<PAGE>

                                UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 FORM 10-Q / A-1
                           Amendment no.1 to Form 10-Q

Mark one:
                 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                         For Quarter Ended June 30, 2009

                                       OR

            [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934.

                    For the transition period from to _______

                        Commission File Number 000-32695

                                   Amaru, Inc.
--------------------------------------------------------------------------------
              (Exact name of registrant as specified in its charter.)

             Nevada                                   88-0490089
           ----------                                 ----------
    (State of Incorporation)              (IRS Employer Identification No.)


             62 Cecil Street, #06-00 TPI Building, Singapore 049710
            --------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code (65) 6332 9287
                               -------------------
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 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 [ ]

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.

Large accelerated filer |_|   Accelerated filer  |_|    Non-accelerated filer|_|
Smaller reporting company |X|       (Do not check if a smaller reporting company

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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock $0.001 par value                           159,431,861 shares
-----------------------------                     -----------------------------
          (Class)                                 (Outstanding at July 31, 2009)


<PAGE>


                           AMARU, INC. AND SUBSIDARIES
                       2009 Quarterly Report on Form 10-Q
                                Table of Contents


PART I:  FINANCIAL INFORMATION
--------------------------------------------------------------------------------

ITEM 1:  CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets                                                  F-2
Consolidated Statements of Income                                            F-3
Consolidated Statement of Stockholders' Equity and Comprehensive
   Income                                                             F-4 to F-5
Consolidated Statements of Cash Flows                                        F-6
Notes to Consolidated Financial Statements                           F-7 to F-26

ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS                                      1

ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK          7

ITEM 4:  CONTROLS AND PROCEDURES                                         9 to 11

PART II:  OTHER INFORMATION
--------------------------------------------------------------------------------

ITEM 1:  LEGAL PROCEEDINGS                                                   11
ITEM 1A: RISK FACTORS                                                        11
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS          15
ITEM 3: DEFAULTS UPON SENIOR SECURITIES                                      15
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITIY HOLDERS                 15
ITEM 5: OTHER INFORMATION
15
ITEM 6:  EXHIBITS                                                            15

SIGNATURES


<PAGE>

<TABLE>
<S>            <C>

                              AMARU, INC. AND SUBSIDIARIES
                              CONSOLIDATED BALANCE SHEETS


                                                            JUNE 30,       DECEMBER 31,
                                                             2009              2008
                                                          ------------     ------------
                                                          (Unaudited)

ASSETS
Current assets
Cash and cash equivalents                                 $    324,025     $  1,484,945
Accounts receivable, net of allowance of
  $113,015 and $1,055,855 at June 30, 2009 and
  December 31, 2008 respectively                               135,535          134,710
Accounts receivable from sale of IPTV Platform               9,500,000        9,500,000
Equity securities held for trading                             463,420          179,620
Other current assets                                           290,149          230,293
Inventories                                                    642,268          644,153
Investments available for sale                               2,402,613        2,402,613
                                                          ------------     ------------
Total current assets                                        13,758,010       14,576,334

Non-current assets
Property and equipment, net                                    796,970        1,033,506
Intangible assets, net                                      20,532,508       20,872,056
Investments available for sale                                 616,136          616,136
                                                          ------------     ------------
Total non-current assets                                    21,945,614       22,521,698
                                                          ------------     ------------
Total assets                                              $ 35,703,624     $ 37,098,032
                                                          ============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses                     $  1,051,789     $  1,319,897
Others payable                                                      --            5,458
Advances from related parties                                       --           48,681
Capital lease payable - short term                              10,700           10,809
Income taxes payable                                             5,428            5,428
                                                          ------------     ------------
Total current liabilities                                    1,067,917        1,390,273
                                                          ------------     ------------

Convertible term loan                                        2,370,296        2,307,796
Capital lease payable - long term                               41,012           46,831
                                                          ------------     ------------
Total non-current liabilities                                2,411,308        2,354,627
                                                          ------------     ------------

Total liabilities                                            3,479,225        3,744,900

Commitments                                                         --               --

Amaru, Inc. stockholders' equity
Preferred stock (par value $0.001) 5,000,000 shares                 --               --
  authorized; 0 shares issued and outstanding at
  June 30, 2009 and December 31, 2008, respectively
Common stock (par value $0.001) 200,000,000 shares             154,098          154,098
  authorized;154,098,528 shares issued and outstanding
  at June 30, 2009 and December 31, 2008, respectively
Additional paid-in capital                                  39,190,666       39,190,666
Accumulated Deficit                                        (10,700,301)      (9,726,413)
Accumulated other comprehensive income                         968,406          968,406
                                                          ------------     ------------
Total Amaru, Inc. stockholders' equity                      29,612,869       30,586,757

Noncontrolling interest                                      2,611,530        2,766,375
                                                          ------------     ------------
Total equity                                                32,224,399       33,353,132
                                                          ------------     ------------
Total liabilities and shareholders' equity                $ 35,703,624     $ 37,098,032
                                                          ============     ============


              See accompanying notes to consolidated financial statements

                                          F-2

<PAGE>

                                                AMARU, INC. & SUBSIDIARIES
                                             CONSOLIDATED STATEMENTS OF INCOME
                                                        (UNAUDITED)


                                                          FOR THE SIX MONTHS ENDED           FOR THE THREE MONTHS ENDED
                                                       -------------------------------     -------------------------------
                                                       June 30, 2009     June 30, 2008     June 30, 2009     June 30, 2008
                                                       -------------     -------------     -------------     -------------

Revenue:

Entertainment                                          $      30,820     $      48,169     $      14,007     $      13,176
Digit gaming                                                      --                --                --                --
                                                       -------------     -------------     -------------     -------------
Total revenue                                                 30,820            48,169            14,007            13,176

Cost of services                                            (111,143)         (265,008)          (56,090)         (101,963)
                                                       -------------     -------------     -------------     -------------
Gross loss                                                   (80,323)         (216,839)          (42,083)          (88,787)

Distribution costs                                           (97,122)       (1,067,086)          (64,441)          (80,970)
Administrative expenses                                   (1,171,647)       (1,941,146)         (637,942)         (902,644)
                                                       -------------     -------------     -------------     -------------
Total expenses                                            (1,268,769)       (3,008,232)         (702,383)         (983,614)
                                                       -------------     -------------     -------------     -------------

Loss from operations                                      (1,349,092)       (3,225,071)         (744,466)       (1,072,401)

Other (expenses) income
 Interest expense                                            (63,545)           (1,111)          (31,774)             (568)
 Interest income                                                 104             8,970                37             3,527
 Gain on disposal of equipment                                    --             1,888                --                --
Loss on disposal of investment available for sale                 --          (442,051)               --           (44,296)
Net change in fair value of financial
 assets at Fair value securities for trading                 283,800        (1,385,000)          293,091        (1,385,000)
Share of loss of associate                                        --           (12,546)               --            (3,718)
                                                       -------------     -------------     -------------     -------------
Loss before income taxes                                  (1,128,733)       (5,054,921)         (483,112)       (2,502,456)

Benefit for income taxes                                          --           947,099                --           826,000
                                                       -------------     -------------     -------------     -------------

Net (loss) including noncontrolling interest           $  (1,128,733)    $  (4,107,822)    $    (483,112)    $  (1,676,456)
                                                       =============     =============     =============     =============

Less: Net (loss) attributable to
 noncontrolling interest                                    (154,845)         (406,665)          (56,728)         (241,732)
                                                       -------------     -------------     -------------     -------------

Net (loss) attributable to Amaru, Inc.                 $    (973,888)    $  (3,701,157)    $    (426,384)    $  (1,434,184)
                                                       =============     =============     =============     =============
Earnings per share attributable to Amaru, Inc.
 common shareholders
- - Basic and diluted                                    $       (0.01)    $       (0.03)    $      (0.003)    $       (0.01)
                                                       =============     =============     =============     =============

Weighted average number of Amaru, Inc. common
 shares outstanding
- - Basic and diluted                                      154,098,528       154,098,528       154,098,528       154,098,528
                                                       =============     =============     =============     =============


                                See accompanying notes to consolidated financial statements

                                                            F-3

<PAGE>

                                                   AMARU, INC. AND SUBSIDIARIES
                             CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
                                                            (UNAUDITED)



                              PREFERRED STOCK                COMMON STOCK
                        ---------------------------   ---------------------------
                                 NUMBER        PAR          NUMBER           PAR         ADDITIONAL                    SUBSCRIBED
                                   OF         VALUE           OF            VALUE         PAID-IN        COMMON         RETAINED
                                 SHARES      ($0.001)       SHARES         ($0.001)       CAPITAL         STOCK         EARNINGS
                               ----------   ----------   ------------    ------------   ------------   ------------   ------------
Balance at December 31, 2007           --           --    159,431,861    $    159,431   $ 42,918,666   $         --   $  5,650,447

Net loss                               --           --             --              --             --             --    (15,376,860)

Change in fair value
of available
for-sale-equity
securities, net
of tax                                 --           --             --              --             --             --             --

Common stock received in
Cancellation of exchange for
Repayment of investment                --           --     (5,333,333)         (5,333)    (3,728,000)            --             --

Comprehensive loss                     --           --             --              --             --             --             --
                               ----------   ----------   ------------    ------------   ------------   ------------   ------------
Balance at December 31, 2008           --           --    154,098,528    $    154,098   $ 39,190,666   $         --   $ (9,726,413)
                               ==========   ==========   ============    ============   ============   ============   ============


(CONTINUED)


                                  ACCUMULATED OTHER
                                  COMPREHENSIVE INCOME
                               ---------------------------
                                 CURRENCY                                         TOTAL
                               TRANSLATION     FAIR VALUE    NONCONTROLLING   SHAREHOLDERS'
                                 RESERVE        RESERVE         INTEREST         EQUITY
                               ------------   ------------    ------------    ------------

Balance at December 31, 2007   $     12,927   $  2,210,714    $  4,619,381    $ 55,571,566

Net loss                                 --             --      (1,853,006)    (17,229,866)

Change in fair value
of available
for-sale-equity
securities, net
of tax                                   --     (1,255,235)             --      (1,255,235)


Common stock received in
Cancellation of exchange for
Repayment of investment                  --             --              --      (3,733,333)

                                                                              ------------
Comprehensive loss                       --             --              --     (22,218,434)
                               ------------   ------------    ------------    ------------
Balance at December 31, 2008   $     12,927   $    955,479    $  2,766,375    $ 33,353,132
                               ============   ============    ============    ============




           See accompanying notes to consolidated financial statements

                                       F-4

<PAGE>

                                                AMARU, INC. AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
                                                        (UNAUDITED)


                              PREFERRED STOCK                COMMON STOCK
                        ---------------------------   ---------------------------
                                 NUMBER        PAR          NUMBER           PAR         ADDITIONAL                    SUBSCRIBED
                                   OF         VALUE           OF            VALUE         PAID-IN        COMMON         RETAINED
                                 SHARES      ($0.001)       SHARES         ($0.001)       CAPITAL         STOCK         EARNINGS
                               ----------   ----------   ------------    ------------   ------------   ------------   ------------
Balance at December 31, 2008           --           --    154,098,528    $    154,098   $ 39,190,666   $         --   $ (9,726,413)

Net loss                               --           --             --              --             --             --       (973,888)

Comprehensive loss                     --           --             --              --             --             --             --
                               ----------   ----------   ------------    ------------   ------------   ------------   ------------
Balance at June 30, 2009               --           --    154,098,528    $    154,098   $ 39,190,666   $         --   $(10,700,301)
                               ==========   ==========   ============    ============   ============   ============   ============


(CONTINUED)



                                  ACCUMULATED OTHER
                                  COMPREHENSIVE INCOME
                               ---------------------------
                                 CURRENCY                                         TOTAL
                               TRANSLATION     FAIR VALUE    NONCONTROLLING   SHAREHOLDERS'
                                 RESERVE        RESERVE         INTEREST         EQUITY
                               ------------   ------------    ------------    ------------

Balance at December 31, 2008   $     12,927   $    955,479    $  2,766,375    $ 33,353,132

Net loss                                 --             --        (154,845)     (1,128,733)
                                                                              ------------
Comprehensive loss                       --             --              --      (1,128,733)
                               ------------   ------------    ------------    ------------
Balance at June 30, 2009       $     12,927   $    955,479    $  2,611,530    $ 32,224,399
                               ============   ============    ============    ============



