<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, 2008

                                       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 (65) 6332 9287
                                                    -------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [X]       No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

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

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

Yes [ ]       No [X]

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

Common Stock $0.001 par value                          159,431,861 shares
-----------------------------                  -------------------------------
          (Class)                              (Outstanding at July 31, 2008)




<PAGE>

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                           AMARU, INC. AND SUBSIDARIES
                       2008 Quarterly Report on Form 10-Q
                                Table of Contents


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

ITEM 1:  CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets                                                 F-2
Consolidated Statements of Income                                           F-3
Consolidated Statement of Stockholders' Equity and Comprehensive Income     F-4 to F-5
Consolidated Statements of Cash Flows                                       F-6
Notes to Consolidated Financial Statements                                  F-7 to F-29

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

ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK          7

ITEM 4:  CONTROLS AND PROCEDURES                                             9


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

ITEM 1:  LEGAL PROCEEDINGS                                                  11
ITEM 1A: RISK FACTORS                                                       11
ITEM 2:  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS        14
ITEM 3:  DEFAULTS UPON SENIOR SECURITIES                                    14
ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITIY HOLDERS               14
ITEM 5:  OTHER INFORMATION
                                                                            14
ITEM 6:  EXHIBITS                                                           14

SIGNATURES

</TABLE>




<PAGE>

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                          AMARU, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


                                                      June 30,       DECEMBER 31,
                                                       2008             2007
                                                     -----------     -----------
                                                     (UNAUDITED)

ASSETS
Current assets
Cash and cash equivalents                            $ 2,062,908     $ 2,322,541
Accounts receivable, net of allowance of
 $109,430 and $54,154 at June 30, 2008 and
  December 31, 2007 respectively                         534,564         744,589
Prepayment on purchase                                 3,733,333       3,733,333
Account receivable from sale of IPTV Platform          9,500,000       9,500,000
Equity securities held for trading                     1,539,000       2,924,000
Other current assets                                     471,179         513,614
Inventories                                            1,147,404       1,157,248
Investments available for sale                         2,402,613       2,402,613
                                                     -----------     -----------
Total current assets                                  21,391,001      23,297,938
                                                     -----------     -----------

Non-current assets
Property and equipment, net                            1,463,540       1,797,146

Intangible assets, net                                25,158,149      25,693,066

Equity Method Investment                               4,929,737       4,942,283
Investments available for sale                         1,259,612       4,911,345
                                                     -----------     -----------

Total non-current assets                              32,811,038      37,343,840
                                                     -----------     -----------
Total assets                                         $54,202,039     $60,641,778
                                                     ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses                $ 2,368,666     $ 3,068,613
Other payables                                            40,000         100,005
Advances from related parties                            123,793         155,313
Capital lease payable - short term                        11,364          10,746
Income taxes payable                                       5,428           5,428
                                                     -----------     -----------
Total current liabilities                              2,549,251       3,340,105
                                                     -----------     -----------
Deferred tax liabilities                                  68,391       1,672,801

Capital lease payable - long term                         54,919          57,306
                                                     -----------     -----------

Total non-current liabilities                            123,310       1,730,107
                                                     -----------     -----------
Total liabilities                                      2,672,561       5,070,212

Minority interest                                      4,212,716       4,619,381

Stockholders' equity

Preferred stock (par value $0.001)
 5,000,000 shares authorized;
 0 shares issued
 and outstanding at June 30,
 2008 and December 31, 2007, respectively                   --               --

Common stock (par value $0.001)
 200,000,000 shares authorized;159,431,861
 and 159,431,861 shares issued and outstanding at
 June 30, 2008 and December 31,
 2007, respectively                                      159,431         159,431

Additional paid-in capital                            42,918,666      42,918,666

Retained earnings                                      3,187,628       5,650,447

Accumulated other comprehensive income                 1,051,037       2,223,641
                                                     -----------     -----------

Total stockholders' equity                            51,529,478      55,571,566
                                                     -----------     -----------

Total liabilities and shareholders' equity           $54,202,039     $60,641,778
                                                     ===========     ===========


