<PAGE>

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

                                    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, 2007

                                       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 000-50065

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

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


             112 Middle Road, #08-01 Midland House, Singapore 188970
            --------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code  (011)(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 an accelerated filer (as
defined in Rule 12b-2 Of the Exchange Act.

Yes [X]       No [ ]


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                      154,098,528 shares
-----------------------------              ---------------------------------
          (Class)                          (Outstanding at June 30,2007)
<PAGE>

                           AMARU, INC. AND SUBSIDARIES
                       2007 Quarterly Report on Form 10-Q

                                Table of Contents


PART 1:  FINANCIAL INFORMATION
--------------------------------------------------------------------------------

ITEM 1:  CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets                                                  F-2
Consolidated Statements of Income                                            F-3
Consolidated Statements of Stockholders' Equity and Comprehensive Income   F-4,5
Consolidated Statements of Cash Flows                                        F-6
Notes to Consolidated Financial Statements                           F-7 to F-22

ITEM 2:  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION          1-8
         AND RESULTS OF OPERATIONS

ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK         9-10

ITEM 4:  CONTROLS AND PROCEDURES                                              11


PART 2:  OTHER INFORMATION
--------------------------------------------------------------------------------

ITEM 1:  LEGAL PROCEEDINGS                                                    12
ITEM 1A: RISK FACTORS                                                   12 to 14
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                                                                    16





                                      F-1

<PAGE>
<TABLE>
<S>     <C>
AMARU, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


                                                                           JUNE 30,     DECEMBER 31,
                                                                            2007           2006
                                                                         ------------   ------------
ASSETS                                                                    (UNAUDITED)    (AUDITED)
Current assets
Cash and cash equivalents                                               $  4,200,078   $  2,294,984
Accounts receivable, net                                                  12,422,915      2,106,647
Equity securities held for trading                                         7,020,000             --
Other current assets                                                         481,748        539,604
Inventories                                                                1,168,679      1,689,634
                                                                        ------------   ------------
     Total current assets                                                 25,293,420      6,630,869

Non-current assets
Property and equipment, net                                                1,656,382      1,215,744
Intangible assets, net                                                    28,330,585     28,886,883
Associate                                                                  4,950,891             --
Available-for-sale of equity securities                                   11,496,565     12,158,351
                                                                        ------------   ------------
     Total non-current assets                                             46,434,423     42,260,978
                                                                        ------------   ------------

Total assets                                                            $ 71,727,843   $ 48,891,847
                                                                        ============   ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses                                   $  2,091,772   $  2,101,970
Other payables                                                               105,000             --
Finance lease liabilities                                                     10,124             --
Income taxes payable                                                          45,245         58,473
                                                                        ------------   ------------
     Total current liabilities                                             2,252,141      2,160,443

Non-current liabilities
Deferred tax liabilities                                                   3,833,000      1,684,158
Hire purchase creditor                                                        59,901             --
                                                                        ------------   ------------
     Total non-current liabilities                                         3,892,901      1,684,158
                                                                        ------------   ------------
Total liabilities                                                          6,145,042      3,844,601

Minority interests                                                         5,871,607             --

Commitments                                                                       --             --

Stockholders' equity
Preferred stock (par value $0.001) 5,000,000 shares authorized;
     0 shares issued and outstanding at June 30, 2007 and
     December 31, 2006, respectively                                              --             --
Common stock (par value $0.001) 200,000,000 shares authorized;
     154,098,528 and 153,638,528 shares issued and outstanding at
     June 30, 2007 and December 31, 2006, respectively                       154,098        153,638
Additional paid-in capital                                                39,190,666     38,942,126
Subscribed common stock, 0 and 420,000 shares at June 30, 2007
     and December 31, 2006, respectively                                          --        189,000
Retained earnings                                                         14,713,052      2,084,908
Accumulated other comprehensive income                                     5,653,378      3,677,574
                                                                        ------------   ------------
     Total stockholders' equity                                           59,711,194     45,047,246
                                                                        ------------   ------------
Total liabilities and stockholders' equity                              $ 71,727,843   $ 48,891,847
                                                                        ============   ============

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, 2007     JUNE 30, 2006     JUNE 30, 2007     JUNE 30, 2006
                                                             -------------     -------------     -------------     -------------
Revenue:
   Entertainment                                             $  15,034,689     $   3,215,479     $  15,024,440     $   2,212,822
   Digit gaming                                                 10,459,791        11,094,343         4,982,965         5,220,649
   Other income                                                         --             1,144                --               358
                                                             -------------     -------------     -------------     -------------
     Total revenue                                              25,494,480        14,310,966        20,007,405         7,433,829


Cost of services                                               (11,292,135)      (10,973,303)       (5,868,634)       (5,184,910)
                                                             -------------     -------------     -------------     -------------
Gross profit                                                    14,202,345         3,337,663        14,138,771         2,248,919

Distribution costs                                                (505,653)         (559,529)         (196,006)         (312,095)
Administrative expenses                                         (3,521,215)       (1,682,011)       (1,848,919)       (1,048,334)
                                                             -------------     -------------     -------------     -------------
     Total expenses                                             (4,026,868)       (2,241,540)       (2,044,925)       (1,360,429)


Income from operations                                          10,175,477         1,096,123        12,093,846           888,490


Other expenses:
   Interest expenses                                                  (171)               --              (171)               --
   Interest income                                                  26,101            57,871            12,419            40,289
   Gain on dilution of interest in subsidiary                    2,483,871                --                --                --
   Net change in fair value of financial assets
    at fair value through Profit or Loss-held for trading        4,320,000                --         4,320,000                --
   Share of loss of associate                                      (15,224)               --           (22,763)               --
                                                             -------------     -------------     -------------     -------------
Income before income taxes                                      16,990,054         1,153,994        16,403,331           928,779
(Provision) Benefit for income taxes                            (1,586,432)           66,465        (1,749,945)           (8,576)
                                                             -------------     -------------     -------------     -------------
Net income                                                   $  15,403,622     $   1,220,459     $  14,653,386     $     920,203
                                                             =============     =============     =============     =============


Attributable to:
Equity holders of the Company                                $  12,628,144     $   1,220,459     $  11,797,894     $     920,203
Minority interests                                               2,775,478                --         2,855,492                --
                                                             -------------     -------------     -------------     -------------
Net income                                                   $  15,403,622     $   1,220,459     $  14,653,386     $     920,203
                                                             =============     =============     =============     =============

Net income per share
- basic and diluted                                          $        0.10     $        0.01     $        0.10     $        0.01
                                                             =============     =============     =============     =============
Weighted average number of common shares outstanding
- basic and diluted                                            153,942,285       142,983,737       154,098,528       151,100,426
                                                             =============     =============     =============     =============