           See accompanying notes to consolidated financial statements

                                       F-5

<PAGE>

                                      AMARU, INC. & SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                             FOR THE SIX MONTHS ENDED
                                                                            --------------------------
                                                                           JUNE 30 2009   June 30, 2008
                                                                            -----------    -----------
                                                                            (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES
    Net (loss) including noncontrolling interest                            $(1,128,733)   $(4,107,822)
    Adjustments to reconcile net income including noncontrolling interest
    to cash and cash equivalents used or provided by operations:
    Amortization                                                                349,255        585,042
    Depreciation                                                                253,121        340,450
    Gain on disposal of equipment                                                    --         (1,888)
    Loss on disposal of investment available for sales                               --        442,051
    Deferred taxes                                                                   --       (947,099)
    Net change in fair value of financial assets at fair value
    Through profit or loss-held for trading                                    (283,800)     1,385,000
    Share of loss of Equity Method Investment                                        --         12,546

 Changes in operation assets and liabilities
    Accounts receivables                                                           (825)       586,233
    Inventories                                                                   1,885          9,844
    Others current assets                                                       (59,856)        42,435
    Accounts payable and accrued expenses                                      (268,108)      (699,947)
    Other payables                                                               (5,458)       (60,005)
                                                                            -----------    -----------
Net cash used in operating activities                                        (1,142,519)    (2,413,160)
                                                                            -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES
    Acquisition of equipment                                                    (16,585)        (7,640)
    Proceeds from disposal of equipment                                              --          2,684
    Acquisition of intangible assets                                             (9,707)       (50,125)
    Proceeds from disposal of investment available for sale                          --      1,379,767
                                                                            -----------    -----------
Net cash provided by (used in) investing activities                             (26,292)     1,324,686
                                                                            -----------    -----------
CASH PROVIDED FROM FINANCING ACTIVITIES
   Repayment of related parties                                                 (48,681)        (1,769)
   Repayments of obligations under capital leases                                (5,928)       (31,520)
   Receipts from convertible term loan                                           62,500             --
                                                                            -----------    -----------
Net cash provided by (used in) financing activities                               7,891        (33,289)
                                                                            -----------    -----------
Effect of exchange rate changes on cash and cash equivalents                         --             --
                                                                            -----------    -----------

Cash flows from all activities                                               (1,160,920)    (1,121,763)

Cash and cash equivalents at beginning of period                              1,484,945      2,322,541
                                                                            -----------    -----------

Cash and cash equivalents at end of period                                  $   324,025    $ 1,200,778
                                                                            ===========    ===========



                      See accompanying notes to consolidated financial statements

                                                  F-6
</TABLE>
<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008

1. BASIS OF PRESENTATION AND REORGANIZATION

     Amaru, Inc. (the "Company") is in the business of broadband
     entertainment-on-demand, streaming via computers, television sets, PDAs
     (Personal Digital Assistant) and the provision of broadband services. Its
     business includes channel and program sponsorship (advertising and
     branding); online subscriptions, channel/portal development (digital
     programming services); content aggregation and syndication, broadband
     consulting services, broadband hosting and streaming services and
     E-commerce.

     The Company is also in the business of digit gaming (lottery). The Company
     has an 18 year license to conduct nation wide lottery in Cambodia. The
     Company through its subsidiary, M2B Commerce Limited, signed an agreement
     with Allsports International Ltd, a British Virgin Islands company to
     operate and conduct digit games in Cambodia and to manage the digit games
     activities in Cambodia. The digit game lottery operations have been
     suspended by the government of Cambodia in March, 2009, and it cannot be
     determined at this time whether the suspension of the digit games lottery
     is temporary or permanent, see Note 14.

     The key business focus of the Company is to establish itself as the leading
     provider and creator of a new generation of Entertainment-on-Demand and
     E-Commerce Channels on Broadband, and 3G (Third Generation) devices.

     The Company delivers both wire and wireless solutions, streaming via
     computers, TV sets, PDAs and 3G hand phones.

     At the same time the Company intends to launch e-commerce channels
     (portals) that provide on-line shopping and pay per view services but with
     a difference, merging two leisure activities of shopping and entertainment.
     The entertainment channels are designed to drive and promote the shopping
     portals, and vice versa.

     The Company's business model in the area of broadband entertainment
     includes e-services, which would provide the Company with multiple streams
     of revenue. Such revenues would be derived from advertising and branding
     (channel and program sponsorship); on-line subscriptions; online games
     micro-payments; channel/portal development (digital programming services);
     content aggregation and syndication; broadband consulting services; on-line
     shopping turnkey solutions; broadband hosting and streaming services;
     E-commerce commissions and on-line dealerships; and digit game operations.

  1.2  Recent Accounting Standards and Pronouncements

     In June 2006, the Financial Accounting Standards Board ("FASB") issued
     Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an
     Interpretation of FASB Statement No. 109, Accounting for Income Taxes ("FIN
     48"), to create a single model to address accounting for uncertainty in tax
     positions. FIN 48 clarifies the accounting for income taxes by prescribing
     a minimum recognition threshold a tax position is required to meet before
     being recognized in the financial statements. FIN 48 also provides guidance
     on derecognition, measurement, classification, interest and penalties,
     accounting in interim periods, disclosure and transition. FIN 48 is
     effective for fiscal years beginning after December 15, 2006. The Company
     adopted FIN 48 on January 1, 2007. The adoption of FIN 48 did not have an
     impact on the Company's opening retained earnings.

     In September 2006, the FASB issued Statement of Financial Accounting
     Standard ("SFAS") No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS
     No. 157 clarifies the principle that fair value should be based on the
     assumptions market participants would use when pricing an asset or
     liability and establishes a fair value hierarchy that prioritizes the
     information used to develop those assumptions.


                                      F-7

<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008


     Under the standard, fair value measurements would be separately disclosed
     by level within the fair value hierarchy. In February 2008, the FASB issued
     two Staff Positions that amend SFAS No. 157. The first FASB Staff Position
     (FSP), No. FAS 157-1, excludes from the scope of SFAS No. 157 accounting
     pronouncements that address fair value measurements for purposes of lease
     classification and measurement. The second FSP, No. FAS 157-2, delays the
     effective date of SFAS No. 157 for nonfinancial assets and nonfinancial
     liabilities, except for items that are recognized or disclosed at fair
     value in the financial statements on a recurring basis (at least annually).
     SFAS 157 is effective for the Company on January 1, 2008, except for
     nonfinancial assets and nonfinancial liabilities that are not recognized or
     disclosed at fair value on a recurring basis for which its effective date
     is January 1, 2009. The adoption of this statement did not have a material
     impact on the Consolidated Financial Statements.

     In December 2007, the FASB issued Statement of Financial Accounting
     Standards No. 141 (revised 2007), Business Combinations ("SFAS 141R"). SFAS
     141R established principles and requirements for how an acquiring company
     recognizes and measures in its financial statements the identifiable assets
     acquired, the liabilities assumed, any noncontrolling interest if the
     acquired company and the goodwill acquired. SFAS 141R also established
     disclosure requirements to enable the evaluation of the nature and
     financial effects of the business combination. SFAS 141R is effective for
     fiscal periods beginning after December 15, 2008. The Company is currently
     evaluating the impact that SFAS 141R will have on the financial position
     and results of operations.

     In December 2007, the FASB issued Statement of Financial Accounting
     Standards No. 160, Noncontrolling Interests in Consolidated Financial
     Statements-an amendment of Accounting Research Bulletin No. 51 ("SFAS.
     160"). SFAS 160 establishes accounting and reporting standards of ownership
     interests in subsidiaries held by parties other than the parent, the amount
     of consolidated net income attributable to the parent and to the
     noncontrolling interest, changes in a parent's ownership interest and the
     valuation of retained noncontrolling equity investments when a subsidiary
     is deconsolidated. SFAS 160 also establishes disclosure requirements that
     clearly identify and distinguish between the interests of the parent and
     the interests of the noncontrolling owners. SFAS 160 is effective for
     fiscal periods beginning after December 15, 2008. The adoption of this
     statement did not have a material impact on the Consolidated Financial
     Statements.

     In May 2008, the FASB issued SFAS No. 162 ("FAS 162"), The Hierarchy of
     Generally Accepted Accounting Principles. FAS 162 identifies the sources of
     accounting principles and the framework for selecting the principles used
     in the preparation of financial statements that are presented in accordance
     with accounting principles generally accepted in the United States of
     America. FAS 162 was effective on November 13, 2008. The adoption of FAS
     162 did not have a material impact on the Company's consolidated financial
     statements. FAS 162 was superseded by FAS 168.

     In June 2009, the FASB issued SFAS No. 168 ("FAS 168"), The FASB Accounting
     Standards Codification. FAS 168 is effective for financial statements
     issued for annual and interim periods beginning after September 15, 2009.
     On the effective date of FAS 168, the Codification will supersede all
     then-existing non-SEC accounting and reporting standards. Rules and
     interpretive releases of the SEC under authority of federal securities laws
     will continue to be sources of authoritative GAAP for SEC registrants. The
     adoption of FAS 168 is not expected to have a material effect on the
     Consolidated Financial Statements.



                                       F-8

<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  2.1  Principles of Consolidation

     The consolidated financial statements include the financial statements of
     Amaru, Inc. and its majority owned subsidiaries. All significant
     intercompany balances and transactions have been eliminated in
     consolidation. In addition, the Company evaluates its relationships with
     other entities to identify whether they are variable interest entities as
     defined by FASB Interpretation No. 46 (R) Consolidation of Variable
     Interest Entities ("FIN 46R") and to assess whether it is the primary
     beneficiary of such entities. If the determination is made that the Company
     is the primary beneficiary, then that entity is included in the
     consolidated financial statements in accordance with FIN 46(R).

  2.2 Use of Estimates

     The preparation of the consolidated financial statements in accordance with
     generally accepted accounting principles requires management to make
     estimates and assumptions relating to the reported amounts of assets and
     liabilities and the disclosure of contingent assets and liabilities at the
     date of the consolidated financial statements and the reported amounts of
     revenues and expenses during the period. Significant items subject to such
     estimates and assumptions include carrying amount of property and
     equipment, intangibles, valuation allowances of receivables and
     inventories. Actual results could differ from those estimates.

     Management has not made any subjective or complex judgments the application
     of which would result in any material differences in reported results.

  2.3 Cash and Cash Equivalents

     Cash and cash equivalents are defined as cash on hand, demand deposits and
     short-term, highly liquid investments readily convertible to cash and
     subject to insignificant risk of changes in value.

     Cash in banks and short-term deposits are held to maturity and are carried
     at cost. For the purposes of the consolidated statements of cash flows,
     cash and cash equivalents consist of cash on hand and deposits in banks,
     net of outstanding bank overdrafts.

     The Company monitors its liquidity risk and maintains a level of cash and
     cash equivalents deemed adequate by management to finance the Company's
     operations and to mitigate the effects of fluctuations in cash flows.

  2.4 Accounts Receivable

     Accounts receivable, which generally have 30 to 90 day terms, are recorded
     at the invoiced amount less an allowance for any uncollectible amounts (if
     any) and do not bear interest. Amounts collected on accounts receivable are
     included in net cash provided by operating activities in the consolidated
     statements of cash flows. The allowance for doubtful accounts is the
     Company's best estimate of the amount of probable credit losses in the
     Company's existing accounts receivable. Account balances are charged off
     against the allowance after all means of collection have been exhausted and
     the potential for recovery is considered remote. Bad debts are written off
     as incurred. The Company does not have any off-balance sheet credit
     exposure related to its customers.

     The Company's primary exposure to credit risk arises through its accounts
     receivable. The credit risk on liquid funds is limited because the
     counterparties are banks with high credit ratings assigned by international
     credit-rating agencies.



                                       F-9
<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008


  2.5 Inventories

     Inventories are carried at the lower of cost or and net realizable value.
     Cost is calculated using first-in, first-out ("FIFO") method and comprises
     all costs of purchase, costs of conversion and other costs incurred in
     bringing the inventories to their present location and condition.
     Inventories comprised primarily of finished products used in the Company's
     IPTV service. As at June 30,, 2009, the net inventories amount is $642,268
     after written off of $457,400 during the year ended December 31, 2008.

  2.6 Property and Equipment

     Property and equipment are stated at cost. Depreciation is computed using
     the straight-line method over the estimated useful lives of the assets for
     financial reporting purposes. Expenditures for major renewals and
     betterments that extend the useful lives are capitalized. Expenditures for
     normal maintenance and repairs are expensed as incurred. The cost of assets
     sold or abandoned and the related accumulated depreciation are eliminated
     from the accounts and any gains or losses are reflected in the accompanying
     consolidated statement of income of the respective period. The estimated
     useful lives of the assets range from 3 to 5 years.

  2.7 Intangible Assets

     Intangible assets consist of film library, gaming and software licence and
     product development costs. Intangible assets which were purchased and have
     indefinite lives are stated at cost less impairment losses and are tested
     for impairment at least annually in accordance with the provisions of FASB
     Statement No. 142, Goodwill and Other Intangible Assets.

     Intangible assets which were purchased for a specific period are stated at
     cost less accumulated amortization and impairment losses. Such intangible
     assets are reviewed for impairment in accordance with FASB Statement No.
     144, Accounting for Impairment or Disposal of Long-Lived Assets. Such
     intangible assets are amortized over the period of the contract, which is 2
     to 18 years.

