400
            (A)
            $
            75,0002006
            
            
            386,000
            
            
            -
            
            
            156,600
            (A)
            
            229,4002005
            
            
            225,000
            
            
            161,000
            
            
            -
            
            
            386,000Stock
                subscriptions and interest receivable2007
            
            
            100,761
            
            
            60,000
            
            
            -
            
            
            160,7612006
            
            
            98,000
            
            
            70,000
            
            
            67,239
            (A)
            
            100,7612005
            
            
            71,000
            
            
            27,009
            
            
            9
            
            
            98,000





(A)
            
            Write-off
                uncollectible receivables




F
          -
          44