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                                         ACCUMULATED OTHER
                 ---------------  ------------------                                     COMPREHENSIVE INCOME
                                                                                         ---------------------              TOTAL
                 NUMBER   PAR                 PAR      ADDITIONAL   SUBSCRIBED            CURRENCY                         SHARE-
                   OF    VALUE   NUMBER OF   VALUE      PAID-IN       COMMON   RETAINED TRANSLATION FAIR VALUE MINORITY   HOLDERS'
                 SHARES ($0.001   SHARES    ($0.001)    CAPITAL       STOCK    EARNINGS   RESERVE   RESERVE    INTEREST    EQUITY
                 ------  ------ ----------- --------- -----------  ----------- --------- --------- ---------   -------- ------------

Balance at
  December 31,
  2005               --      -- 125,591,120 $125,591   $14,642,550 $ 4,256,880 $  834,379 $12,927  $       --   $    --  $19,872,327

Common stock
  issued for
  cash               --      --  15,339,568   15,339    11,255,404          --         --      --          --        --  11,270,743

Common stock
  issued for
  services           --      --      40,000       40        59,960          --         --      --          --        --      60,000

Subscribed
  common stock
  issued             --      --   5,675,840    5,676     4,251,204  (4,256,880)        --      --          --        --          --

Common stock
  issued in
  exchange for
  acquisition
  of film library    --      --   6,992,000    6,992     8,733,008          --         --      --          --        --   8,740,000

Common stock
  subscribed
  for services
  (420,000
  shares)            --      --          --       --            --     189,000         --      --          --        --     189,000

Net income           --      --          --       --            --          --  1,250,529      --          --        --   1,250,529

Change in
  fair value
  of available
  for-sale-equity
  securities
  net of tax         --     --          --       --             --          --         --      --   3,664,647        --    3,664,647
                                                                                                                          ----------

Comprehensive
  income             --      --          --       --            --         --         --       --          --        --    4,915,176
                 ------  ------ ----------- --------   ----------- ----------- ---------- -------  ----------- --------- -----------
Balance at
  December 31,
  2006               --      -- 153,638,528 $153,638   $38,942,126 $   189,000 $2,084,908 $12,927  $3,664,647  $     --  $45,047,246
                 ======  ====== =========== ========   =========== =========== ========== =======  ==========  ========= ===========

                                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                                         ACCUMULATED OTHER
                 ---------------  ------------------                                    COMPREHENSIVE INCOME
                                                                                        ---------------------              TOTAL
                 NUMBER   PAR                 PAR      ADDITIONAL  SUBSCRIBED           CURRENCY    FAIR                  SHARE-
                   OF    VALUE   NUMBER OF   VALUE      PAID-IN      COMMON   RETAINED TRANSLATION  VALUE    MINORITY   HOLDERS'
                 SHARES ($0.001   SHARES    ($0.001)    CAPITAL      STOCK    EARNINGS   RESERVE   RESERVE   INTEREST    EQUITY
                 ------  ------ ----------- --------- ----------- ----------- --------- --------- ---------  -------- ------------

Balance at
  December 31,
  2006             --       --  153,638,528 $153,638 $38,942,126 $ 189,000  $ 2,084,908  $12,927 $3,664,647 $        -- $45,047,246

Subscribed
  common
  Stock issued     --       --      420,000      420     188,580  (189,000)          --       --         --          --          --

Common stock
  issued
  for services     --       --       40,000       40      59,960        --           --       --         --          --      60,000

Contribution
  from
  minority
  interest         --       --           --       --          --        --           --       --         --   5,580,000   5,580,000

Gain on
  dilution of
  interest in
  subsidiary       --       --           --       --          --        --           --       --         --  (2,483,871) (2,483,871)

Net income         --       --           --       --          --        --   12,628,144       --         --   2,775,478  15,403,622

Change in
  fair value
  of available-
  for-sale
  equity
  securities
  net of tax        --      --           --       --          --        --           --       --  1,975,804          --   1,975,804
                                                                                                                         ----------
Comprehensive
  income            --      --           --       --          --        --           --       --         --          --  17,379,426
               ------   ------  ----------- -------- ----------- ---------  -----------  ------- ---------- -----------  ----------
Balance at
 June 30,          --       --  154,098,528 $154,098 $39,190,666        --  $14,713,052  $12,927 $5,640,451 $ 5,871,607 $65,582,801
 2006          ======   ======  =========== ======== =========== =========  ===========  ======= ========== =========== ===========

See accompanying notes to consolidated financial statements

                                                               F-5
<PAGE>

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

                                                                        FOR THE SIX MONTHS ENDED
                                                                      June 30, 2007   June 30, 2006
                                                                      --------------  --------------
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                           15,403,622    $  1,220,459
    Adjustments for :
    Amortization                                                          1,625,493          78,369
    Depreciation                                                            270,208         325,819
    Acquisition of investment in exchange for account receivable         (4,400,000)           --
    Gain on dilution of interest in a subsidiary                         (2,483,871)           --
    Net change in fair value of financial assets at fair value
     through Profit or Loss-held for trading                             (4,320,000)           --
    Common stock issued for services                                         60,000            --
    Deferred tax                                                          1,586,432            --
    Share of loss of associate                                               15,224            --

Changes in operation assets and liabilities
    Accounts receivable                                                 (10,316,268)        356,307
    Inventories                                                             520,955            --
    Other current assets                                                     57,856      (3,510,588)
    Accounts payable and accrued expenses                                   (10,198)        494,078
    Other payables                                                          105,000            --
    Income taxes payable                                                    (13,228)           --
                                                                       ------------    ------------
Net cash used in operating activities                                    (1,898,775)     (1,035,556)

CASH FLOWS FROM INVESTING ACTIVITIES
    Acquisition of equipment                                               (710,846)     (5,906,324)
    Acquisition of associate                                                (66,115)
    Acquisition available-for-sale of equity securities                          --        (438,458)
    Acquisition of intangible assets                                     (1,069,195)     (2,400,000)
                                                                       ------------    ------------
Net cash used in investing activities                                    (1,846,156)     (8,744,782)

CASH FLOWS FROM FINANCING ACTIVITIES
   Repayment of balances due to related party                                    --         (58,392)
   Proceeds from hire purchase creditor                                      70,025            --
   Proceeds from issuance of common stock                                        --      11,110,860
   Capital contributed by minority shareholders                           5,580,000            --
                                                                       ------------    ------------
Net cash provided by financing activities                                 5,650,025      11,052,468

Effect of exchange rate changes on cash and cash equivalents                     --            --
                                                                       ------------    ------------
Cash flows from all activities                                            1,905,094       1,272,130

Cash and cash equivalents at beginning of period                          2,294,984       4,776,819
                                                                       ------------    ------------

Cash and cash equivalents at end of period                             $  4,200,078    $  6,048,949
                                                                       ============    ============

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND
INVESTING ACTIVITIES:
Acquisition of investments (1)                                         $  4,400,000    $       --
                                                                       ============    ============
Common stock in exchange for acquisition of film library               $         --    $  8,740,000
                                                                       ============    ============

Subscribed common stock issued                                         $         --    $  4,256,880
                                                                       ============    ============

(1)  On February 15, 2007, the Company through its subsidiary, M2B World Asia Pacific Pte. Ltd subscribed
     for additional 4% interest in an investment for $1.7 million in exchange for the settlement of an
     accounts receivables from the investee company.