     The film library, which are classified as indefinite lives, relate to film
     library rights that are acquired for perpetuity by the Company. The film
     library, which are classified as having definite lives, relate to film
     library rights that are generally acquired for one to ten years by the
     Company.

  2.8 Investments

     The Company classifies its investments in marketable equity and debt
     securities as "available-for-sale", "held to maturity" or "trading" at the
     time of purchase in accordance with the provisions of Statement of
     Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
     Investments in Debt and Equity Securities" ("SFAS No. 115"). Equity
     securities held for trading as of December 31, 2008 totaled $179,620.


                                      F-10

<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008


     Available-for-sale securities are carried at fair value with unrealized
     gains and losses, net of related tax, if any, reported as a component of
     other comprehensive income (loss) until realized. Realized gains and losses
     from the sale of available-for-sale securities are determined on a
     specific-identification basis. A decline in the market value of any
     available-for-sale security below cost that is deemed to be other than
     temporary will result in an impairment, which is charged to earnings.

     Available-for-sale securities that are not publicly traded or have resale
     restrictions greater than one year are accounted for at cost. The Company's
     cost method investments include companies involved in the broadband and
     entertainment industry. The Company uses available qualitative and
     quantitative information to evaluate all cost method investment impairments
     at least annually.

  2.9 Valuation of Long-Lived Assets

     The Company evaluates the carrying value of long-lived assets to be held
     and used, other than intangible assets with indefinite lives, when events
     or circumstances warrant such a review. No impairment losses were recorded
     for the years ended December 31, 2008 and 2007.

  2.10 Fair Value

     An instrument is classified as at fair value through profit or loss if it
     is held for trading or is designated as such upon initial recognition.
     Financial instruments are designated as fair value through profit or loss
     if the Company manages such investments and makes purchase and sales
     decisions based on their fair value. Upon initial recognition, attributable
     transaction costs are recognised in the income statement when incurred.
     Financial instruments at fair value through profit or loss are measured at
     fair value, and changes therein are recognized in the income statement.

     Financial assets recorded at fair value on the Consolidated Balance Sheets
     are categorized as follows:

     Level 1: Quoted prices (unadjusted) in active markets for identical assets
              or liabilities, as applicable, that the reporting entity has the
              ability to access at the measurement date.

     Level 2: Quoted prices in markets, other than quoted prices included in
              Level 1, that are not active or inputs that are observable either
              directly or indirectly for substantially the full term of the
              asset or liability, as applicable, Level 2 inputs include the
              following:

               a) Quoted prices for similar assets or liabilities in active
               markets;

               b) Quoted prices for identical or similar assets or liabilities
               in non-active markets;

               c) Inputs other than quoted market prices which are observable
               for the asset or liability; and

               d) Inputs that are derived principally from or corroborated by
               observable market data by correlation or other means.

     Level 3: Prices or valuation techniques that require inputs which are both
              unobservable and significant to the overall fair value measurement
              of the asset or liability, as applicable. They may reflect
              management's own assumptions about the assumptions a market
              participant would use in pricing the asset or liability.


                                      F-11



<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008


The following table shows how our investments are categorized.

Fair Value Measurement at June 30, 2009 using:
----------------------------------------------

<TABLE>
<S>     <C>

                                               Prices or Fair Value    Quoted Prices in         Valuation
                                                Measurements at         Active Markets          Techniques
                                                 June 30, 2009            (Level 1)              (Level 3)
Description                                           ($)                    ($)                   ($)
-----------------------------------------------------------------------------------------------------------
  Cash and cash equivalents                     $   324,025            $   324,025           $        --

  Equity Securities Held for Trading            $   463,420            $   463,420           $        --

  Investments Available for Sale - Current      $ 2,402,613            $        --           $ 2,402,613

  Investments Available for Sale - Non Current  $        --            $        --           $   616,136

</TABLE>

The Company's cash and cash equivalents is classified within Level 1 of the fair
value hierarchy because it is valued using quoted market prices. The cash
instrument is included in current assets in the accompanying consolidated
balance sheets.

The Company's equity securities held for trading consists primarily of shares
held for sale and is classified within Level 1 of the fair value hierarchy
because it is valued using quoted market prices. The cash instrument is included
in current assets in the accompanying consolidated balance sheets.

The Company's investments available for sale are valued using pricing models and
the Company generally uses similar models to value similar instruments. Where
possible, the Company verifies the values produced by its pricing models to
market prices. Valuation models require a variety of inputs, including
contractual terms, market prices, yield curves, credit spreads, measures of
volatility and correlations of such inputs. These financial liabilities do not
trade in liquid markets, and as such, model inputs cannot generally be verified
and do involve significant management judgment. Such instruments are typically
classified within Level 3 of the fair value hierarchy.

The table below sets forth a summary of changes in the fair value of the
Company's Level 3 financial assets (Investments Available for Sale) for the year
ended December 31, 2008.

                                                               For quarter ended
                                                                 June 30, 2009
                                                              ------------------

     Balance at the beginning and end of the period                $ 3,018,749

     In February 2007, the FASB issued Statement of Financial Accounting
     Standards No. 159, The Fair Value Option for Financial Assets and Financial
     Liabilities. SFAS No. 159 permits entities to choose to measure many
     financial assets and financial liabilities at fair value. Unrealized gains
     and losses on items for which the fair value option has been elected are
     reported in net income. SFAS No. 159 is effective for fiscal years
     beginning after November 15, 2007 and interim periods within those fiscal
     years. Upon adoption of this Statement, the Company did not elect SFAS No.
     159 option for existing financial assets and liabilities and therefore
     adoption of SFAS No. 159 did not have any impact on its Consolidated
     Financial Statements.

  2.11 Advances from Related Party

     Advances from director and related party of $48,681 at December 31, 2008
     are unsecured, non-interest bearing and payable on demand. As at June 30,
     2009, the amount is $0.00.

  2.12 Leases

     The Company is the lessee of equipment under a capital lease expiring in
     2014. The assets and liabilities under capital leases are recorded at the
     lower of the present value of the minimum lease payments or the fair value
     of the asset. The assets are amortized over the lower of their related
     lease terms or their estimated productive lives. Amortization of assets
     under capital leases is included in depreciation expense for the quarter
     ended June 30, 2009 and 2008.

     On November 1, 2007, the Company sub-leased the office premises of M2B
     World Inc, a wholly owned subsidiary of the Company in Los Angeles,
     California as part of its efforts to streamline its operations and reduce
     operating costs.

  2.13 Foreign Currency Translation

     Transactions in foreign currencies are measured and recorded in the
     functional currency, U.S. dollars, using the Company's prevailing month
     exchange rate. The Company's reporting currency is also in U.S. dollars. At
     the balance sheet date, recorded monetary balances that are denominated in
     a foreign currency are adjusted to reflect the rate at the balance sheet
     date and the income statement accounts using the average exchange rates
     throughout the period. Translation gains and losses are recorded in
     stockholders' equity as other Comprehensive income and realized gains and
     losses from foreign currency transactions are reflected in operations.



                                      F-12


<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008

  2.14 Revenues

     Subscription and related services revenues are recognized over the period
     that services are provided. Advertising and sponsorship revenues are
     recognized as the services are performed or when the goods are delivered.
     Licensing and content syndication revenue is recognized when the license
     period begins, and the contents are available for exploitation by customer,
     pursuant to the terms of the license agreement. Gaming revenue is
     recognized as earned net of winnings. E-commerce commissions are recognized
     as received. Broadband consulting services and on-line turnkey solutions
     revenue are recognized as earned. The digit game operations has been
     suspended. See Note 14.

  2.15 Costs of Services

     The cost of services pertaining to advertising and sponsorship revenue and
     subscription and related services are cost of bandwidth charges, channel
     design and alteration, copyright licensing, and hardware hosting and
     maintenance costs. The cost of services pertaining to E-commerce revenue is
     channel design and alteration, and hardware hosting and maintenance costs.
     The cost of services pertaining to gaming is for managing and operating the
     operations and gaming centers. All these costs are accounted for in the
     period its was incurred. The license and operations has been suspended. See
     Note 14.

  2.16 Income Taxes

     Deferred income taxes are determined using the liability method in
     accordance with Statement of Financial Accounting Standards ("SFAS") No.
     109, Accounting for Income Taxes. Deferred tax assets and liabilities are
     recognized for the future tax consequences attributable to differences
     between the financial statement carrying amounts of existing assets and
     liabilities and their respective tax bases. Deferred income taxes are
     measured using enacted tax rates expected to apply to taxable income in
     years in which such temporary differences are expected to be recovered or
     settled. The effect on deferred income taxes of a change in tax rates is
     recognized in the statement of income of the period that includes the
     enactment date. In addition, a valuation allowance is established to reduce
     any deferred tax asset for which it is determined that it is more likely
     than not that some portion of the deferred tax asset will not be realized.

     During the year ended December 31, 2007, the Company adopted Financial
     Accounting Standards Board (FASB) Interpretation No. 48, "Accounting for
     Uncertainty in Income Taxes" (FIN 48), which supplements SFAS No. 109,
     "Accounting for Income Taxes," by defining the confidence level that a tax
     position must meet in order to be recognized in the financial statements.
     The Interpretation requires that the tax effects of a position be
     recognized only if it is "more-likely-than-not" to be sustained based
     solely on its technical merits as of the reporting date. The
     more-likely-than-not threshold represents a positive assertion by
     management that a company is entitled to the economic benefits of a tax
     position, If a tax position is not considered more-likely-than-not to be
     sustained based solely on its technical merits. No benefits of the tax
     position are to be recognized. Moreover, the more-likely-than-not threshold
     must continue to be met in each reporting period to support continued
     recognition of a benefit. With the adoption of FIN 48, companies are
     required to adjust their financial statements to reflect only those tax
     positions that are more-likely-than-not to be sustained. Any necessary
     adjustment would be recorded directly to retained earnings and reported as
     a change in accounting principle.

     Upon adoption of FIN 48 as of January 1, 2007, the Company had no gross
     unrecognized tax benefits that, if recognized, would favorably affect the
     effective income tax rate in future periods. At December 31, 2007 the
     amount of gross unrecognized tax benefits before valuation allowances and
     the amount that would favorably affect the effective income tax rate in
     future periods after valuation allowances were $0. These amounts consider
     the guidance in FIN 48-1, "Definition of Settlement in FASB Interpretation
     No. 48".The Company has not accrued any additional interest or penalties as
     a result of the adoption of FIN 48.

     The Company files income tax returns in the United States federal
     jurisdiction and certain states in the United States and certain other
     foreign jurisdictions. With a few exceptions, the Company is no longer
     subject to U. S. federal, state or foreign income tax examination by tax
     authorities on income tax returns filed before December 31, 2004. U. S.
     federal. State and foreign income returns filed for years after December
     31, 2004 are considered open tax years as of the date of these consolidated
     financial statements. No income tax returns are currently under examination
     by any tax authorities.

                                      F-13



<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008


  2.17 Earnings (Loss) Per Share

     In February 1997, the Financial Accounting Standards Board (FASB) issued
     FAS No. 128 "Earnings Per Share" which requires the Company to present
     basic and diluted earnings per share, for all periods presented. The
     computation of earnings per common share (basic and diluted) is based on
     the weighted average number of shares actually outstanding during the
     period. The Company has no common stock equivalents, which would dilute
     earnings per share.

  2.18 Financial Instruments

     The carrying amounts for the Company's cash, other current assets, accounts
     payable, accrued expenses and other liabilities approximate their fair
     value.

  2.19 Advertising

     The cost of advertising is expensed as incurred. For the six months ended
     June 30, 2009 and 2008, the Company incurred advertising expenses of
     $63,821 and $43,112 respectively.


3. EQUITY SECURITIES HELD FOR TRADING

                                                     June 30,      December 31,
                                                      2009            2008
                                                  ------------     ------------
     Quoted equity security, at fair value        $    463,420     $    179,620
                                                  ============     ============

     The fair value of quoted security is based on the quoted closing market
     price on the date of Sale and Purchase agreement. The investment in quoted
     equity security at fair value includes an impairment gain of US$283,800.

     The investments in quoted equity securities comprised of 34,000,000 common
     shares of PT Agis at the market value of US$ 0.01363 per share as of June
     30, 2009 and 34,000,000 common shares of PT Agis at the market value of US$
     0.00528 per share as of December 31, 2008.

     The Company's equity securities held for trading investment is denominated
     in Indonesian Ruppiah.