           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, 2008      June 30, 2007      June 30, 2008      June 30, 2007
                                                      -------------      -------------      -------------      -------------

Revenue:

Entertainment:
  Advertising/Subscription                            $      48,169      $      34,689      $      13,176      $      24,440
  Syndication and e-services                                     --         15,000,000                 --         15,000,000
                                                      -------------      -------------      -------------      -------------
    Total Entertainment                                      48,169         15,034,689             13,176         15,024,440

Digit gaming                                             11,457,693         10,459,791          5,863,939          4,982,965
                                                      -------------      -------------      -------------      -------------
Total revenue                                            11,505,862         25,494,480          5,877,115         20,007,405

Cost of services                                        (11,345,549)       (11,292,135)        (5,757,169)        (5,868,634)
                                                      -------------      -------------      -------------      -------------

Gross profit                                                160,313         14,202,345            119,946         14,138,771

Distribution costs                                         (205,900)          (505,653)           (80,970)          (196,006)
Administrative expenses                                  (1,941,146)        (3,521,215)          (902,644)        (1,848,919)
                                                      -------------      -------------      -------------      -------------
Total expenses                                           (2,147,046)        (4,026,868)          (983,614)        (2,044,925)
                                                      -------------      -------------      -------------      -------------

(Loss) Income from operations                            (1,986,733)        10,175,477           (863,668)        12,093,846

Other (expenses) income

 Interest expense                                            (1,111)              (171)              (568)              (171)

 Interest income                                              8,970             26,101              3,527             12,419

 Gain on disposal of equipment                                1,888                 --                 --                 --

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

Loss on disposal of investment available for sale          (442,051)                --            (44,296)                --

Net change in fair value of financial
 assets held for trading                                 (1,385,000)         4,320,000         (1,385,000)         4,320,000
Share of (loss) profit of equity method investment          (12,546)           (15,224)            (3,178)           (22,763)
                                                      -------------      -------------      -------------      -------------

(Loss) Income before income taxes                        (3,816,583)        16,990,054         (2,293,183)        16,403,331

(Provision) benefit for income taxes                        947,099         (1,586,432)           826,000         (1,749,945)
                                                      -------------      -------------      -------------      -------------
Net income (loss)                                     $  (2,869,484)     $  15,403,622      $  (1,467,183)     $  14,653,386
                                                      =============      =============      =============      =============
Attribute to:
Equity holders of the company                         $  (2,462,819)     $  12,628,144      $  (1,225,451)     $  11,797,894
Minority interests                                         (406,665)         2,775,478           (241,732)         2,855,492
                                                      -------------      -------------      -------------      -------------
Net income (loss)                                     $  (2,869,484)     $  15,403,622      $  (1,467,183)     $  14,653,386
                                                      =============      =============      =============      =============
Net income per share
- Basic and diluted                                   $       (0.02)     $        0.10      $       (0.01)     $        0.10
                                                      =============      =============      =============      =============

Weighted average number of common
shares outstanding
-  Basic                                                159,431,861        153,942,285        159,431,861        154,098,528
                                                      =============      =============      =============      =============

-  Diluted                                              159,431,861        153,942,285        159,431,861        154,098,528
                                                      =============      =============      =============      =============


                                 See accompanying notes to consolidated financial statements

                                                             F-3


<PAGE>



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


                              PREFERRED STOCK               COMMON STOCK
                        ---------------------------   ---------------------------
                           NUMBER          PAR                           PAR           ADDITIONAL      SUBSCRIBED
                             OF           VALUE         NUMBER OF       VALUE           PAID-IN          COMMON          RETAINED
                           SHARES        ($0.001)        SHARES       ($0.001)          CAPITAL          STOCK           EARNINGS
                        -----------    -----------    -----------     -----------     -----------     -----------      ------------

Balance at
  December 31, 2006              --            --     153,638,528     $   153,638     $38,942,126     $   189,000      $ 2,084,908

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

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

Common stock issued
  in exchange for prepayment
   of investment                 --            --       5,333,333           5,333       3,728,000            --                 --