     On June 27, 2007, M2B World Holdings Limited, a wholly owned subsidiary of
     M2B World Asia Pacific Pte. Ltd received $2.7 million in quoted equity securities in exchange for
     accounts receivable from a company, as part of the sales and purchase agreement with the company.

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, 2007 AND 2006


1.    BASIS OF PRESENTATION

      1.1   Description of Business

            Amaru, Inc. (the Company) through its subsidiaries under the M2B
            brand is in the Broadband Media Entertainment business, and a
            provider of interactive Entertainment-on-demand, Education-on-demand
            and E-commerce streaming over Broadband channels, Internet portals
            and Third-Generation (3G) devices globally. It has launched multiple
            Broadband TV and integrated shopping websites with multiple channels
            of content designed and programmed to target specific viewer
            profiles and lifestyles of local and international audiences. The
            Company controls substantial content libraries for aggregation,
            distribution and syndication on Broadband and other media, sourced
            from Hollywood and major content providers around the world.

            The Company's business strategy is to be a diversified media company
            specializing in the interactive media industry, using the latest
            broadband, E-Commerce and communications technologies and access to
            international content and programming.

            The Company's goal is to provide on-line entertainment and education
            on-demand on Broadband channels, Internet portals and 3G devices
            across the globe; for specific and identified viewer lifestyles,
            demographics and interests; and to tie the viewing experience to an
            on-line shopping experience. This is to enable two leisure
            activities to be rolled into one for the ultimate convenience and
            reaching out to a global viewing audience.

      1.2   Basis of Presentation

            The financial statements included herein are unaudited. However,
            such information reflects all adjustments (consisting solely of
            normal occurring adjustments) which are, in the opinion of
            management, necessary for a fair statement of results for the
            interim periods. The results of operations for the six months
            ended June 30, 2007, are not necessarily indicative of the results
            to be expected for the full year.

            The accompanying financial statements do not include footnote and
            certain financial presentation normally required under generally
            accepted accounting principles, and, therefore, should be read in
            conjunction with the company's Annual report on Form 10-KSB for the
            year ended December 31, 2006.

                                      F-7
<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006


     1.3   Recent Accounting Standards and Pronouncements

            In 2006, the FASB issued Interpretation No. 48 (FIN 48), "
            Accounting for Uncertainty in Income Taxes - an Interpretation of
            FASB Statement No. 109 Accounting for Income Taxes." FIN 48
            clarifies the accounting for uncertainty in income taxes recognized
            in an enterprise's financial statements in accordance with SFAS 109.
            FIN 48 also prescribes a recognition threshold and measurement
            attribute for the financial statement recognition and measurement of
            a tax position taken or expected to be taken in a tax return. FIN 48
            provides guidance on de-recognition, classification, interest and
            penalties, accounting in interim periods, disclosure and transition.
            The Company adopted FIN 48 as of January 1, 2007, as required.


            The current Company policy classifies any interest recognized on an
            underpayment of income taxes as interest expense and classifies any
            statutory penalties recognized on a tax position taken as selling,
            general and administrative expense. There were no interest or
            selling, general and administrative expenses accrued or recognized
            related to income taxes for the six months ended June 30, 2007.
            The Company has not taken a tax position that would have a material
            effect on 30 June, 2007 or during the prior three years applicable
            under FIN 48. It is determined not to be reasonably possible for the
            amounts of unrecognized tax benefits to significantly increase or
            decrease within 12 months of the adoption of FIN 48. The Company is
            currently subject to a three year statute of limitations by major
            tax jurisdictions.

                                      F-8

<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006



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.

                                      F-9
<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006


 2.4   Trade Accounts Receivable

            Trade 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 trade 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
            trade 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.

            Entertainment revenues were concentrated with one customer totalling
            99.8% of these related revenues for the six months ended June 30,
            2007 and four customers totaling 96.7 % of these related revenues
            for the six months ended June 30, 2006.

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

                                              FOR THE SIX MONTHS ENDED    FOR THE THREE MONTHS ENDED
                                            --------------------------    --------------------------
                                                JUNE 30,       JUNE 30,        JUNE 30,     JUNE 30,
                                                  2007           2006            2007         2006
                                            ------------    -----------   ------------  ------------
<S>                                         <C>            <C>            <C>            <C>
            Sales outside of the U.S.       $ 25,494,193   $ 14,310,936   $ 20,007,163   $ 7,433,829


            Services purchased outside      $ 11,260,156   $ 10,957,064   $  5,866,757   $ 5,183,218
            of the U.S.
</TABLE>

      2.5   Inventories

            Inventories are carried at the lower of cost 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.

      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.

                                      F-10
<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006

      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 two 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 Company capitalized the development and building cost related to
            the broad-band sites and infrastructure for the streaming system,
            most of which was developed in 2002 as product development costs.
            The Company projects that these development costs will be useful for
            up to five years before additional significant development needs to
            be done.

      2.8   Associate

            An associate is an entity over which the Company has significant
            influence and that is neither a subsidiary nor an interest in a
            joint venture. Significant influence is the power to participate in
            the financial and operating policy decisions of the investee but is
            not control or joint control over those policies.

            The results and assets and liabilities of associates are
            incorporated in these financial statements using the equity method
            of accounting. Under the equity method, investments in associates
            are carried in the consolidated balance sheet at cost as adjusted
            for post-acquisition changes in the Company's share of the net
            assets of the associate, less any impairment in the value of
            individual investments. Losses of an associate in excess of the
            group's interest in that associate (which includes any long-term
            interests that, in substance, form part of the Company's net
            investment in the associate) are not recognised, unless the group
            has incurred legal or constructive obligations or made payments on
            behalf of the associate.

            Any excess of the cost of acquisition over the Company's share of
            the net fair value of the identifiable assets, liabilities and
            contingent liabilities of the associate recognised at the date of
            acquisition is recognised as goodwill. The goodwill is included
            within the carrying amount of the investment and is assessed for
            impairment as part of the investment. Any excess of the Company's
            share of the net fair value of the identifiable assets, liabilities
            and contingent liabilities over the cost of acquisition, after
            reassessment, is recognised immediately in the consolidated profit
            and loss statement.

            Where a group entity transacts with an associate of the group,
            profits and losses are eliminated to the extent of the group's
            interest in the relevant associate.


                                      F-11
<PAGE>
                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006


      2.9   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").

            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.

                                      F-12

<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006

      2.10  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 six months ended June 30, 2007 and
            the three months ended March 31, 2007.

      2.11  Investments at fair value through profit or loss

            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.

      2.12  Advances from Related Party

            Advances from related party are unsecured, non-interest bearing and
            payable on demand.