4. OTHER CURRENT ASSETS

     Other current assets consist of the following:

                                                     June 30,      December 31,
                                                      2009            2008
                                                  ------------     ------------
     Prepayments                                  $     50,512     $     70,108
     Deposits                                          162,116           69,995
     Other receivables                                  77,521           90,190
                                                  ------------     ------------
                                                  $    290,149     $    230,293
                                                  ============     ============


                                      F-14



<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008


5. PROPERTY AND EQUIPMENT

     Property and equipment consist of the following:

                                                     June 30,      December 31,
                                                      2009            2008
                                                  ------------     ------------
     Office equipment                             $  1,021,089     $  1,004,504
     Motor vehicle                                      91,190           91,190
     Furniture, fixture and fittings                   313,208          313,208
     Pony set-top boxes                                843,946          843,946
                                                  ------------     ------------
                                                     2,269,433        2,252,848
     Accumulated depreciation                       (1,472,463)      (1,219,342)
                                                  ------------     ------------
                                                  $    796,970     $  1,033,506
                                                  ============     ============

     Depreciation expense was $253,121 for the six months ended June 30, 2009
     and $340,450 for the six months ended June 30, 2008.

6. INTANGIBLE ASSETS

     Intangible assets consist of the following:

                                                     June 30,      December 31,
                                                      2009            2008
                                                  ------------     ------------
     INDEFINITE LIVES
     Film library                                 $ 17,765,818     $ 17,763,716
                                                  ------------     ------------
                                                    17,765,818       17,763,716
                                                  ------------     ------------
     DEFINITE USEFUL LIVES
     Film library                                    5,408,015        5,400,410
     Gaming license                                  7,090,000        7,090,000
     Product development expenditures                  719,220          719,220
     Software license                                   12,649           12,649
                                                  ------------     ------------
                                                    13,229,884       13,222,279
     Accumulated amortization                       (6,700,417)      (6,351,162)
                                                  ------------     ------------
                                                     6,529,467        6,871,117
                                                  ------------     ------------
                                                    24,295,285     $ 24,634,833
     Impairment loss                                (3,762,777)      (3,762,777)
                                                  ------------     ------------
                                                  $ 20,532,508     $ 20,872,056
                                                  ============     ============


                                      F-15



<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008

     Amortization expense was $349,255 for the six months ended June 30, 2009
     and $585,042 for the six months ended June 30, 2008.

     Intangible assets purchased and have indefinite lives are stated at cost
     less impairment losses are tested for impairment at least annually in
     accordance with the provisions of FASB Statement No. 142, Goodwill and
     Other Intangible Assets.

     FILM LIBRARY WITH INDEFINITE LIVES

     Intangible assets of the Company which have been classified as having
     indefinite useful lives relate to film library rights acquired for
     perpetuity by the Company.

     Film costs are stated at the lower of estimated net realizable value
     determined on an individual film basis, or cost. Film costs represent the
     acquisition of film rights for cash.

     The Company maintains distribution rights to these films for which it has
     no financial obligations to third parties.

     The Company is currently directing all its time and efforts towards
     building its broadband business.

     The Company evaluates the recoverability of its long lived assets in
     accordance with the provisions of Statement of Financial Accounting
     Standards No. 142 "Goodwill and the Intangible Assets," in which intangible
     assets purchased and which have indefinite lives are stated at cost less
     impairment losses and are tested for impairment at least annually.

     Recoverable amount is the higher of fair value less costs to sell and value
     in use. In assessing value in use, the estimated future cash flows are
     discounted to their present value using a pre-tax discount rate that
     reflects current market assessments of the time value of money and the
     risks specific to the asset. The use of a discounted cash flow model often
     involves the use of significant estimates and assumptions. Estimates are
     based upon assumptions about future demand and market conditions and can
     vary significantly. When necessary, the Company uses internal cash flow
     estimates, quoted market prices or appraisals, as appropriate, to determine
     fair value. If the recoverable amount of an asset is estimated to be less
     than its carrying amount, the carrying amount of the asset is reduced to
     its recoverable amount. An impairment loss is recognized immediately in the
     profit and loss statement, unless the relevant asset is carried at a
     revalued amount, in which case the impairment loss is treated as a
     revaluation decrease.

     The estimation of fair value is in accordance with AICPA Statement of
     Position 00-2, Accounting by Producers and Distributors of Film. Actual
     results may differ from estimates and as a result the estimation of fair
     values may be adjusted in the future.



                                      F-16



<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                              JUNE 3, 2009 AND 2008


     Valuations were performed on May 25, 2009 for the assessments of impairment
     of the Company's 100% ownership of the film library, which reflected a
     higher value from its cost. The methods of valuation used by the Company
     consisted of a discounted cash flow model, as well as sales transactions
     comparison method and market earnings/multiples method. Based on careful
     analysis of information available, the estimation for the investment value
     of the film library currently ranges from $203 million to $340 million.

     ASSETS WITH DEFINITE USEFUL LIVES

     Intangible assets which were purchased for a specific period are stated at
     cost less accumulated amortization and impairment losses. Such intangible
     assets are reviewed for impairment in accordance with FASB Statement No.
     144, Accounting for Impairment or Disposal of Long-Lived Assets. Such
     intangible assets are amortized over the period of the contract, which is 2
     to 18 years.

     Included in the gaming license are the rights to a digit games license in
     Cambodia. The license is for a minimum period of 18 years commencing from
     June 1, 2005, with an option to extend for a further 5 years or such other
     period as may be mutually agreed. The license and operations has been
     suspended. See Note 14.





                                      F-17



<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008


7. INVESTMENTS AVAILABLE-FOR-SALE

      Investments available-for-sale consist of the following:

                                                     June 30,      December 31,
                                                      2009            2008
                                                  ------------     ------------
      Non Current :
        Quoted equity securities                  $         --     $         --
        Unquoted equity securities                     616,136          616,136
                                                  ------------     ------------
                                                      $616,136     $    616,136
      Current :
        Unquoted equity securities                   2,402,613        2,402,613
                                                  ------------     ------------
                                                  $  3,018,749     $  3,018,749
                                                  ============     ============


     The unquoted equity securities classified as available-for-sale, with a
     carrying value of $3,018,749 as of June 30, 2009 and December 31, 2008, are
     measured at cost less impairment losses as there is no quoted market price
     in an active market and other methods of determining fair value do not
     result in a reasonable estimate.

     The Company explores other alternatives and considers using other valuation
     techniques to establish the fair value. Valuation techniques include using
     recent arm's length market transactions between knowledgeable and willing
     parties. However, as the key investments held by the Company operate in
     Singapore, there are no established markets in Singapore for similar
     investments for the Company to obtain comparables and observable data to
     carry out a reliable fair valuation.



                                      F-18



<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008


8. COMMITMENTS

     As of the balance sheet date, the Group has the following capital
     commitments:

                                                     June 30,      December 31,
                                                      2009            2008
                                                  ------------     ------------
      CAPITAL COMMITMENTS:
      Contracted but not provided for
             Film library                         $    108,000     $    111,687
             Set-top boxes                           2,074,825        2,074,825
             Contents                                       --          110,171
                                                  ------------     ------------
                                                  $  2,182,825     $  2,296,683
                                                  ============     ============

Capital Leases

     The following summarizes the Company's capital lease obligations at June
     30, 2009:

                                                      2009             2008
                                                  ------------     ------------
     Future minimum lease payments                $     62,029     $     69,140
     Less: amounts representing interest               (10,317)         (11,500)
                                                  ------------     ------------
     Present value of net minimum lease payments        51,712           57,640

     Less: current portion                             (10,700)         (10,809)
                                                  ------------     ------------
                                                  $     41,012     $     46,831
                                                  ============     ============

     The Company is the lessee of equipment under capital leases expiring in
     various years through 2014. The assets and liabilities under capital leases
     are recorded at the lower of the present value of the minimum lease
     payments or the fair value of the asset. The assets are amortized over the
     lower of their related lease terms or their estimated productive lives.
     Depreciation of assets under capital leases is included in depreciation
     expense for 2008 and 2007. Interest rates on capitalized leases is fixed at
     2.85%.





                                      F-19



<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                              JUNE 3, 2009 AND 2008


Operating Leases

     The Company leases facilities and equipment under operating leases expiring
     through 2012. Total rental expense on operating leases for the six months
     ended June 30, 2009 and 2008 was $61,769 and $124,382, respectively. As of
     June 30, 2009, the future minimum lease payments are as follows:

     For the Quarter Ended
     June 30,                                       Operating         Capital
     ---------------------                        ------------     ------------
          2009                                          23,645           10,319
          2010                                           3,959           10,319
          2011                                              --           10,319
          2012                                              --           21,493
                                                  ------------     ------------
                                                        27,604           52,450
                                                  ============     ============

9. INCOME TAXES

     The Company files separate tax returns for Singapore and the United States
     of America.

     The Company had available approximately $6,987,000 of unused U.S. net
     operating loss carry-forwards at June 30, 2009, that may be applied against
     future taxable income. These net operating loss carry-forwards expire for
     U.S. income tax purposes beginning in 2026. There is no assurance the
     Company will realize the benefit of the net operating loss carry-forwards.

     SFAS No. 109 requires a valuation allowance to be recorded when it is more
     likely than not that some or all of the deferred tax assets will not be
     realized. As of June 30, 2009 the Company maintained a valuation allowance
     for the U.S. deferred tax asset due to uncertainties as to the amount of
     the taxable income from U.S. operations that will be realized.

     The Company had available approximately $6,045,000 of unused Singapore tax
     losses and capital allowance carry-forwards at June 30, 2009, that may be
     applied against future Singapore taxable income indefinitely provided the
     company satisfies the shareholdings test for carry-forward of tax losses
     and capital allowances.




                                      F-20



<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008


10. SEGMENT REPORTING

     The Company classifies its business into reportable segments. The segments
     consists principally of entertainment and digit gaming. Information as to
     the operations of the Company in each of its business segments is set forth
     below based on the nature of the products and services offered.

     The Company has provided a summary of operating income by segment at and
     for the six months ended June 30, 2009. The accounting policies of the
     business segments are the same as those described in the summary of
     significant accounting policies in Note 2.

<TABLE>

            <c>
June 30, 2009                       ENTERTAINMENT    DIGIT GAMING         OTHER           TOTAL
                                    ------------     ------------     ------------    ------------
Revenues from external customers    $     30,820     $         --     $         --          30,820
Interest revenue                    $        104     $         --     $         --    $        104
Interest expenses                   $     63,545     $         --     $         --    $     63,545
Depreciation and amortization       $    602,376     $         --     $         --    $    602,376
Segment loss                        $   (934,265)    $     (9,451)    $         --        (943,716)
Segment assets                      $ 33,279,691     $  2,409,303     $     14,630    $ 35,703,624
Expenditures for segment assets     $     26,292     $         --     $         --    $     26,292
</TABLE>


    Reconciliation:-
      REVENUES
      Total revenues for reportable segments                      $      30,820
      Other revenue                                                          --
                                                                  -------------
      Total consolidated revenues                                 $      30,820
                                                                  =============

      INTEREST REVENUE
      Total interest revenue for reportable segments              $         104
      Corporate interest revenue                                             --
                                                                  -------------
      Total consolidated interest revenue                         $         104
                                                                  =============

      INTEREST EXPENSES
      Total interest revenue for reportable segments              $      63,545
      Corporate interest revenue                                             --
                                                                  -------------
      Total consolidated interest expenses                        $      63,545
                                                                  =============

      PROFIT OR LOSS
      Total (loss) for reportable segments                        $    (943,716)
      Corporate loss                                                   (185,017)
                                                                  -------------
      Loss before income tax                                      $  (1,128,733)
                                                                  =============

                                      F-21



<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008


      ASSETS
      Total assets for reportable segments                        $  35,688,994
      Other assets                                                       14,630
                                                                  -------------
      Total consolidated assets                                   $  35,703,624
                                                                  =============

      EXPENDITURES FOR SEGMENT ASSETS
      Total expenditures for assets for reportable segments       $      26,292
                                                                  =============

<TABLE>
<S>            <C>
June 30, 2008                        ENTERTAINMENT     DIGIT GAMING         OTHER            TOTAL
                                     ------------      ------------      ------------     ------------
Revenues from external customers     $     48,169      $         --      $         --     $     48,169
Interest revenue                     $      8,970      $         --      $         --     $      8,970
Interest expenses                    $      1,111      $         --      $         --     $      1,111
Depreciation and amortization        $    776,214      $    149,278      $         --     $    925,492
Segment profit (loss)                $ (2,082,652)     $ (1,022,084)     $         --     $ (3,104,736)
Segment assets                       $ 46,599,948      $  6,332,284      $     31,469     $ 52,963,701
Expenditures for segment assets      $     57,765      $         --      $         --     $     57,765
</TABLE>

    Reconciliation:-
      REVENUES
      Total revenues for reportable segments                     $       48,169
      Other revenue                                                          --
                                                                 --------------
      Total consolidated revenues                                $       48,169
                                                                 ==============

      INTEREST REVENUE
      Total interest revenue for reportable segments             $        8,970
      Corporate interest revenue                                             --
                                                                 --------------
      Total consolidated interest revenue                        $        8,970
                                                                 ==============

      INTEREST EXPENSES
      Total interest revenue for reportable segments             $        1,111
      Corporate interest revenue                                             --
                                                                 --------------
     Total consolidated interest expenses                        $        1,111
                                                                 ==============

      PROFIT OR LOSS
      Total (loss) for reportable segments                       $   (3,104,736)
      Corporate loss                                                   (110,588)
      Loss on disposal of investment available for sale                (442,051)
      Loss on valuation of held for trading investment               (1,385,000)
      Share of loss of associate                                        (12,546)
                                                                 --------------
      Loss before income tax                                     $   (5,054,921)
                                                                 ==============

                                      F-22





<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008

      ASSETS
      Total assets for reportable segments                       $   52,932,232
      Other assets                                               $       31,469
                                                                 --------------
      Total consolidated assets                                  $   52,963,701
                                                                 ==============

      EXPENDITURES FOR SEGMENT ASSETS
      Total expenditures for assets for reportable segments      $       57,765
                                                                 ==============

Following table presents revenues earned from customers located in different
geographic areas. Property and equipment is grouped by its location.