Contribution from
  minority interest              --            --              --              --              --            --                 --

Gain on dilution of
  interest in
  subsidiary                     --            --              --              --              --            --                 --

Net income                       --            --              --              --            -  --           --        $ 3,565,539

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

Comprehensive
  income                         --            --              --              --              --              --               --
                        -----------    -----------    -----------     -----------     -----------     -----------      ------------
Balance at
December 31, 2007                --            --     159,431,861     $   159,431     $42,918,666              --      $ 5,650,447
                        ===========    ===========    ===========     ===========     ===========     ===========      ============

                                                                                                       (CONTINUED ON NEXT PAGE)

                                                                F-4




<PAGE>


(CONTINUED FROM PREVIOUS PAGE)


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

Balance at
  December 31, 2006              $     12,927     $  3,664,647      $         --      $ 45,047,246

Subscribed common
  Stock issued                             --               --                --                --

Common stock issued
  for services                             --               --                --            60,000

Common stock issued
  in exchange for prepayment
  of investment                            --               --                --         3,733,333

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

Gain on dilution of
  interest in
  subsidiary                               --               --        (2,483,872)       (2,483,872)

Net income                                 --               --         1,523,253         5,088,792

Change in fair value
  of available for-sale-
  equity securities,
  net of tax                               --       (1,453,933)               --        (1,453,933)
                                                                                      ------------
Comprehensive
  income                                   --                --               --         3,634,859
                                 ------------     ------------      ------------      ------------
Balance at
December 31, 2007                $     12,927     $  2,210,714      $  4,619,381      $ 55,571,566
                                 ============     ============      ============      ============

                    See accompanying notes to consolidated financial statements

                                                F-4A


<PAGE>

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


                              PREFERRED STOCK               COMMON STOCK
                        ---------------------------   ---------------------------
                           NUMBER          PAR                           PAR           ADDITIONAL      SUBSCRIBED
                             OF           VALUE         NUMBER OF       VALUE           PAID-IN          COMMON          RETAINED
                           SHARES        ($0.001)        SHARES       ($0.001)          CAPITAL          STOCK           EARNINGS
                        -----------    -----------    -----------     -----------     -----------     -----------      ------------

Balance at
  December 31,
  2007                          --             --     159,431,861     $   159,431     $42,918,666             --       $ 5,650,447

Net loss                        --             --              --             --              --              --        (2,462,819)

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

Comprehensive                   --             --              --             --              --              --                --
  income
                        -----------    -----------    -----------     -----------     -----------     -----------      ------------
Balance at June
  30, 2008                       --            --     159,431,861     $   159,431     $42,918,666              --      $ 3,187,628
                        ===========    ===========    ===========     ===========     ===========     ===========      ============

                                                                                                                   (CONTINUED BELOW)


(CONTINUED FROM ABOVE)


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

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


Net loss                         --             --            (406,665)       (2,869,484)

Change in
  fair value
  of available
  for-sale-equity
  securities,
  net of tax                     --       (1,172,604)               --        (1,172,604)
                                                                            ------------
Comprehensive
 loss                            --               --                --        (4,042,088)
                       ------------     ------------      ------------      ------------

Balance at June
  30, 2008             $     12,927     $  1,038,110      $  4,212,716      $ 51,529,478
                       ============     ============      ============      ============


               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, 2008     June 30, 2007
                                                                     -------------     -------------

CASH FLOWS FROM OPERATING ACTIVITIES
    Net income (loss)                                                $ (2,869,484)     $ 15,403,622
    Adjustments to reconcile net income to cash and cash
      equivalents used or provided by operations:
    Amortization                                                          585,042         1,625,493
    Depreciation                                                          340,450           270,208
    Acquisition of investment in exchange for account receivable               --        (4,400,000)
    Gain on disposal of equipment                                          (1,888)               --
    Loss on disposal of investment available for sale                     442,051                --
    Gain on dilution of interest in subsidiary                                 --        (2,483,871)
    Loss(Gain)in fair value of financial assets at fair value
     through Profit or Loss-held for trading                            1,385,000        (4,320,000)
    Common stock issued for services                                           --            60,000
    Deferred taxes                                                       (947,099)        1,586,432
    Share of loss (profit) of Equity Method Investment                     12,546            15,224