      2.13  Leases

            Leased assets in which the Company assumes substantially all the
            risks and rewards of ownership are classified as finance leases.
            Upon initial recognition, property, plant and equipment acquired
            through finance leases are capitalized at the lower of its fair
            value and the present value of the minimum lease payments.
            Subsequent to recognition, the asset is accounted for in accordance
            with the accounting policy applicable to that asset. Leased assets
            are depreciated over the shorter of the lease term and their useful
            lives. Lease payments are apportioned between finance expense and
            reduction of the lease liability. The finance expense is allocated
            to each period during the lease term so as to produce a constant
            periodic rate of interest on the remaining balance of the liability.
            Contingent lease payments are accounted for by revising the minimum
            lease payments over the remaining term of the lease when the lease
            adjustment is confirmed.

      2.14  Foreign Currency Translation

            Transactions in foreign currencies are translated at foreign
            exchange rates ruling at the dates of the transactions. Monetary
            assets and liabilities denominated in foreign currencies at the
            balance sheet date are translated into US dollars at foreign
            exchange rate ruling at that date. Non-monetary assets and
            liabilities measured at cost in a foreign currency are translated
            using exchange rates at the date of the transaction. Foreign
            currency transaction gains and losses are included in determining
            net income and were not significant.

       2.15  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.

      2.16  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
            it was incurred.

                                      F-13

<PAGE>
                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006


      2.17  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.

                                      F-14

<PAGE>
                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006

     2.16  Earnings 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.

      2.17  Financial Instruments

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

      2.18  Advertising

            The cost of advertising is expensed as incurred. For the six months
            ended June 30, 2007 and 2006, the Company incurred advertising
            expenses of $317,437 and $421,831 respectively. For the three months
            ended June 30, 2007 and 2006, the Company incurred advertising
            expenses of $112,008 and $231,701 respectively.

      2.19  Reclassifications

            Certain amounts in the previous periods presented have been
            reclassified to conform to the current year financial statement
            presentation.



3.  EQUITY SECURITIES HELD FOR TRADING INVESTMENT

                                                   JUNE 30,       DECEMBER 31,
                                                    2007             2006
                                                ------------      ------------
     Quoted equity security, at fair value      $  7,020,000      $   --
                                                ============      ============

            The fair value of the security is based on closing quoted market
            price on the last market day of the financial period.

            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,
                                                        2007           2006
                                                  ------------     ------------

      Prepayments                                 $   135,183      $   177,278
      Deposits                                        175,211          172,882
      Other receivables                               171,354          189,444
                                                  ------------     ------------
                                                  $   481,748      $   539,604
                                                  ============     ============

5.    PROPERTY AND EQUIPMENT

      Property and equipment consist of the following:

                                                   JUNE 30,        DECEMBER 31,
                                                     2007              2006
                                                 ------------     ------------

      Office equipment                           $   740,486     $    721,085
      Motor vehicle                                  112,563           11,000
      Furniture, fixture and fittings                587,408          556,069
      Set-top boxes                                  824,224          265,681
                                                 ------------     ------------
                                                   2,264,681        1,553,835
      Accumulated depreciation                      (608,299)        (338,091)
                                                 ------------     ------------
                                                 $ 1,656,382     $  1,215,744
                                                 ============     ============

      Depreciation expense was $270,208 for the six months ended June 30,
      2007 and $78,369 for the six months ended June 30, 2006.

                                      F-15
<PAGE>
                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006


6.    INTANGIBLE ASSETS

      Intangible assets consist of the following:

                                                       JUNE 30,     DECEMBER 31,
                                                         2007          2006
                                                     ------------  ------------
      INDEFINITE LIVES
      Film library                                  $ 17,697,261   $ 17,674,378
      Software license                                 2,420,227      2,420,227
                                                    ------------  - -----------
                                                      20,117,488     20,094,605

      DEFINITE USEFUL LIVES
      Film library                                     3,984,789      2,947,564
      Gaming license                                   7,090,000      7,090,000
      Product development expenditures                   678,616        669,529
                                                    ------------   ------------
                                                      11,753,405     10,707,093
      Accumulated amortization                        (3,540,308)    (1,914,815)
                                                    ------------   ------------
                                                       8,213,097      8,792,278

                                                    ------------   ------------
                                                    $ 28,330,585   $ 28,886,883
                                                    ============   ============

      Amortization expense was $1,625,493 for the six months ended June 30,
      2007 and $325,819 for the six months ended June 30, 2006.


7.    ASSOCIATE
                                                       JUNE 30,   DECEMBER 31,
                                                         2007          2006
                                                     ------------  ------------

      Fair value of investment in associate          $ 3,583,223   $         --
      Goodwill                                         1,382,892             --
      Share of post-acquisition loss                     (15,224)            --
                                                     ------------  ------------
                                                     $ 4,950,891   $         --
                                                     ============  ============

      Details of the Company's associate at June 30, 2007 are as follows:

      Name of Business :  121 View Corporation (SEA) Ltd

      Place of Incorporation : British Virgin Islands

      Principle Activity :  Digital signage solutions

      Proportion of  :        JUNE 30, 2007    DECEMBER 31, 2006
      Ownership Interest      ------------     -----------------
                                 30.1%              25.0%

      One of the directors of the Company has interests in the associated
      oompany and one of the directors of the Company is also a director in the
      associated company.

      On April 20, 2007, M2B World Asia Pacific Pte. Ltd subscribed for
      additional 0.2% interest in the investee company, for an investment of
      $66,115.

                                      F-16
<PAGE>
                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006


      Summarised financial information in respect of the Company's associate is
      set out below:

                                                       JUNE 30,    DECEMBER 31,
                                                         2007          2006
                                                     ------------  ------------

      Total assets                                   $ 9,381,105   $         --
      Total liabilities                                  (22,108)            --
                                                     ------------  ------------
      Net assets                                     $ 9,358,997   $         --
                                                     ============  ============
      Company's share of associate's net assets      $ 2,798,340             --
                                                     ============  ============
      Revenue                                        $    96,312             --
                                                     ============  ============

      Loss for the period                            $  (48,793)             --
                                                     ============  ============
      Company's share of associate's loss for the
      period                                         $   (15,224)            --
                                                     ============  ============


8.    AVAILABLE-FOR-SALE EQUITY SECURITIES

      Available-for-sale equity securities consist of the following:

                                                       JUNE 30,     DECEMBER 31,
                                                         2007          2006
                                                     ------------  ------------

      Quoted equity securities                        $8,214,288   $  5,676,074
      Unquoted equity securities                       3,282,277      6,482,277
                                                     ------------  ------------
                                                     $11,496,565   $ 12,158,351
                                                     ============  ============



      The investments in quoted equity securities comprised of 36,428,571 common
      shares of Auston International Group Ltd (Auston).  As of June 30, 2007,
      the market value of the Auston shares was $0.225.

      The unquoted equity securities classified as available-for-sale, with a
      carrying value of $3,282,277 and $6,482,277 as of June 30, 2007 and
      December 31, 2006, respectively, 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-17

<PAGE>
                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006

9.    COMMITMENTS

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

                                                       MARCH 31,   DECEMBER 31,
                                                          2007         2006
                                                     ------------  ------------
      CAPITAL COMMITMENTS:
      Contracted but not provided for
             Film library                            $  3,416,945  $  4,254,372
             Set-top boxes                              2,562,000     2,562,000
             Other equipments                             164,000            --
                                                     ------------  ------------
                                                     $  6,142,945  $  6,816,372
                                                     ============  ============

      The Company has several noncancelable operating leases, primarily for
      office spaces, that expire over the next five years.