<TABLE>
<S>            <C>
  June 30, 2009                           ASIA PACIFIC    UNITED STATES      OTHER           TOTAL
                                          ------------    ------------    ------------    ------------

     Revenues from external customers     $     30,820    $         --    $         --    $     30,820
     Property and equipment, net          $    784,806    $     12,164    $         --    $    796,970


  June 30, 2008                           ASIA PACIFIC    UNITED STATES      OTHER           TOTAL
                                          ------------    ------------    ------------    ------------

     Revenues from external customers     $     48,169    $         --    $         --    $     48,169
     Property and equipment, net          $  1,210,464    $    157,676    $     95,400    $  1,463,540
</TABLE>


     The Company's operations are conducted over the world wide web and some
     purchases are made from locations outside of Singapore.

                                                     FOR THE SIX MONTHS ENDED
                                                   ----------------------------
                                                      JUNE 30,       JUNE 30,
                                                       2009            2008
                                                   ------------    ------------
     Sales outside of the U.S.                     $     30,820    $     48,162
     Services purchased outside of the U.S.        $    111,143    $    242,012



                                      F-23



<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008

11. RELATED PARTY TRANSACTIONS

     Related parties are entities with common direct or indirect shareholders
     and/or directors. Parties are considered to be related if one party has the
     ability to control the other party or exercise significant influence over
     the other party in making financial and operating decisions.

     Some of the company's transactions and arrangements are with the related
     party and the effect of these on the basis determined between the party is
     reflected in these financial statements. The balances are unsecured,
     interest-free and repayable on demand unless otherwise stated.

     During the period, the Group entered into the following transactions with
     the associate:

                                                      JUNE 30,       JUNE 30,
                                                       2009            2008
                                                   ------------    ------------
     Associate :
       Marketing                                   $      9,059    $         --
                                                   ============    ============

       Professional fee                            $      6,108    $         --
                                                   ============    ============


12. SALE OF IPTV PLATFORM

In April 2007 the Company through its subsidiary M2B World Holdings Limited
entered into an agreement to sell its IPTV platform to a company in Indonesia
(buyer) for $14,500,000. The total amount of the consideration was to be
received in shares of the buyer and a 50% share of a newly incorporated entity.
The Company has received $5,000,000 in cash and publicly-traded securities. The
balance outstanding receivable of $9,500,000 is included as "Receivable from
sale of IPTV platform" at June 30, 2009 and December 31, 2008, respectively,
which comprises of two portions: the first portion of $2 million to be settled
fully in publicly-traded shares of the buyer and the other portion of $7,500,000
million will be reinvested in the form of joint venture with the buyer as stated
in the terms of the sale agreement.

On December 15, 2008, M2B World Holdings entered into a further agreement with
PT Agis to set up a Joint Venture Company to launch WOWtv in Indonesia. The
agreement with PT Agis TBK would give M2B World Holdings a 49 percent equity
stake in the Joint Venture Company called PT WOW Television Management is in the
process of completing this transaction and has determined that the entire amount
of $9,500,000 is recoverable and no allowances are necessary. In accordance with
the agreement, the JV company was initially expected to be capitalized and go
into operations by July 2009. The Company intends to complete the valuation of
the content and to have the site up and running by September 2009.



                                      F-24



<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008


13. PURCHASE OF CBBN HOLDINGS LIMITED

The Company through its wholly owned subsidiary, Tremax International Limited,
entered into a sale and purchase agreement dated July 10, 2007 with Domaine
Group Limited which has not yet been consummated. Per the agreement the Company
through its wholly owned subsidiary, Tremax International Limited would transfer
5,333,333 shares of the Company valued at $3,733,333 which is included as
"Prepayment on purchase" at June 30, 2008 and December 31, 2007, respectively,
in exchange for Domaine Group Limited transferring its 100% shares in CBBN
Holdings Limited, a company incorporated in the British Virgin Islands. The
transaction has not been consummated and the agreement had expired and was not
extended. The Management of the Company had decided not to proceed with this
agreement.

On January 22, 2009, the Company approved the termination and rescission of the
Agreement where the seller failed to comply with the terms of the Agreement and
did not deliver to the Company or Purchaser the consideration for the issuance
of the Amaru Shares. The Company further approved the cancellation of the Amaru
Shares.

14. IMPAIRMENT OF DIGIT GAMES LICENSE

On March 25, 2009, the Company was officially notified that the digit games were
suspended by the Cambodia Government as part of the suspension of all lotteries
in Cambodia. It cannot be determined at this time whether the suspension of the
digit games is temporary or permanent, though the Government of Cambodia is
currently closing the gaming business by the order of its Ministry of Economy
and Finance. Due to the lack of access to the digit game operations, the digit
games lottery operations resulting from the holding of the digit games lottery
license were impaired as of December 31, 2008, and no revenues were received as
of June 30, 2009 since the Company's recognition criteria related to the
associated revenues were not met.

15. LOAN AND BORROWINGS


                                                      JUNE 30,       JUNE 30,
                                                       2009            2008
                                                   ------------    ------------
     Non-current

     Convertible loan                              $  2,500,000    $         --
     Less: Future interest charges                 $   (129,704)             --
                                                   ------------    ------------
                                                   $  2,370,296    $         --
                                                   ============    ============


Term loans held by the Company at balance sheet date are as follows:

(a)  $2,500,000 represents a two years convertible loan drawn down by a
     subsidiary company. It bears interest at a fixed rate of 5.0% per annum.
     The loan allows the borrower the option to convert the loan into shares of
     the subsidiary company at the issue price of $0.942 per share at the end of
     the two years period. The loan commenced in July 2008 and will mature in
     June 2010. The note was obtained from a company in which a board of
     director is the Joint Company Secretary of the lender.


16. LEGAL PROCEEDINGS

On September 15, 2008, M2B Commerce Limited filed a lawsuit in the Kingdom of
Cambodia for breach of the Performance and Maintenance Agreement dated May 20,
2005 between M2B Commerce Limited and Allsports International Ltd, by Allsports
International Ltd seeking damages in the total amount of $794,189 and calling
for the termination of the Performance and Maintenance Agreement.

On December 4, 2008, M2B Commerce Limited filed two further lawsuits in the
Kingdom of Cambodia against the owners of Allsports International Ltd, in
support of its earlier suit of September 15, 2008 against Allsports
International Ltd for breach of the Performance and Maintenance Agreement dated
May 20, 2005. One lawsuit was against the four principal officers of Allsports
International Ltd for breach of trust of the total amount of $794,189 owing to
M2B Commerce Limited. The other lawsuit was to get Allsports International Ltd
to transfer the shares of the Lottery Company to M2B Commerce Limited, in lieu
of the earlier lawsuit of September 15, 2008 which called for the termination of
the Performance and Maintenance Agreement.



                                      F-25


<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2009 AND 2008


On November 7, 2008, M2B World Asia Pacific Pte. Ltd was served a summons in
Singapore by M2B Game World Pte. Ltd, a company owned 81% by Auston
International Group Limited and 19% by M2B World Pte. Ltd, claiming a sum of
US$153,744 (S$235,229) in unpaid invoices in 2006. Following this, M2B World
Asia Pacific Pte. Ltd filed a counter claim to strike off this summons on the
basis that the invoices were non-existent and that M2B World Asia Pacific Pte.
Ltd was not yet incorporated as a company as of the date of the invoices
produced by M2B Game World Pte. Ltd.

On February 23, 2009, M2B World Pte Ltd was served a summons in Singapore by
Auston International Group Limited, claiming a sum of US$496,765 (S$760,050) to
be paid as shortfall in Guaranteed Profit to M2B Game World Pte. Ltd for
financial years 2006 and 2007, as part of the agreement for the acquisition of
M2B Game World in December 20, 2005 between M2B World Pte Ltd and Auston
International Group Limited. On March 20, 2009 in response to this summons, M2B
World Pte. Ltd filed a counter-claim against Auston International Group Limited
to claim damages amounting to US$1,568,172 and other damages as a result of
material breaches on the part of Auston International Group Limited to the
agreement of December 20, 2005 for the acquisition of M2B Game World Pte Ltd.

17. SUBSEQUENT EVENTS

The Company commenced a private placement pursuant to the Regulation D as
promulgated under the Securities Act of 1933 up to $254,778, and that the
company anticipates the closing of the placement on or about 20 August, 2009.
The total amount sold at the time of the filing of this Form 10-Q is $204,778
for 2,047,780 shares. The price per share in the offering is at USD 0.10 per
share.

The Company moved to a new premises at 62 Cecil Street #06-00,TPI Building
Singapore 049710 on July 27, 2009. The Company anticipates the signing of the
rental agreement on or about August 25, 2009. The monthly rental amount of the
premises is US$8,289 (S$12,000).



                                      F-26

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 0F FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

ALL FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE DEEMED BY THE COMPANY TO BE
COVERED BY AND TO QUALIFY FOR THE SAFE HARBOR PROTECTION PROVIDED BY THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. PROSPECTIVE SHAREHOLDERS SHOULD
UNDERSTAND THAT SEVERAL FACTORS GOVERN WHETHER ANY FORWARD - LOOKING STATEMENT
CONTAINED HEREIN WILL BE OR CAN BE ACHIEVED. ANY ONE OF THOSE FACTORS COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED HEREIN. THESE
FORWARD - LOOKING STATEMENTS INCLUDE PLANS AND OBJECTIVES OF MANAGEMENT FOR
FUTURE OPERATIONS, INCLUDING PLANS AND OBJECTIVES RELATING TO THE PRODUCTS AND
THE FUTURE ECONOMIC PERFORMANCE OF THE COMPANY. ASSUMPTIONS RELATING TO THE
FOREGOING INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE
ECONOMIC, COMPETITIVE AND MARKET CONDITIONS, FUTURE BUSINESS DECISIONS, AND THE
TIME AND MONEY REQUIRED TO SUCCESSFULLY COMPLETE DEVELOPMENT PROJECTS, ALL OF
WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND MANY OF WHICH ARE
BEYOND THE CONTROL OF THE COMPANY. ALTHOUGH THE COMPANY BELIEVES THAT THE
ASSUMPTIONS UNDERLYING THE FORWARD - LOOKING STATEMENTS CONTAINED HEREIN ARE
REASONABLE, ANY OF THOSE ASSUMPTIONS COULD PROVE INACCURATE AND, THEREFORE,
THERE CAN BE NO ASSURANCE THAT THE RESULTS CONTEMPLATED IN ANY OF THE FORWARD -
LOOKING STATEMENTS CONTAINED HEREIN WILL BE REALIZED. BASED ON ACTUAL EXPERIENCE
AND BUSINESS DEVELOPMENT, THE COMPANY MAY ALTER ITS MARKETING, CAPITAL
EXPENDITURE PLANS OR OTHER BUDGETS, WHICH MAY IN TURN AFFECT THE COMPANY'S
RESULTS OF OPERATIONS. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE
FORWARD - LOOKING STATEMENTS INCLUDED THEREIN, THE INCLUSION OF ANY SUCH
STATEMENT SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER
PERSON THAT THE OBJECTIVES OR PLANS OF THE COMPANY WILL BE ACHIEVED.

General

     The Company is in the business of broadband entertainment-on-demand,
     streaming via computers, television sets, and 3G (Third Generation) devices
     and the provision of broadband services. Its business includes channel and
     program sponsorship (advertising and branding); online subscriptions,
     channel/portal development (digital programming services); content
     aggregation and syndication, broadband consulting services, broadband
     hosting and streaming services and E-commerce.