 Changes in operation assets and liabilities
    Accounts receivables                                                  210,025       (10,316,268)
    Inventories                                                             9,844           520,955
    Others current assets                                                  42,435            57,856
    Accounts payable and accrued expenses                                (699,947)          (10,198)
    Other payables                                                        (60,005)          105,000
    Income taxes payable                                                       --           (13,228)
                                                                     ------------      ------------
Net cash used in operating activities                                  (1,551,030)       (1,898,775)
                                                                     ------------      ------------
CASH FLOWS FROM INVESTING ACTIVITIES
    Proceeds from disposal of equipment                                     2,684                --
    Proceeds from disposal of investment available for sale             1,379,767                --
    Acquisition of equipment                                               (7,640)         (710,846)
    Acquisition of Equity Method Investment                                    --           (66,115)
    Acquisition of intangible assets                                      (50,125)       (1,069,195)
                                                                     ------------      ------------
Net cash generated from (used in) investing activities                  1,324,686        (1,846,156)
                                                                     ------------      ------------
CASH PROVIDED FROM FINANCING ACTIVITIES
   Repayments of obligations under capital leases                          (1,769)               --
   Repayment of related parties                                           (31,520)               --
   Proceeds from Capital lease payable                                         --            70,025
   Proceeds from issuance of common stock                                      --                --
   Capital contributed by minority shareholders                                --         5,580,000
                                                                     ------------      ------------
Net cash provided used in by financing activities                         (33,289)        5,650,025
                                                                     ------------      ------------
Effect of exchange rate changes on cash and cash equivalents                   --                --
                                                                     ------------      ------------

Cash flows from all activities                                           (259,633)        1,905,094

Cash and cash equivalents at beginning of period                        2,322,541         2,294,984
                                                                     ------------      ------------

Cash and cash equivalents at end of period                           $  2,062,908      $  4,200,078
                                                                     ============      ============


SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND
INVESTING ACTIVITIES:
Acquisition of investments (1)                                       $         --      $  4,400,000
                                                                     ============      ============



(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 investment for $1.7 million in exchange for the settlement of an accounts
         receivable 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


</TABLE>

                                                 F-6

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



1.       BASIS OF PRESENTATION AND REORGANIZATION

  1.1    Description of Business

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

         The Company is also in the business of digit gaming (lottery). The
         Company has an 18 year license to conduct a 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 key business focus of the Company is to establish itself as the
         leading provider and creator of a new generation of
         Entertainment-on-Demand and E-Commerce Channels on Broadband, and 3G
         (Third Generation) devices.

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

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

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

   1.2   Recent Accounting Standards and Pronouncements

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

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


                                       F-7
<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



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

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

         In December 2007, the FASB issued Statement of Financial Accounting
         Standards No. 160, Noncontrolling Interests in Consolidated Financial
         Statements-an amendment of Accounting Research Bulletin No. 51 ("SFAS .
         160"). SFAS 160 establishes accounting and reporting standards of
         ownership interests in subsidiaries held by parties other than the
         parent, the amount of consolidated net income attributable to the
         parent and to the noncontrolling interest, changes in a parent's
         ownership interest and the valuation of retained noncontrolling equity
         investments when a subsidiary is deconsolidated. SFAS 160 also
         establishes disclosure requirements that clearly identify and
         distinguish between the interests of the parent and the interests of
         the noncontrolling owners. SFAS 160 is effective for fiscal periods
         beginning after December 15, 2008. The Company is currently evaluating
         the impact that SFAS 160 will have on its financial position and
         results of operations.