      As of June 30, 2007, the Company has commitments for future minimum
      lease payments under non-cancellable operating leases (with initial or
      remaining lease terms in excess of one year) as follows:

                                                       OPERATING
                                                        LEASES
                                                      -----------
      Year ending December 31,
          2007                                            151,183
          2008                                            262,426
          2009                                            178,675
          2010                                            126,360
          2011                                             80,504
                                                      -----------
          Total minimum lease payments                $   799,148
                                                      ===========

      Rent expense totaled $171,914 for the six months ended June 30, 2007 and
      $74,610 for the six months ended June 30, 2006.

10.    CAPITAL STOCK

      (a)   Common stock issued for services

            On March 19, 2007, the Company issued 40,000 shares of common stock
            in a private placement at a price of $1.50 per share for a total
            amount of $60,000 for services rendered to the Company.

      (b)   Common stock issued to employees

            On December 20, 2006, 420,000 shares of common stock were approved
            for issuance at a price of $0.45 a share to its employees. These
            shares were issued on March 2, 2007 to the employees for their
            services to the Company pursuant to the Company's 2004 Equity
            Compensation Plan (the "Plan"). The shares of common stock issued to
            the employees pursuant to the Plan have been registered on the
            registration statement on Form S-8.

                                      F-18

<PAGE>
                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006


11.   INCOME TAXES

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

      The Company had available approximately $5,201,580 of unused U.S. net
      operating loss carry-forwards at June 30, 2007, 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, 2007 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 $770,639 of unused Singapore
      capital allowance carry-forwards at June 30, 2007, 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.


12.   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. The
      accounting policies of the business segments are the same as those
      described in the summary of significant accounting policies in Note 2.
<TABLE>
<S>     <C>
2007
                                   Entertainment    Digit Gaming       Other           Total
                                   ------------    ------------    ------------   ------------
Revenues from external customers   $ 15,034,689    $  10,459,791    $         --   $ 25,494,480
Interest revenue                   $     26,101    $         --     $         --   $     26,101
Interest expenses                  $        171    $         --     $         --   $        171
Depreciation and amortization      $  1,746,423    $    149,278     $         --   $  1,895,701
Segment profit                     $ 10,229,860    $     161,906    $         --   $ 10,391,766
Segment assets                     $ 62,111,786    $   7,163,454    $  2,452,603   $ 71,727,843
Expenditures for segment assets    $  1,780,041    $         --     $         --   $  1,780,041

                                      F-19
</TABLE>
<PAGE>
                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006


Reconciliation :-

REVENUES
Total revenues for reportable segments                            $  25,494,480
Other revenue                                                     $          --
                                                                  -------------
         Total consolidated revenues                              $  25,494,480
                                                                  -------------
INTEREST REVENUE
Total interest revenue for reportable segments                    $      26,071
Corporate interest revenue                                        $          30
                                                                  -------------
         Total consolidated interest revenue                      $      26,101
                                                                  -------------
INTEREST EXPENSES
Total interest expenses for reportable segments                    $        171
Corporate interest expenses                                       $          --
                                                                  -------------
         Total consolidated interest revenue                      $         171
                                                                  -------------
PROFIT OR LOSS
Total loss for reportable segments                                $  10,391,766
Corporate expenses                                                $    (190,359)
Gain on dilution of interest in subsidiary                        $   2,483,871
Gain on valuation of held for trading investment                  $   4,320,000
Share of loss of associate                                        $     (15,224)
                                                                  -------------
         Income before income tax                                 $  16,990,054
                                                                  -------------
ASSETS
Total assets for reportable segments                              $  69,275,240
Other assets                                                      $   2,452,603
                                                                  -------------
         Total consolidated assets                                $  71,727,843
                                                                  -------------
EXPENDITURES FOR SEGMENT ASSETS
Total expenditures for assets for reportable segments             $   1,780,041
                                                                  -------------

                                      F-20
<PAGE>
                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006

12.   SEGMENT REPORTING (Cont'd)

<TABLE>
<S>     <C>
2006
                                   Entertainment    Digit Gaming       Other           Total
                                   ------------    ------------    ------------   ------------
Revenues from external customers   $  3,215,479    $ 11,094,343    $      1,144   $ 14,310,966
Interest revenue                   $     57,871    $         --    $         --   $     57,871
Interest expense                   $         --    $         --    $         --   $         --
Depreciation and amortization      $    244,908    $    159,280    $         --   $    404,188
Segment profit (loss)              $  1,472,129    $   (197,815)   $      1,144   $  1,275,458
Segment assets                     $ 25,837,054    $  9,213,037    $  7,201,873   $ 42,251,964
Expenditures for segment assets    $ 17,046,324    $         --    $         --   $ 17,046,324

Reconciliation :-

REVENUES
Total revenues for reportable segments                             $  14,309,822
Other revenue                                                      $       1,144
                                                                   -------------
         Total consolidated revenues                               $  14,310,966
                                                                   -------------

INTEREST REVENUE
Total interest revenue for reportable segments                     $      27,522
Corporate interest revenue                                         $      30,349
                                                                   -------------
         Total consolidated interest revenue                       $      57,871
                                                                   -------------
PROFIT OR LOSS
Total profit for reportable segments                               $   1,275,458
Corporate expenses                                                 $    (121,464)
                                                                   -------------
         Income before income tax                                  $   1,153,994
                                                                   -------------
ASSETS
Total assets for reportable segments                               $  35,050,091
Other assets                                                       $   7,201,873
                                                                   -------------
         Total consolidated assets                                 $  42,251,964
                                                                  -------------
EXPENDITURES FOR SEGMENT ASSETS
Total expenditures for assets for reportable segments              $  17,046,324
                                                                   -------------
</TABLE>

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

<TABLE>
<S>     <C>
      2007                               ASIA PACIFIC  UNITED STATES     OTHER          TOTAL
                                         ------------  -------------  ------------  ------------

      Revenues from external customers   $  25,494,193  $        287  $      --     $ 25,494,480
      Property and equipment, net        $   1,306,001  $    254,981  $  95,400     $  1,656,382


       2006                               ASIA PACIFIC  UNITED STATES     OTHER          TOTAL
                                         ------------  -------------  ------------  ------------

      Revenues from external customers   $ 14,310,936   $          30  $       --    $14,310,966
      Property and equipment, net        $    347,359   $      85,283  $    85,000   $   517,642

</TABLE>

                                      F-21
<PAGE>
                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2007 AND 2006




13.   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 Company entered into the following transactions
      with the associate:




                     FOR THE SIX MONTHS ENDED      FOR THE THREE MONTHS ENDED
                    --------------------------     --------------------------
                     JUNE 30,        JUNE 30,        JUNE 30,       JUNE 30,
                      2007            2006             2007           2006
                   ------------    -----------     ----------     ----------
      Marketing     $    82,449    $        --     $   40,233     $       --
                   ============    ===========     ==========     ==========


14.   SUBSEQUENT EVENTS

On July 10, 2007, the Company together with one of the subsidiaries of the
Company, Tremax International Limited entered into a sale and purchase agreement
(the "Agreement") with Domaine Group Limited, a British Virgin Islands
corporation (the "Vendor"), for the acquisition of CBBN Holdings Limited ("CBBN
Holdings"). CBBN Holdings is a 80% beneficial owner of Cosmactive Broadband
Networks Co. Ltd ("CBN"). The purchase consideration shall be satisfied in full
via the issuance of 5,333,333 of common stock of the Company.