     The Company is also in the business of digit gaming (lottery). The Company
     has an 18 year license to conduct nation wide lottery in Cambodia. The
     Company through its subsidiary, M2B Commerce Limited, signed an agreement
     with Allsports Limited, a British Virgin Islands company to operate and
     conduct digit games in Cambodia and to manage the digit games activities in
     Cambodia. On March 25, 2009, the Company was notified that the digit games
     were suspended by the Cambodia Government as part of the suspension of all
     lotteries in Cambodia. It cannot be determined at this time whether the
     suspension of the digit games is temporary or permanent, though the
     Government of Cambodia is currently closing the gaming business by the
     order of its Ministry of Economy and Finance.

     The following discussion should be read in conjunction with selected
     financial data and the financial statements and notes to financial
     statements.

                                        1



<PAGE>

OVERVIEW

The business focus of the Company is Entertainment-on-Demand and E-Commerce
Channels on Broadband, and 3G (Third Generation) devices.

For the broadband, the Company delivers both wire and wireless solutions,
streaming via computers, TV sets, PDAs and 3G hand phones. At the same time the
Company launches e-commerce channels (portals) that provide on-line shopping but
with a difference, merging two leisure activities of shopping and entertainment.
The entertainment channels are designed to drive and promote the shopping
portals, and vice versa.

The Company's business model in the area of broadband entertainment includes
focuses on e-services, which would provide the Company with multiple streams of
revenue. Such revenues would be derived from advertising and branding (channel
and program sponsorship); on-line subscriptions; online games micro-payments;
channel/portal development (digital programming services); content aggregation
and syndication; broadband consulting services; on-line shopping turnkey
solutions; broadband hosting and streaming services; E-commerce commissions and
on-line dealerships; and digit game operations.

In fiscal 2008, the business was reorganized under the following entities to
spearhead the expansion of the Company's business and focus on specific growth
areas and territories.

M2B WORLD PTE. LTD.

M2B World Pte. Ltd. was incorporated on April 3, 2003. This subsidiary used to
oversee the management and operation of the Company as a whole and oversees the
Asian business. With effect from September 1, 2006, the Company's Asian business
was overseen by another subsidiary, M2B World Asia Pacific Pte. Ltd.

The Company took an investment on May 16, 2005 for a 9.1% equity position with a
company called Activ Lifestyle Pte Ltd in Singapore to help facilitate Amaru
Inc.'s diversification into the health and wellness market.On September 27,
2005, the Company raised its investment in Activ Lifestyle Pte Ltd to 12.6%.
This was further increased to 17.4% as of December 31, 2006.

In December 2005, M2B World Pte. Ltd. sold 81% equity interests of its
wholly-owned subsidiary, M2B Game World Pte. Ltd. to Auston International Group
Ltd (Auston), a public listed company in Singapore, in exchange for 27% equity
interest in Auston. As of December 31, 2008, the Company disposed all of its
common shares in Auston. As of the date of this report, the Company holds no
shares in Auston.

M2B WORLD, INC.

M2B World, Inc., a California corporation, was incorporated on January 24, 2005.
This subsidiary handles and oversees the Company's business in the U.S. The
Company has leased a new office on Sunset Boulevard, West Hollywood that came
into effect in August 2006, which offices are currently being subleased (see
below). In October 2007, M2B World Inc reduced its staffing and in November 2007
sub-leased its premise as part of the Company's cost reduction measures.

On May 27, 2005, M2B World, Inc. entered into an agreement with Indie Vision
Films, Inc., a California corporation, to purchase 20% of the beneficial
ownership of Indie Vision Films, Inc. The investment will allow M2B World,
Inc.to access the library of programs of Indie Vision Films, Inc. The Company is
currently into negotiations with Indie Vision Films, Inc to convert its
investment into content rights, thereby giving up its 20% share of beneficial
ownership in lieu of library rights that the Company could exploit commercially
for international use. As of the date of this report, the Company had received
the list of content titles from Indie Vision Films, Inc for evaluation and
selection in order to convert its investment into content rights.

On November 1, 2007, the Company sub-leased the office premises of M2B World
Inc, a wholly owned subsidiary of the Company in Los Angeles, California as part
of its efforts to streamline its operations and reduce operating costs. The
staffing of M2B World Inc was also reduced from 9 staff to 1 staff as of October
31, 2007, and remains as 1 staff as of the date of this report. The company has
transferred its server farm to the Singapore server farm to, optimize bandwidth
and support cost.


                                        2



<PAGE>


M2B WORLD ASIA PACIFIC PTE. LTD.

M2B World Asia Pacific Pte Ltd was incorporated in the Republic of Singapore on
1 August 2006 for the purposes of handling all the business operations of the
Company in the Asia Pacific region. This company had taken over the Asian
business operations as well as the assets and liabilities of M2B World Pte. Ltd.
with effect from September 1, 2006.

On January 3, 2007, M2B World Asia Pacific Pte Ltd, issued 7,778,014 shares of
common stock through a private placement at a price of $0.77 a share for a total
amount of $6,000,000. This had effectively reduced the Company's effective
equity interest in M2B World Asia Pacific Pte. Ltd from 100% to 81.6%.

On July 8, 2008, M2B World Asia Pacific Pte Ltd signed a two year convertible
loan agreement with a third party to raise $2,500,000 in funding. The loan
allows the borrower to convert the loan into shares of the Company at the issue
price of $0.942 per share at the end of the two years period. The loan bears an
interest rate of 5.0% per annum, and will mature in June 2010. The note was
obtained from a company in which a board of director is the Joint Company
Secretary of the lender.


M2B COMMERCE LIMITED

M2B Commerce Limited, a company incorporated in the British Virgin Islands on
July 25, 2002, focuses on e-commerce and digit gaming, with a branch in Cambodia
that oversees the digit gaming operation in Cambodia.

The Company has an agreement with Allsports Limited, a British Virgin Islands
company to operate, administer, and manage the lottery digit game activities in
Cambodia, as an extension of the Company's entertainment operations. On March
25, 2009, the Company was notified that the digit game were suspended by the
Cambodia Government as part of the suspension of all lotteries in Cambodia. It
cannot be determined at this time whether the suspension of the digit game is
temporary or permanent, though the Government of Cambodia is currently closing
the gaming business by the order of its Ministry of Economy and Finance.

The company had entered into an investment agreement on January 12, 2006, with
Khoo Kim Leng, the beneficial owner of Dai Long Co., Ltd, which holds a valid
casino license and freehold land and intends to develop and operate an
integrated resort in the Kingdom of Cambodia. The resort will feature a hotel,
guest house, shopping arcade, entertainment and amusement center and some gaming
tables. As of December 31, 2006, the company had invested $2,402,613 in relation
to this investment. The resort was completed and is in operation subsequent to
the balance sheet date.

M2B ENTERTAINMENT, INC.

M2B Entertainment, Inc. was incorporated on October 27, 2005. This subsidiary
will oversee the Company's Canadian market. As of June 30, 2009, this subsidiary
is dormant.

M2B AUSTRALIA PTY LTD

M2B Australia Pty Ltd was incorporated on June 15, 2005. This subsidiary handles
and oversees the Company's business in Australia. As of June 30, 2009 this
subsidiary is dormant.

M2B WORLD TRAVEL SINGAPORE PTE. LTD.

M2B World Travel Singapore Pte Ltd was incorporated in the Republic of Singapore
on March 7, 2006. This subsidiary of M2B World Travel Limited launches a global
online travel platform which offers global e-travel services.

The Company has completed the development of an online travel engine and travel
web applications for integration with suppliers of travel information and travel
services; and incorporating travel features with current media operations under
the M2B brand name.


                                        3



<PAGE>

M2B World Travel Limited signed a global agreement with Amadeus Global Travel
Distribution, SA, a Spanish corporation. Through the agreement, the company will
be able to offer direct access to the extensive range of travel options
available through the Amadeus network to viewers around the world.

The company has entered into an agreement with Elleipsis, Inc to host the travel
site and the travel software platform in the US with effect from June 30, 2008,
The Company plans to have the travel service and the site operational before the
end of the year. The launch and operations of the travel service is subject to
funding considerations, and there can be no guarantee that the service can be
operational as planned.

AMARU HOLDINGS LIMITED AND M2B WORLD HOLDINGS LIMITED

Amaru Holdings Limited and M2B World Holdings Limited are incorporated in the
British Virgin Islands on February 21, 2005 and June 15, 2006, respectively.
Amaru Holdings Limited focuses on content syndication and distribution in areas
other than Asia Pacific region. M2B World Holdings Limited focuses on content
syndication and distribution in Asia Pacific region and is a subsidiary of M2B
World Asia Pacific Pte. Ltd.

                                        4



<PAGE>

RESULTS OF OPERATIONS

REVENUE

Financial Statement

-    Revenue for the six months ended June 30, 2009 was $30,820 compared with
     $48,169 for the same period in 2008.

-    The Company's cash balance was $324,025 at June 30, 2009 compared with
     $1,484,945 at December 31, 2008.

Revenue

Revenue from entertainment for the six months ended June 30, 2009 at $30,820 was
lower than revenue of $48,169 for the six months ended June 30, 2008 by $17,349
(36%). It was insignificant mainly due to no new advertising or content
syndication contracts being secured.

Cost of Services

Cost of services for the three months ended June 30, 2009 was $111,143 which
decreased by $153,865 (58%) from $265,008 for the six months ended June 30,
2008.

As a proportion of revenue the cost of the services for the six months ended
June 30, 2009 was 361% (cost of sales at $111,143 and revenue of $ 30,820) as
compared to 550% (cost of sales at $265,008 and revenue of $48,169) for the six
months ended June 30, 2008.

The decrease in cost of services of $153,865(58%) was significant and was
attributed to cost reduction measures to reduce operating costs.

DISTRIBUTION EXPENSES

Distribution expenses for the six months ended June 30, 2009 at $97,122 were
lower by $969,964 (91%) as compared to the amount of $1,067,086 incurred for the
six months ended June 30, 2008.

The lower distribution expenses were attributed to the suspension of digit games
working capital amounting to $861,186 for the six months ended June 30, 2008,
and decreased spending on travelling expenses which decreased by $65,209(74%)
from $88,497 for the six months ended June 30, 2008 to $23,288 for the six
months ended June 30, 2009.

GENERAL AND ADMINISTRATIVE EXPENSES

Administration expenses for the six months ended June 30, 2009 at $1,171,647
were lowered by $769,499 (40 %) as compared to the amount of $1,941,146 incurred
for the six months ended June 30, 2008.

The decrease in administrative expenses for the period ended June 30, 2009 was
attributed mainly to the decrease in:

o    Depreciation and amortization. Equipment depreciation and license
     amortization had decreased by $323,116 (35 %), from $925,492 for the six
     months ended June 30, 2008 to $ 602,376 for the period ended June 30, 2009.
     The decrease was mainly due to most of the intangible assets and equipment
     being fully amortized and written off during end of December 31, 2008.

o    Legal and professional fees. Fees had decreased by $44,627 (25%), from
     $180,842 for the six months ended June 30, 2008 to $136,215 for the six
     months ended June 30, 2009. The decrease was mainly due as a result of cost
     reduction measures to reduce operating costs

o    Staff costs. Staff costs had decreased by $317,801 (61%), from $525,246 for
     the six months ended June 30, 2008 to $207,445 for the six months ended
     June 30, 2009. The decrease was mainly due as a result of cost reduction
     measures to reduce operating costs

                                        5



<PAGE>

(LOSS) INCOME FROM OPERATIONS

The Company incurred a loss from operations of $1,349,092 for the six months
ended June 30, 2009 as compared to the loss from operations of $3,225,071 for
the six months ended June 30, 2008. This was mainly due as a result of cost
reduction measures to reduce operating costs for the six months ended June 30,
2009 and the write off of digit games working capital for the six months ended
June 30, 2008.

NET LOSS

Net loss for the six months ended June 30, 2009, was $1,128,733 which decreased
by $2,979,089 (73) from net loss of $4,107,822 for the six months ended June 30,
2008. The decrease was mainly due as a result of cost reduction measures to
reduce operating costs for the six months ended June 30, 2009, the write off of
digit games working capital and the net change in fair value of securities held
for trading for the six months ended June 30, 2008, and offset by the benefit
for income taxes incurred for the six months ended June 30, 2008.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash at $324,025 at June 30, 2009 as compared to cash of
$1,484,945 at December 31, 2008.

The Company does not finance its operations through short-term bank credit nor
long-term bank loans as it believes that cash generated from its operations will
be able to cover its daily running cost and overheads.

During the six months ended June 30, 2009, the Company had not entered into any
transactions using derivative financial instruments or derivative commodity
instruments. Accordingly the Company believes its exposure to market interest
rate risk is not material.

Cash generated from operations will not be able to cover the Company's intended
growth and expansion. The Company has plans in 2009 to expand its broadband
coverage by launching new broadband sites in Asia Pacific region and Australia.
No assurances can be made that such plans will be carried out in a timely
manner.