         In March 2008, the FASB issued SFAS No. 161, "Disclosures about
         Derivative Instruments and Hedging Activities -- an amendment of FASB
         Statement No. 133". This statement amends SFAS No. 133 by requiring
         enhanced disclosures about an entity's derivative instruments and
         hedging activities, but does not change SFAS No. 133's scope or
         accounting. SFAS No. 161 requires increased qualitative, quantitative
         and credit-risk disclosures about the entity's derivative instruments
         and hedging activities. SFAS 161 is effective for fiscal years, and
         interim periods within those fiscal years, beginning after November 15,
         2008, with earlier adoption permitted. The Company is currently
         evaluating the impact that SFAS 161 will have on its financial position
         and results of operations.


                                       F-8
<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



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 in the
            United States of America 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.




                                       F-9

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



      2.3   Cash and Cash Equivalents

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

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

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


      2.4   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.



                                      F-10

<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



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

                                                       FOR THE SIX MONTHS ENDED       FOR THE THREE MONTHS ENDED
                                                     ---------------------------     ---------------------------
                                                       JUNE 30,        JUNE 30,        JUNE 30,       JUNE 30,
                                                        2008             2007            2008            2007
                                                     -----------     -----------     -----------     -----------

          Sales outside of the U.S.                  $11,505,862     $25,494,480     $ 5,877,115     $20,007,405

          Services purchased outside of the U.S.     $11,322,553     $11,260,156     $ 5,734,173     $ 5,866,757
</TABLE>

      2.5   Inventories

            Inventories are carried at the lower of cost or net realizable
            value. Cost is calculated using first-in, first-out ("FIFO") method
            and comprises all costs of purchase, costs of conversion and other
            costs incurred in bringing the inventories to their present location
            and condition. Inventories comprised primarily of finished products
            used in the Company's IPTV service.


      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-11

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



      2.7   Intangible Assets

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

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

            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 5 years before additional significant development needs to be
            done.

      2.8   Equity Method Investment

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


                                      F-12

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



            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 Equity Method Investment recognized at
            the date of acquisition is recognized 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 recognized immediately in the consolidated
            profit and loss statement.

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

      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"). Equity securities held for trading as of June 30,
            2008 totaled $1,539,000 and December 31, 2007 totaled $2,924,000.

            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-13

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



      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 three months ended June 30, 2008 and
            the year ended December 31, 2007.

      2.11  Investments at fair value through profit and 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.

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

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

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

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

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

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

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

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

            The following table shows how our investments are categorized.

<TABLE>
<S>     <C>

                                                         Fair Value Measurement at June 30, 2008 using:
                                                  ----------------------------------------------------------
                                                                                         Prices or
                                                     Fair Value         Quoted Prices in         Valuation
                                                  Measurements at       Active Markets          Techniques
                                                   June 30, 2008          (Level 1)              (Level 3)
Description                                              ($)                  ($)                   ($)
-----------------------------------------------------------------------------------------------------------
   Equity Securities Held for Trading                 1,539,000            1,539,000                   --

   Investments Available for Sale - Current           2,782,561                   --            2,402,613

   Investments Available for Sale - Non Current              --                   --            1,259,612
</TABLE>


                                      F-14
<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007

         The table below sets forth a summary of changes in the fair value of
         the Company's Level 3 financial assets (Investments Available for Sale)
         for the six months ended June 30, 2008.

                                                               Six Months Ended
                                                                June 30, 2008
                                                                 -----------
            Balance at the beginning of the period               $ 7,313,958
            Change in fair value of Investments
             Available for Sale - unrealized                      (1,829,915)
            Loss on disposal of Investments
             Available for Sale - realized                          (442,051)
            Proceeds from sale of Investments
             Available for Sale                                   (1,379,767)
                                                                 -----------
            Balance at the end of the period                     $ 3,662,225
                                                                 ===========

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

      2.12  Advances from Related Party

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

      2.13  Leases

            The Company is the lessee of equipment under a capital lease
            expiring in 2014. The assets and liabilities under capital leases
            are recorded at the lower of the present value of the minimum lease
            payments or the fair value of the asset. The assets are amortized
            over the lower of their related lease terms or their estimated
            productive lives. Amortization of assets under capital leases is
            included in depreciation expense for the quarter ended June 30, 2008
            and 2007.