                                      F-22
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 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 and
education-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
Limited, a British Virgin Islands company to operate and conduct digit games in
Cambodia and to manage the digit games activities in Cambodia.

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


RESULTS OF OPERATIONS
---------------------

For the six months and three months ended June 30, 2007 compared with the six
months and three months ended June 30, 2006

OVERVIEW

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,
Education-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
both education on-demand and 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 games operations.

                                       1

<PAGE>


Business Operations
-------------------

Our principal operations are carried out through the following three segments of
our business:

1.      Entertainment Services - Video on-Demand services such as for
        entertainment and education, providing the Company with advertising,
        subscriptions, online games and e-commerce ( B2B and B2C) revenues
2.      Digit Games
3.      E-Travel Services - Online Travel Portal


1. Entertainment Services
   ----------------------

        The Company provides online entertainment and education on-demand on
        Broadband channels, Internet portals and 3G devices across the globe,
        for specific and identified viewer lifestyles, demographics and
        interests. Entertainment and web visit experience is maintained
        throughout from the initial viewing experience to on-line shopping and
        payment checkout experience.

        The Company uses Broadband technology to provide its services. Broadband
        technology is defined as high speed, high-bandwidth, two-way data, voice
        and video communications, delivered at high transmission rates.

        SERVICES: Broadband technology allows us to deliver the following
        services::

        o       Video-on-demand (VOD) services that enable individuals to select
                videos from a Central Server, on-demand 24 hours a day, 7 days a
                week, for viewing on:

                o       Television screens (Set top Box Technology)

                o       PCs (Digital Subscriber Line (DSL) Technology)

                o       Personal Digital Assistants(PDA), 3G hand phones
                        (Wireless Technology)

                o       E-Commerce or online shopping - linked interactively to
                        the VOD platforms on broadband. Consumers choose to buy
                        products online as they watch the videos.

        The Company applies broadband technologies to facilitate its growth in
        the broadband sector. Its main competitive advantage is derived from its
        ownership of rights for various territories on broadband for its
        contents i.e. movies and programs on lifestyles, education, business and
        glamour.

        The Company has built and installed its broadband streaming system
        complete with firewalls, load balancing, bandwidth and consumer
        monitoring systems, which include video streaming, video storage and web
        servers in Singapore and the U.S. The Company has also developed its
        streaming applications to stream into television sets, via a set top
        box.

        The Company has developed a capability to stream wireless broadband and
        have its own digitized entertainment sites for wireless broadband
        applications.

        M2B offers consumers personalized entertainment through its wide range
        of broadband streaming channels available at www.m2bworld.com.

                                       2
<PAGE>


 PRODUCTS: We offer the following products on the VOD platform:

        o       Entertainment - Consumers access movies, music, glamour and
                fashion, lifestyle (hobbies, cooking, and personalities),
                documentaries, sports, health and fitness and others. They can
                choose from a large number of different channels depending on
                their interests or lifestyle preferences.

        o       Adult Education - consumers view program on management skills,
                communication skills, decision making, customer services and
                sales, motivation, presentation and writing skills, counseling
                and others.


        With this strategy, the Company generates diversified sources of revenue
        from:

        1.      Advertising i.e. program and channel sponsorship

        2.      Online subscriptions

        3.      Channel/portal development i.e. digital programming services

        4.      Content aggregation and syndication

        5.      Broadband consulting services and online shopping turnkey
                solutions

        6.      E-commerce services

        7.      Online games micro-payments

        Currently, the Company is in the process of revamping it's Broadband
        websites. The current Broadband websites, which may change from time to
        time include:

        1.      Entertainment Sites

                INTERNATIONAL AND U.S. SITES:

                o       Star78.com - currently shut down for revamping

                o       Shine8.com - an advertising-based Lifestyle site for
                        international viewers

                o       Jump29.com - an advertising-based Young Adults site for
                        international viewers

                o       Dreamstage7.com - an advertising and subscription-based
                        Glamour and Fashion site for international viewers

                o       Highfashion7.com - an advertising and subscription based
                        designer Fashion site for international viewers

                o       Dragon78.tv - an advertising and subscription-based
                        Mandarin Entertainment site for viewers in US only

                o       Chinois78.com - an advertising and subscription based
                        Mandarin Lifestyle site for viewers in US only

                o       m2btv - Broadband TV (IPTV) service available through
                        set-top box


                 ASIAN SITES:

                o       Dimension88.com - an advertising and subscription-based
                        Movie site in Singapore only

                o       Dragon78.com - currently shut down for revamping

                o       Ideas Broadband - four subscription based entertainment
                        sites (Movie Mania, Executive Online, Glamour Galore,
                        Dragon City providing 25 channels) dedicated for
                        Singapore Telecommunications Ltd Ideas Broadband viewers
                        in Singapore only

                o       Trilogy - a subscription based 3G mobile phone
                        entertainment site dedicated for Singapore
                        Telecommunications Trilogy viewers in Singapore only

                o       Colours78.com - an advertising and subscription based
                        Mandarin Lifestyle site in Singapore only

                                       3
<PAGE>

2.       Education Sites

                U.S. SITES:

                o       Wiz5.us - an advertising and subscription-based Business
                        & Corporate Training site for viewers in US only

                ASIAN SITES:

                o       Wiz5.com - an advertising and subscription-based
                        Business and Corporate Training site for viewers in
                        Singapore only

        3.      E-Commerce Sites

                INTERNATIONAL SITES:

                o       Starzmall.com - A One-Stop Shopping Paradise

                o       Royalhive.com - A One-Stop Health and Beauty Mall

                                       3
        BROADBAND SERVICES

        The Company has an automated Content Management System ("CMS") to
        enhance its advertising service offered to clients and to provide a new
        revenue source for the Company. The system allows for the programming of
        video, animation, streaming and flash content to multiple destinations
        and was demonstrated back in 2005 at the Asia Television Forum (ATF
        2005), a regional platform for media buyers and sellers. As a sponsor at
        the event, M2B World showcased the automated CMS on plasma screens,
        together with programming from the M2B content library that includes
        movies, dramas, comedies, documentaries, music, fashion, lifestyle,
        learning and more.

        Linked by broadband networks and wireless set-top boxes to push content
        and scheduled advertising at physical premises, the CMS allows
        businesses the option of presenting targeted content on selected video
        displays in multiple locations, such as on different levels of a
        shopping mall, in various spots within a restaurant or club or on
        separate elevators in the same building.