The Company intends to raise additional funds, to fund its business expansion;
however no assurances can be made that the Company will raise sufficient funds
as planned.

NEW CONTRACTS

o    On March 31, 2009, the Company signed an agreement with Beijing Baidu
     Network Science and Technology Co Ltd ("Baidu") to launch the WOWtv
     platform in China. The agreement was a strategic partnership with Baidu to
     provide content services to Baidu.com users.

o    On April 17,2009, the Company signed a strategic cooperation agreement with
     LTDnetwork Inc. who owns the brand name and music site called QTRAX. QTRAX
     is the world's first free and legal peer-to-peer music service. Both
     parties agreed to look into areas to promote each other's site to increase
     internet traffic and to exploit each other's content.


                                        6



<PAGE>



ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of our investment activities is to preserve principal
while concurrently maximizing the income we receive from our investments without
significantly increasing risk. Some of the securities that we may invest in may
be subject to market risk. This means that a change in prevailing interest rates
may cause the principal amount of the investment to fluctuate. For example, if
we hold a security that was issued with a fixed interest rate at the
then-prevailing rate and the prevailing interest rate later rises, the current
value of the principal amount of our investment will decline. To minimize this
risk in the future, we intend to maintain our portfolio of cash equivalents and
short-term investments in a variety of securities, including commercial paper,
money market funds, high-grade corporate bonds, government and non- government
debt securities and certificates of deposit. In general, money market funds are
not subject to market risk because the interest paid on such funds fluctuates
with the prevailing interest rate. The Company held $3,482,169 and $3,198,369 in
marketable securities as of June 30, 2009 and December 31, 2008 respectively.

The Company does not believe that it faces material market risk with respect to
its cash and cash equivalents which totaled $324,025 and $1,484,945 at June 30,
2009 and December 31, 2008, respectively.

The Company has no long-term obligations or hedging activities.

ABILITY TO EXPAND CUSTOMER BASE

The Company's future operating results depend on our ability to expand our
customer base for broadband services and e-commerce portals. An increase in
total revenue depends on our ability to increase the number of broadband and
e-commerce portals, in the US, Europe and Asia. The degree of success of this
depends on

o    our efforts to establish independent broadband sites in countries where
     conditions are suitable.

o    our ability to expand our offerings of content in entertainment and
     education, to include more niche channels and offerings.

o    our ability to provide content beyond just personal computers but to
     encompass television, wireless application devices and 3G hand phones.

ABILITY TO ACQUIRE NEW MEDIA CONTENTS

The continued ability of the Company to acquire rights to new media contents, at
competitive rates, is crucial to grow and sustain the Company's business.

AVAILABILITY OF TECHNOLOGICALLY RELIABLE NEW GENERATION OF BROADBAND DEVICES

The growth of demand for broadband services is dependent on the wide
availability of technologically reliable new generation of broadband devices, at
affordable prices to prospective customers of broadband services. The early and
widespread availability and market adoption of new generation broadband devices,
will significantly impact demand for broadband services and the growth of the
Company's business.



                                        7



<PAGE>

CAPITAL INVESTMENT IN BROADBAND INFRASTRUCTURE BY GOVERNMENT AND TELCOS

The growth of demand for broadband services is dependent on the capital
investment in broadband infrastructure by governments and Telcos. A significant
source of demand for the Company's broadband services could be from homes and
enterprises with access to high-speed broadband connections. The ability of
countries to invest in public broadband infrastructure to offer public
accessibility is subject to countries' economic health. The Company's prospects
for business growth in Asia especially would be impacted by overall economic
conditions in the territories that we seek to expand into.

COMPETITION FROM BROADBAND CABLE AND TV NETWORKS OPERATORS

The competition of services provided by broadband cable network operators and TV
networks. As traditional TV networks and cable TV operators provide alternate
supply of entertainment and on-demand broadband services, they are in
competition with the Company, for market share. The Company, nevertheless, will
continue to leverage on its advantage of ownership rights to its own portfolio
of media content and its ability to provide broadband services over both the
cable and wireless networks, at competitive rates.

The Company's business is reliant on complex information technology systems and
networks. Any significant system or network disruption could have a material
adverse impact on our operations and operating results. The Company's nature of
business is highly dependent on the efficient and uninterrupted operation of
complex information technology systems networks, may they, either be that of
ours, or our Telco/ ISP partners.

All information technology systems are potentially vulnerable to damage or
interruption from a variety of sources, including but not limited to computer
viruses, security breach, energy blackouts, natural disasters and terrorism, war
and telecommunication failures.

System or network disruptions may arise if new systems or upgrades are defective
or are not installed properly. The Company has implemented various measures to
manage our risks related to system and network disruptions, but a system failure
or security breach could negatively impact our operations and financial results.

LAW AND REGULATIONS GOVERNING INTERNET

Increased regulation of the Internet or differing application of existing laws
might slow the growth of the use of the Internet and online services, which
could decrease demand for our services. The added complexity of the law may lead
to higher compliance costs resulting in higher costs of doing business.

UNAUTHORIZED USE OF PROPRIETARY RIGHTS

Our copyrights, patents, trademarks, including our rights to certain domain
names are very important to M2B's brand and success. While we make every effort
to protect and stop unauthorized use of our proprietary rights, it may still be
possible for third parties to obtain and use the intellectual property without
authorization. The validity, enforceability and scope of protection of
intellectual property in Internet-related industries remain uncertain and still
evolving. Litigation may be necessary in future to enforce these intellectual
property rights. This will result in substantial costs and diversion of the
Company's resources and could disrupt its business, as well as have a material
adverse effect on its business.



                                       8



<PAGE>

LAW AND REGULATIONS GOVERNING BUSINESS

As the Company continues to expand its business internationally across different
geographical locations there are risks inherent including:

1)   Trade barriers and changes in trade regulations
2)   Local labor laws and regulations
3)   Currency exchange rate fluctuations
4)   Political, social or economic unrest
5)   Potential adverse tax regulation
6)   Changes in governmental regulations

OUTBREAK OF N1H1 VIRUS FLU PANDEMIC OR SIMILAR PUBLIC HEALTH DEVELOPMENTS

Any future outbreak of the N1H1 flu pandemic or similar adverse public health
developments may have a material adverse effect on the Company's business
operations, financial condition and results of operations.

ITEM 4: CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES


         A system of disclosure controls and procedures (as defined in Rule
         13a-15(e) and 15d-15(e)) under the Securities Exchange Act of 1934, as
         amended [the "Exchange Act"]) are controls and other procedures that
         are designed to provide reasonable assurance that the information that
         the Company is required to disclose in the reports that it files or
         submits under the Exchange Act is recorded, processed, summarized and
         reported within the time periods specified in the SEC's rules and
         forms, and that such information is accumulated and communicated to the
         Company's management, including the Chief Executive Officer and Chief
         Financial Officer, as appropriate to allow timely decisions regarding
         required disclosure. There are inherent limitations to the
         effectiveness of any system of disclosure controls and procedures,
         including the possibility of human error and the circumvention or
         overriding of the controls and procedures. Accordingly, even effective
         disclosure controls and procedures can only provide reasonable
         assurance of achieving their control objectives, and management
         necessarily is required to use its judgment in evaluating the
         cost-benefit relationship of possible controls and procedures. In
         addition, the design of any system of controls is based in part upon
         certain assumptions about the likelihood of future events, and there
         can be no assurance that any design will succeed in achieving its
         stated goals under all potential future conditions. Moreover, over
         time, controls may become inadequate because of changes in conditions,
         or the degree of compliance with policies or procedures may
         deteriorate. Because of the inherent limitations in a control system,
         misstatements due to error or fraud may occur and not be detected.

         Notwithstanding the issues described below, the current management has
         concluded that the consolidated financial statements for the periods
         covered by and included in the Quarterly Report on Form 10-Q for the
         period ended June 30, 2009 are fairly stated in all material
         respects in accordance with generally accepted accounting principles in
         the United States for each of the periods presented herein.

                                       9
<PAGE>


         MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

         The Company's management is responsible for establishing and
         maintaining adequate internal control over the Company's financial
         reporting, as such term is defined in Exchange Act Rule 13a-15(f).
         Internal control over financial reporting is a process designed to
         provide reasonable assurance regarding the reliability of financial
         reporting and the preparation of financial statements for external
         purposes in accordance with United States of America generally accepted
         accounting principles. A Company's internal control over financial
         reporting includes those policies and procedures that (i) pertain to
         the maintenance of records that, in reasonable detail, accurately and
         fairly reflect the transactions and dispositions of the assets of the
         company; (ii) provide reasonable assurance that transactions are
         recorded as necessary to permit preparation of financial statements in
         accordance with generally accepted accounting principles and that
         receipts and expenditures of the Company are being made only in
         accordance with authorization of management and directors of the
         Company and (iii) provide reasonable assurance regarding the prevention
         or timely detection of unauthorized acquisition, use or disposition of
         the Company's assets that could have a material effect on our
         consolidated financial statements.

         In connection with the preparation of this Quarterly Report on Form
         10Q, under the supervision and with the participation of our
         management, including our Chief Executive Officer and Chief Financial
         Officer, we conducted an evaluation of the effectiveness of internal
         control over financial reporting based on criteria established in the
         framework in Internal Control - Integrated Framework issued by the
         Committee of Sponsoring Organizations of the Treadway Commission
         ("COSO"), as supplemented by the COSO publication Internal Control over
         Financial Reporting - Guidance for Smaller Public Companies. Based on
         their evaluation, our Chief Executive Officer and Chief Financial
         Officer concluded that our internal control over financial reporting
         was effective as of June 30, 2009, based on these criteria. Management
         is aware that there is a lack of segregation of duties at the Company
         due to the fact that there are only four people dealing with financial
         and accounting matters. However, at this time, management has decided
         that considering the experience and abilities of the employees involved
         and the low quantity of transactions processed, the risks associated
         with such lack of segregation are low and the potential benefits of
         adding employees to clearly segregate duties do not justify the
         substantial expenses associated with such increases. Management will
         periodically reevaluate this situation.

         Notwithstanding the above regarding the lack of segregation of duties,
         management, including our Chief Executive Officer and Chief Financial
         Officer, believes that the consolidated financial statements included
         in this annual report present fairly, in all material respects, our
         financial condition, results of operations and cash flows for the
         periods presented. This annual report does not include an attestation
         report of our registered independent auditors regarding internal
         control over financial reporting. Management's report was not subject
         to attestation by our registered independent auditors pursuant to
         temporary rules of the SEC that permit us to provide only management's
         report in this annual report.

         There were no changes in Internal Control Over Financial Reporting
         during the quarter ended June 30, 2009, there were no changes in our
         internal controls that have materially affected or are reasonably
         likely to have materially affected our internal control over financial
         reporting. Our management, including the Chief Executive Officer and
         Chief Financial Officer, does not expect that our disclosure controls
         and procedures or our internal control over financial reporting will
         prevent all errors and all fraud. A control system, no matter how well
         designed and operated, can provide only reasonable, not absolute,
         assurance that the objectives of the control system are met. Because of
         the inherent limitations in all control systems, no evaluation of
         controls can provide absolute assurance that all control issues and
         instances of fraud, if any, within the company have been detected.

         Our Chief Executive Officer and Chief Financial Officer (our principal
         executive officer and principal financial officer, respectively) has
         concluded, based on their evaluation as of June 30, 2009, that the
         design and operation of our "disclosure controls and procedures" (as
         defined in Rule 13a-15(e) and 15d-15(e)) under the Securities Exchange
         Act of 1934, as amended ("Exchange Act")) are effective to ensure that
         information required to be disclosed by us in the reports filed or
         submitted by us under the Exchange Act is accumulated, recorded,
         processed, summarized and reported to our management, including our
         Chief Executive Officer and Chief Financial Officer, as appropriate to
         allow timely decisions regarding whether or not disclosure is required.

                                       10
<PAGE>


         CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

         There have been no changes in the Company's internal control over
         financial reporting during the most recently completed fiscal quarter
         that have materially affected, or are reasonably likely to materially
         affect, the Company's internal control over financial reporting.



PART II :  OTHER INFORMATION

ITEM 1:  LEGAL PROCEEDINGS

On September 15, 2008, M2B Commerce Limited filed a lawsuit in the Kingdom of
Cambodia for breach of the Performance and Maintenance Agreement dated May 20,
2005 between M2B Commerce Limited and Allsports International Ltd, by Allsports
International Ltd seeking damages in the total amount of $794,189 and calling
for the termination of the Performance and Maintenance Agreement.