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

      2.14  Foreign Currency Translation

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




                                      F-15
<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



      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.

      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-16

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



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

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

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

      2.18  Earnings (Loss) Per Share

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

      2.19  Financial Instruments

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

      2.20  Advertising

            The cost of advertising is expensed as incurred. For the six months
            ended June 30, 2008 and 2007, the Company incurred advertising
            expenses of $43,112 and $317,437 respectively. For the three months
            ended June 30, 2008 and 2007, the Company incurred advertising
            expenses of $10,831 and $112,008 respectively.


                                      F-17

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



      2.21  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

                                                     June 30,      December 31,
                                                       2008          2007
                                                    ----------     ----------

           Quoted equity security, at fair value    $1,539,000     $2,924,000
                                                    ==========     ==========


         The fair value of quoted security is based on the quoted closing market
         price on the date of Sale and Purchase agreement. The investment in
         quoted equity security at fair value includes an impairment loss of
         US$1,861,000.

         The investments in quoted equity securities comprised of 34,000,000
         common shares of PT Agis at the market value of US$0.0453 per share.

         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,
                                           2008            2007
                                         ----------     ----------

          Prepayments                    $  140,946     $  169,641
          Deposits                          170,428        171,095
          Other receivables                 159,805        172,878
                                         ----------     ----------
                                         $  471,179     $  513,614
                                         ==========     ==========

5.   PROPERTY AND EQUIPMENT

         Property and equipment consist of the following:

                                               JUNE 30,       DECEMBER 31,
                                                 2008             2007
                                             -----------      -----------

          Office equipment                   $ 1,148,984      $ 1,148,013
          Motor vehicle                          112,563          112,563
          Furniture, fixture and fitting         602,655          596,790
          Set-top boxes                          842,437          842,494
                                             -----------      -----------
                                               2,706,639        2,699,860
          Accumulated depreciation            (1,243,099)        (902,714)
                                             -----------      -----------
                                             $ 1,463,540      $ 1,797,146
                                             ===========      ===========

         Depreciation expense was $340,450 for the six months ended June 30,
         2008 and $270,208 for the six months ended June 30, 2007.



                                      F-18

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



6.   INTANGIBLE ASSETS

         Intangible assets consist of the following:

                                                 JUNE 30,          DECEMBER 31,
                                                  2008               2007
                                               ------------      ------------
          INDEFINITE LIVES
          Film library                         $ 17,759,316      $ 17,759,080
                                               ------------      ------------
                                                 17,759,316        17,759,080
                                               ------------      ------------
          DEFINITE USEFUL LIVES
          Film library                            5,380,361         5,331,930
          Gaming license                          7,090,000         7,090,000
          Product development expenditures          721,680           719,220
          Software license                           12,649            12,649
                                               ------------      ------------
                                                 13,204,690        13,153,799
          Accumulated amortization               (5,805,857)       (5,219,813)
                                               ------------      ------------
                                                  7,398,833         7,933,986
                                               ------------      ------------
                                               $ 25,158,149      $ 25,693,066
                                               ============      ============

         Amortization expense was $585,042 for the six months ended June 30,
         2008 and $1,625,493 for the six months ended June 30, 2007

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


         FILM LIBRARY WITH INDEFINITE LIVES

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

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

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

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


                                      F-19

<PAGE>


                            AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



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

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

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

         Valuations were performed on January 4, 2007 for the assessments of
         impairment of the Company's 100% ownership of the film library, which
         reflected a higher value from its cost. The methods of valuation used
         by the Company consisted of a discounted cash flow model, as well as
         sales transactions comparison method and market earnings/multiples
         method. Based on careful analysis of information available, the
         estimation for the investment value of the film library currently
         ranges from $400 million to $663 million.

         ASSETS WITH DEFINITE USEFUL LIVES

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

         Included in the gaming license are the rights to a digit games license
         in Cambodia. The license is for a minimum period of 18 years commencing
         from June 1, 2005, with an option to extend for a further 5 years or
         such other period as may be mutually agreed. The 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
         developments costs will be useful for up to five years before
         additional significant development needs to be done.