                                       4

<PAGE>


        In store video panels can also carry individualized messages together
        with customized content to reach consumers and target audiences within
        the premises. Businesses and advertisers can then readily offer
        customers feature-rich content with this versatile and easy-to-use CMS
        designed to advance brand-building activities and widen the advertising
        options for customer outreach. This integrated solution underscores
        M2B's key strength in delivering content for viewing on PCs, 3G mobile
        phones, PDAs as well as television screens. This is another method by
        which M2B is continuing to meet the consumer shift toward on-demand and
        personalized media experiences whether at home or work and now
        additionally on video screens in stores, restaurants, clubs and other
        business or leisure outlets.

        DIGIT GAMES

        The Company has an 18-year license to conduct nation wide lottery in
        Cambodia. The Company also signed an agreement with Allsports Limited, a
        British Virgin Islands company, to operate, administer, and manage the
        lottery digit games activities in Cambodia.

        E-TRAVEL SERVICES

        The Company's subsidiary, M2B World Travel Limited., signed a global
        agreement with Amadeus Global Travel Distribution, SA, a Spanish
        corporation. Through the agreement, M2B continues to offer direct access
        to the extensive range of travel options available through the Amadeus
        network to their viewers around the world. The agreement extends M2B's
        reach through its broadband streaming entertainment into the worldwide
        travel arena.

        According to PhoCusWright, a travel industry research provider, the
        online portion of those sales is growing particularly quickly in the
        U.S., Europe and the Asia-Pacific region, where combined online travel
        sales in those three geographic regions is estimated to top $115 billion
        this year. With eMarketer reporting that broadband currently reaches
        over 58 million households in Asia-Pacific alone, M2B World Travel
        Limited through its agreement with Amadeus, is now poised to immediately
        access and serve this consumer market.

        The M2B World Travel Website aims to provide competitive rates through
        its direct connection to the Amadeus System using the Elleipsis
        TravelTalk(TM) integration platform, which allows M2B to access not only
        the major travel providers, but an expanded roster of additional
        suppliers such as low-cost carriers, cruise lines, and widened hotel
        distribution channels all through one single, easy-to-use platform.

        The video e-travel portal brings an extensive range of travel options to
        our viewers and gives the Company an entry into the travel and tourism
        market; it directly aggregates travel solutions from 500 airlines,
        58,000 hotel properties, some 42 car rental companies serving over
        30,000 locations, as well as widespread air, ferry, rail, cruise, and
        tour operators with proprietary video content, allowing customers to the
        site to view their travel destination, thus influencing their purchasing
        decision.

        The Company plans to launch the M2B travel site in 2007.  No assurances
        can be made that such plan will materialize as planned.

                                       5
<PAGE>


SECOND QUARTER 2007 SUMARRY OF OPERATIONS


Financial Statement

- Revenue for the quarter ended June 30, 2007 was $20,007,405 compared with
  $7,433,829 for the same period in 2006.

- Net income for the quarter ended June 30, 2006 was $14,653,386 compared with
  $920,203 for the same period in 2006.

- The Company's cash balance was $4,200,078 as at June 30, 2007 compared with
  $2,294,984 as at 31 December 2006.


Revenue

Revenue for the six months ended June 30, 2007 increased by $11,183,514 (78%),
from $14,310,966 for the six months ended June 30, 2006 to $25,494,480 for the
six months ended June 30, 2007. The revenue for the three months ended June 30,
2007 increased by $12,573,576 (169%), from $7,433,829 to $20,007,405 for the
three months ended June 30, 2006 and 2007, respectively.

This increase in revenue was mainly contributed by the entertainment segment
which included the completion and delivery of the IPTV platform in Indonesia.
This resulted in a revenue of $15 million in the three months ended June 30,
2007. The completion and delivery of the IPTV platform in Indonesia comprised of
the hardware, software and middleware, and supply and programming of content.
The digit games in Cambodia incurred a decrease in revenue of $634,552 (a drop
of 5.7%) for the six months ended June 30, 2007 from $11,094,343 in June 30,
2006 to $10,459,791 in June 30, 2007, mainly due to more holidays in the first
six months of 2007 as compared to the same period in 2006.


Cost of Sales

Cost of sales for the six months ended June 30, 2007 was $11,292,135 which
increased by $318,832 (2.9%) from $10,973,303 for the six months ended June 30,
2006.

Cost of sales for the three months ended June 30, 2007 was $5,868,634 which
increased by $683,724 (13%) from $5,184,910 for the three months ended June 30,
2006.

Increase in cost of sales of $318,832 and $683,724 for the six months and three
months ended June 30, 2007 respectively was mainly attributed to the delivery of
the IPTV platform in Indonesia, which included the hardware, software and
middleware, and supply and programming of content.

As a proportion of revenue, the cost of sales for the six months ended June 30,
2007 was 44% as compared to 77% for the six months ended June 30, 2006.

As a proportion of revenue, the cost of sales for the three months ended June
30, 2007 was 29% as compared to 70% for the three months ended June 30, 2006.

The cost of sales as a proportion of revenue of 44% and 29% for the six months
and three months ended June 30, 2007 was due to the delivery of the IPTV
platform in Indonesia which resulted in a significant increase in revenue, with
a lower cost.


Distribution Expenses

Distribution expenses for the six months ended June 30, 2007 at $505,653 were
lower by $53,876 (9.6%) as compared to the amount of $559,529 incurred for the
six months ended June 30, 2006.

The lower distribution expenses were attributed to decreased spending for
marketing and promotions which decreased by $104,394 (24%), from $421,831 for
the six months ended June 30, 2006 to $317,437 for the six months ended June 30,
2007.

Distribution expenses for the three months ended June 30, 2007 at $196,006 were
lower by $116,089 (37%) as compared to the amount of $312,095 for the three
months ended June 30, 2006.

The lower amount spent for the three months ended June 30, 2007 was attributed
to the lower expenditure on advertising and marketing, which decreased by
$119,693, (51%) from $231,701 to $112,008 for the three months ended June 30,
2006 and 2007, respectively.

General And Administrative Expenses

Administration expenses for the six months ended June 30, 2007 at $3,521,215
were higher by $1,839,204 (109%) as compared to the amount of $1,682,011
incurred for the six months ended June 30, 2006.

Administration expenses for the three months ended June 30, 2007 at $1,848,919
were higher by $800,585 (76%) as compared to the amount of $1,048,334 incurred
for the three months ended June 30, 2006.