On December 4, 2008, M2B Commerce Limited filed two further lawsuits in the
Kingdom of Cambodia against the owners of Allsports International Ltd, in
support of its earlier suit of September 15, 2008 against Allsports
International Ltd for breach of the Performance and Maintenance Agreement dated
May 20, 2005. One lawsuit was against the four principal officers of Allsports
International Ltd for breach of trust of the total amount of $794,189 owing to
M2B Commerce Limited. The other lawsuit was to get Allsports International Ltd
to transfer the shares of the Lottery Company to M2B Commerce Limited, in lieu
of the earlier lawsuit of September 15, 2008 which called for the termination of
the Performance and Maintenance Agreement.

On November 7, 2008, M2B World Asia Pacific Pte. Ltd was served a summons in
Singapore by M2B Game World Pte. Ltd, a company owned 81% by Auston
International Group Limited and 19% by M2B World Pte. Ltd, claiming a sum of
US$153,744 (S$235,229) in unpaid invoices in 2006. Following this, M2B World
Asia Pacific Pte. Ltd filed a counter claim to strike off this summons on the
basis that the invoices were non-existent and that M2B World Asia Pacific Pte.
Ltd was not yet incorporated as a company as of the date of the invoices
produced by M2B Game World Pte. Ltd.

On February 23, 2009, M2B World Pte Ltd was served a summons in Singapore by
Auston International Group Limited, claiming a sum of US$496,765 (S$760,050) to
be paid as shortfall in Guaranteed Profit to M2B Game World Pte. Ltd for
financial years 2006 and 2007, as part of the agreement for the acquisition of
M2B Game World in December 20, 2005 between M2B World Pte Ltd and Auston
International Group Limited. On March 20, 2009 in response to this summons, M2B
World Pte. Ltd filed a counter-claim against Auston International Group Limited
to claim damages amounting to US$1,568,172 and other damages as a result of
material breaches on the part of Auston International Group Limited to the
agreement of December 20, 2005 for the acquisition of M2B Game World Pte Ltd.


ITEM 1A:  RISK FACTORS

An investment in the Company's common stock involves a high degree of risk. One
should carefully consider the following risk factors in evaluating an investment
in the Company's common stock. If any of the following risks actually occurs,
the Company's business, financial condition, results of operations or cash flow
could be materially and adversely affected. In such case, the trading price of
the Company's common stock could decline, and one could lose all or part of
one's investment. One should also refer to the other information set forth in
this report, including the Company's consolidated financial statements and the
related notes.


                                       11



<PAGE>


THE COMPANY CONTINUES TO USE SIGNIFICANT AMOUNTS OF CASH FOR ITS BUSINESS
OPERATIONS, WHICH COULD RESULT IN US HAVING INSUFFICIENT CASH TO FUND THE
COMPANY'S OPERATIONS AND EXPENSES UNDER OUR CURRENT BUSINESS PLAN. THE COMPANY
IS ALSO HOLDING A CONSIDERABLE AMOUNT OF QUOTED EQUITY SECURITIES THAT IS
AVAILABLE-FOR-SALE OR HELD FOR TRADING.

The Company's liquidity and capital resources remain limited. There can be no
assurance that the Company's liquidity or capital resource position would allow
us to continue to pursue its current business strategy. The Company's quoted
equity securities held as assets are dependent on the market value. Any
fluctuations or downturn in the securities market could adversely affect the
value of these equity securities held. As a result, without achieving growth in
its business along the lines it has projected, it would have to alter its
business plan or further augment its cash flow position through cost reduction
measures, sales of assets, additional financings or a combination of these
actions. One or more of these actions would likely substantially diminish the
value of its common stock.

THE MARKET MAY NOT BROADLY ACCEPT THE COMPANY'S BROADBAND WEBSITES AND SERVICES,
WHICH WOULD PREVENT THE COMPANY FROM OPERATING PROFITABLY.

The Company must be able to achieve broad market acceptance for its Broadband
websites and services, at a price that provides an acceptable rate of return
relative to the Company-wide costs in order to operate profitably. There is no
assurance that the market will develop sufficiently to enable the Company to
operate its Broadband business profitably. Furthermore, there is no assurance
that any of the Company's services will become generally accepted, nor is there
any assurance that enough paying users and advertisers will ultimately be
obtained to enable us to operate these business profitably.

BROADBAND USERS MAY FAIL TO ADOPT THE COMPANY'S BROADBAND SERVICES.

The Company's Broadband services are targeted to the growing market of Broadband
users worldwide to deliver content and E-commerce in an efficient, economical
manner over the Broadband networks. The challenge is to make the Company's
business attractive to consumers, and ultimately, profitable. To do so has
required, and will require, the Company to invest significant amounts of cash
and other resources. There is no assurance that enough paying users and
advertisers will ultimately be obtained to enable the Company to operate the
business profitably.

FAILURE TO SIGNIFICANTLY INCREASE THE COMPANY'S USERS AND ADVERTISERS MAY RESULT
IN FAILURE TO ACHIEVE CRITICAL MASS AND REVENUE TO BUILD A SUCCESSFUL BUSINESS.

The Company incurs significant up-front costs in connection with the acquisition
of content, and bandwidth and network charges. The plan is to obtain recurring
revenues in the form of subscription and advertising fees to use the Broadband
services, either paid by the users or advertisers.

There is no assurance as to whether the Company will be able to maintain, or
whether and how quickly the Company will be able to increase its user base, or
whether the Company will be able to generate recurring subscription and
advertising fees to such a level that would enable this line of business to
continue to operate profitably. If the Company is not successful in these
endeavors, the Company could be required to revise its business model, exit or
reduce the scale of the business, or raise additional capital.

COMPETITION IN THE BROADBAND BUSINESS IS EXPECTED TO INCREASE, WHICH COULD CAUSE
THE BUSINESS TO FAIL.

The Company's Broadband services are targeted to the end user market. As the
Broadband penetration rates increase globally, an increasing number of
well-funded competitors have entered the market. Companies that compete with the
Company's business include telecommunications, cable, content management and
network delivery companies.


                                       12



<PAGE>


The Company may face increased competition as these competitors partner with
others or develop new Broadband websites and service offerings to expand the
functionality that they can offer to their customers. These competitors may,
over time, develop new technologies and acquire content that are perceived as
being more secure, effective or cost efficient than the Company. These
competitors could successfully garner a significant share of the market, to the
exclusion of the Company. Furthermore, increased competition could result in
pricing pressures, reduced margins, or the failure of the business to achieve or
maintain market acceptance, any one of which could harm the business.

THE INABILITY TO SUCCESSFULLY EXECUTE TIMELY DEVELOPMENT AND INTRODUCTION OF NEW
AND RELATED SERVICES AND TO IMPLEMENT TECHNOLOGICAL CHANGES COULD HARM THE
BUSINESS.

The evolving nature of the Broadband business requires the Company to
continually develop and introduce new and related services and to improve the
performance, features, and reliability of the existing services, particularly in
response to competitive offerings.

The Company has under development new features and services for its businesses.
The Company may also introduce new services. The success of new or enhanced
features and services depends on several factors - primarily market acceptance.
The Company may not succeed in developing and marketing new or enhanced features
and services that respond to competitive and technological developments and
changing customer needs. This could harm the business.

CAPACITY LIMITS ON THE COMPANY'S TECHNOLOGY AND NETWORK HARDWARE AND SOFTWARE
MAY BE DIFFICULT TO PROJECT, AND THE COMPANY MAY NOT BE ABLE TO EXPAND AND/OR
UPGRADE ITS SYSTEMS TO MEET INCREASED USE, WHICH WOULD RESULT IN REDUCED
REVENUES.

While the Company has ample through-put capacity to handle its customers'
requirements for the medium term, at some point it may be required to materially
expand and/or upgrade its technology and network hardware and software. The
Company may not be able to accurately project the rate of increase in usage of
its network. In addition, it may not be able to expand and/or upgrade its
systems and network hardware and software capabilities in a timely manner to
accommodate increased traffic on its network. If the Company does not
appropriately expand and/or upgrade our systems and network hardware and
software in a timely fashion, it may lose customers and revenues.

INTERRUPTIONS TO THE DATA CENTERS AND BROADBAND NETWORKS COULD DISRUPT BUSINESS,
AND NEGATIVELY IMPACT CUSTOMER DEMAND FOR THE COMPANY.

The Company's business depends on the uninterrupted operation at the data
centers and the broadband networks run by the various service providers. The
data centers may suffer for loss, damage, or interruption caused by fire, power
loss, telecommunications failure, or other events beyond the Company. Any damage
or failure that causes interruptions in the Company's operations could
materially harm business, financial conditions, and results of operations.

In addition, the Company's services depend on the efficient operation of the
Internet connections between customers and the data centers. The Company depends
on Internet service providers efficiently operating these connections. These
providers have experienced periodic operational problems or outages in the past.
Any of these problems or outages could adversely affect customer satisfaction
and customers could be reluctant to use our Internet related services.

THE COMPANY MAY NOT BE ABLE TO ACQUIRE NEW CONTENT, OR MAY HAVE TO DEFEND ITS
RIGHTS IN INTELLECTUAL PROPERTY OF THE CONTENT THAT IS USED FOR ITS SERVICES
WHICH COULD BE DISRUPTIVE AND EXPENSIVE TO ITS BUSINESS.

The Company may not be able to acquire new content, or may have to defend its
intellectual property rights or defend against claims that it is infringing the
rights of others, where its content rights are concerned. Intellectual property
litigation and controversies are disruptive and expensive. Infringement claims
could require us to develop non-infringing services or enter onto royalty or
licensing arrangements. Royalty or licensing arrangements, if required, may not
be obtainable on terms acceptable to the Company. The business could be
significantly harmed if the Company is not able to develop or license new
content. Furthermore, it is possible that others may license substantially
equivalent content, thus enabling them to effectively compete against us.


                                       13



<PAGE>

THE COMPANY DEPENDS ON KEY PERSONNEL.

The Company depends on the performance of its senior management team. Its
success depends on its ability to attract, retain, and motivate these
individuals. There are no binding agreements with any of its employees that
prevent them from leaving the Company at any time. There is competition for
these people. The loss of the services of any of the key employees or failure to
attract, retain, and motivate key employees could harm the business.

THE COMPANY RELIES ON THIRD PARTIES.

If critical services and products that the Company sources from third parties,
such as content and network services were to no longer be made available to the
Company or at a considerably higher price than it currently pays for them, and
suitable alternatives could not be found, the business could be harmed.

THE COMPANY COULD BE AFFECTED BY GOVERNMENT REGULATION.

The list of countries to which our solutions and services could not be exported
could be revised in the future. Furthermore, some countries may in future impose
restrictions on streaming of broadband contents and related services. Failure to
obtain the required governmental approvals would preclude the sale or use of
services in international markets and therefore, harm the Company's ability to
grow sales through expansion into international markets. While regulations in
almost all countries in which our business currently operates generally permit
the broadband services, such regulations in future may not be as favorable and
may impede our ability to develop business.

THE COMPANY COULD BE AFFECTED BY PIRACY IN ASIA.

The Company is in the process of expanding its services globally, and in
particular is entering specific countries in Asia with customized country sites.
These country sites are designated to suit viewership patterns and styles in the
countries they are launched in, and make use of the Company's content and
intellectual property rights to the content. The piracy of content is a
significant problem in many Asian countries, and it is not uncommon to see
movies and television dramas appearing on illegal internet sites, and sold as
pirated DVDs and VCDs. The extent of this piracy of content in the specific
countries that the Company is launching its sites will adversely affect to a
certain degree the amount of advertising and subscription revenues that the
Company intends to earn.

THE COMPANY COULD BE AFFECTED BY THE GLOBAL ECONOMIC DOWNTURN.

The global economy is undergoing a massive downturn in 2009, which commenced in
the second half of 2008. Many countries are faced with negative growth rates..
Where the media industry is concerned, major corporations have began to reduce
their advertising expenditures or even to cut back substantially all advertising
and promotional expenditures towards the later half of 2008. The Company is
heavily reliant on advertising and syndication revenues and expects to be
significantly affected in 2008 and 2009 by the downsizing in advertising spent,
especially in countries where the WOWtv service is expected to roll out.


                                       14



<PAGE>


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5: OTHER INFORMATION

None

ITEM 6: EXHIBITS:

Exhibit 31.1       CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSANT
                   TO SECTION 302 OF THE SARBANES-OXLEY ACT

Exhibit 31.2       CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSANT
                   TO SECTION 302 OF THE SARBANES-OXLEY ACT

Exhibit 32.1       CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSANT
                   TO SECTION 906 OF THE SARBANES-OXLEY ACT

Exhibit 32.2       CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSANT
                   TO SECTION 906 OF THE SARBANES-OXLEY ACT






                                       15




<PAGE>



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                         Amaru, Inc.
                                         ---------------------------------------
                                         (Registrant)


January 20, 2010                          /s/ Colin Binny
----------------                         ---------------------------------------
Date                                     President, Chief Executive Officer and
                                         Chief Financial Officer