The increase in administrative expenses for the six months and three months
ended June 30, 2007 was attributed mainly to increase in:

                                       6

<PAGE>

o     Depreciation and license amortization had increased by $1,491,513 (369%),
      from $404,188 for the six months ended June 30, 2006 to $1,895,701 for the
      six months ended June 30, 2007. For the three months ended June 30, 2007,
      depreciation and licensing cost had increased by $861,705 (398%) from
      $216,460 to $1,078,165 for the three months ended June 30, 2006 and 2007
      respectively. The increase was mainly attributed to the increase in
      license amortization of the movies content which have a definite life and
      which were acquired for the newly launched Broadband TV service.

o     Staff costs. Staff costs had increased by $286,460 (47%) from $607,165 for
      the six months ended June 30, 2006 to $893,625 for the six months ended
      June 30, 2007. For the three months ended June 30, 2007, staff cost had
      decreased by $21,251 (5%) from $406,519 to $385,268 for the three months
      ended June 30, 2006 and 2007 respectively. The overall increase in staff
      cost for the six months period ended June 30, 2007 resulted from the
      increase in the number of professional employees hired. Staff costs were
      however trimmed and lowered in the second quarter for the three months
      ended June 30, 2007 in order to maintain cost efficient operations.


Income From Operations

The Company reported a gain from operations of $10,175,477 for the six months
ended June 30, 2007 as compared to the income from operations of $1,096,123 for
the six months ended June 30, 2006. For the three months ended June 30, 2007,
the gain from operations was $12,093,846 as compared to the gain of $888,490 for
the three months ended June 30, 2006. The significant increase in the income
from operations for the six months and three months ended June 30, 2007 was due
to the significant increase in the entertainment business for the three months
ended June 30, 2007.


Net Income

For the six months ended June 30, 2007, net income was $15,403,622 which
increased by $14,183,163 (1162%) from $1,220,459 for the six months ended June
30, 2006. For the three months ended June 30, 2007, net income was $14,653,386
which increased by $13,733,183 (1492%) from $920,203 for the three months ended
June 30, 2006.

The significant increase in net income for the six months and three months ended
June 30, 2007 was mainly attributed to increase in the entertainment business.
The increase was partly attributed to the gain on dilution of the Company's
interest in a subsidiary, M2B World Asia Pacific Pte. Ltd. by issuing shares to
the private investors at a premium. The increase was also partly attributed to
the net change in the fair value of an investment (equity securities) held for
trading.

                                       7
<PAGE>


Liquidity And Capital Resources

The Company had cash of $4,200,078 at June 30, 2007 as compared to cash of
$2,294,984 at December 31, 2006.

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 three months ended June 30, 2007, 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 2007 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

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 81.7%.

On January 15, 2007, the Company through its subsidiary, Amaru Holdings Limited
(Amaru Holdings), a British Virgin Islands corporation, entered into a sale and
purchase agreement together with other sellers (the "Agreement") with Auston
International Group Ltd., a Singapore company (Auston) to sell to Auston its
majority owned subsidiary, M2B World Asia Pacific Pte Ltd., together with its
subsidiary, M2B World Holdings Limited (collectively, M2B Asia). Auston is a
company trading on the Singapore Stock Exchange. The Agreement provides for the
sale of 42,459,978 shares of M2B World Asia Pacific Pte. Ltd., its total issued
and outstanding capital. As the consideration for M2B World Asia Pacific Pte.
Ltd. shares, Auston agreed to issue a total of 660 million new ordinary shares
of Auston to M2B World Asia Pacific Pte. Ltd. shareholders. The Auston shares
are valued at S$0.25 per share.

The Agreement is subject to certain conditions precedent, including, but not
limited to the shareholder approval of the transaction by Auston shareholders,
the approval of the Singapore Stock Exchange and other related regulatory
approvals of both parties.

Amaru Holdings is required to deliver a valuation report by an independent
auditor to Auston confirming that the value of the assets of M2B World Asia
Pacific Pte. Ltd. is no less than that of the amount of consideration to be paid
by Auston.

On April 23, 2007, M2B World Holdings Limited ("M2B World"), a British Virgin
Islands corporation entered into a sale and purchase agreement (the "Agreement")
with P T Agis TBK, a company incorporated in Indonesia ("Agis") to sell to Agis
certain assets, including the domain name under which the IPTV business will
operate in Indonesia and the transfer and license of IPTV platform
(collectively, the "Assets"). M2B World is a wholly-owned subsidiary of M2B
World Asia Pacific Pte Ltd. which is a 81.7% owned by Amaru Holdings Limited.
Amaru Holdings Limited is a wholly-owned subsidiary of Amaru Inc., a Nevada
corporation (the "Company"). Agis is trading on the Indonesia Stock Exchange.
The Agreement provides for the consideration of US$15 million for the sale of
the Assets based on the mutually agreed valuation of such Assets. Such
consideration is to be provided through the issuance of 75 million of Agis
shares at an agreed price of IDR 1300 per share, and such number of shares of a
to be formed investment holding wholly-owned subsidiary of Agis that shall equal
to 50% of beneficial holdings of such subsidiary. The sale had been completed by
June 30, 2007.

                                       8
<PAGE>


ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        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.

        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.

                                       9
<PAGE>



        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.

        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 BIRD FLU PANDEMIC OR SIMILAR PUBLIC HEALTH DEVELOPMENTS

        Any future outbreak of the bird 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.

                                       10

<PAGE>


ITEM 4: CONTROLS AND PROCEDURES

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

An evaluation was conducted under the supervision and with the participation of
the Company's management, including its Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the Company's disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedure were effective as of June 30, 2007.  There has been no change in the
Company's internal control over financial reporting that occurred during the
quarter ended June 30, 2007, that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.

The Company's annual report on Form 10-KSB for the year ended December 31, 2006
did not include (nor does this quarterly report on Form 10-Q include) an
attestation report of the Company's registered public accounting firm regarding
internal control over financial reporting. Management's report in the annual
report was not subject to attestation by the Company's registered public
accounting firm pursuant to rules of the Securities and Exchange Commission that
permit the Company to provide only management's report in the annual report.

                                       11

<PAGE>


PART 2:  OTHER INFORMATION

ITEM 1:  LEGAL PROCEEDINGS

On April 23, 2007, a supplier filed a lawsuit against M2B World, Inc. for breach
of contract for an amount of $72,649. In the opinion of Management, the outcome
of this legal proceeding will not have a material effect on the Company's
consolidated financial statements.

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.

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'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. 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.

                                       12


<PAGE>

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.

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 depends 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.

                                       14

<PAGE>


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

On March 19, 2007, the Company issued 40,000 shares of
common stock through its private placement of shares of common stock at a
purchase price of $1.50 per share for a total amount of $60,000 to "accredited
investors", as that term is defined in Regulation D of the Securities Act of
1933.

The shares of the Company's common stock were issued and sold in reliance upon
the exemption provided by Section 4(2) and/or Regulation D/Regulation S of the
Securities Act of 1933.


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:

A - Exhibits:

Exhibit 31             CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
                       CERTIFICATION PURSUANT TO SECTION 906
                       OF THE SARBANES-OXLEY ACT

Exhibit 32             CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF
                       FINANCIAL OFFICER PURSUANT TO RULE 13A-14(b) OF THE
                       EXCHANGE ACT AND 18 U.S.C. SECTION 1350, AS ADOPTED
                       PURSUANT 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)


August 14, 2007                            /s/ Colin Binny
----------------                         ---------------------------------------
Date                                     President, CEO & CFO


                                       16