                                      F-20

<PAGE>


                            AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



7. EQUITY METHOD INVESTMENT

                                                      JUNE 30,      DECEMBER 31,
                                                       2008            2007
                                                    -----------     -----------

          Fair value of investment in Equity        $ 3,693,650     $ 3,693,650
           Method investment
          Goodwill                                    1,272,465       1,272,465
          Share of post-acquisition loss                (36,378)        (23,832)
                                                    -----------     -----------
                                                    $ 4,929,737     $ 4,942,283
                                                    ===========     ===========

      Details of the Company's Equity Method Investment as at June 30, 2008 are
      as follows:

      Name of Business :     121 View Corporation (SEA) Ltd

      Place of Incorporation :  British Virgin Islands

      Principle of Activity  :  Digital signage solutions

      Proportion of           :        JUNE 30, 2008        DECEMBER 31, 2007
      Ownership Interest              ----------------      ----------------
                                           30.1%                 30.1%

      One of the directors of the Company has an interest in the Equity Method
      Investment Company. One of the directors of the Company is also a director
      in the Equity Method Investment.



                                      F-21

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



         Summarised financial information in respect of the Company's Equity
         Method Investment is set out below:


                                                     JUNE 30,       DECEMBER 31,
                                                       2008             2007
                                                    -----------     -----------

         Total assets                               $ 9,337,719     $ 9,353,100
         Total liabilities                              (36,561)        (23,562)
                                                    -----------     -----------
         Net assets                                 $ 9,301,158     $ 9,329,538
                                                    ===========     ===========

         Company's share of Equity Method
         Investment's net assets                    $ 2,799,649     $ 2,808,191
                                                    ===========     ===========

         Revenue                                    $     1,430     $   163,574
                                                    ===========     ===========

         Loss for the period                        $    (9,222)    $   (77,735)
                                                    ===========     ===========

         Company's share of Equity Method
         Investment's loss for the period          $    (3,178)    $   (23,832)
                                                    ===========     ===========



                                      F-22

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007



8.  INVESTMENTS AVAILABLE-FOR-SALE

         Investments available-for-sale consist of the following:

                                            JUNE 30,      DECEMBER 31,
                                              2008           2007
                                           ----------     ----------
          Non Current :
            Quoted equity securities       $  379,948     $4,031,681
            Unquoted equity securities        879,664        879,664
                                           ----------     ----------

                                            1,259,612      4,911,345
          Current :
            Unquoted equity securities      2,402,613      2,402,613
                                           ----------     ----------
                                           $3,662,225     $7,313,958
                                           ==========     ==========

         The investments in quoted equity securities comprised of 9,400,571
         common shares of Auston International Group Ltd (Auston). As of June
         30, 2008, the market value of the Auston shares was S$0.055 (2007:
         S$0.07) per share.

         The unquoted equity securities classified as available-for-sale, with a
         carrying value of $879,664 as of June 30, 2008 and December 31, 2007,
         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-23


<PAGE>


                         AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007

9. COMMITMENTS

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

                                               JUNE 30,      DECEMBER 31,
                                                 2008           2007
                                              ----------     ----------
          CAPITAL COMMITMENTS:
          Contracted but not provided for
                 Film library                 $  181,808     $  118,073
                 Set-top boxes                $2,074,825     $2,074,825
                                              ----------     ----------
                                              $2,256,633     $2,192,898
                                              ==========     ==========


         Capital Leases
         The following summarizes the Company's capital lease obligations at
         June 30, 2008:

                                                            2008         2007
                                                          --------     --------
          Future minimum lease payments                   $ 79,507     $ 81,628

          Less: amounts representing interest              (13,224)     (13,576)
                                                          --------     --------
          Present value of net minimum lease payments       66,283       68,052

          Less: current portion                            (11,364)     (10,746)
                                                          --------     --------
                                                          $ 54,919     $ 57,306
                                                          ========     ========

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



                                      F-24


<PAGE>



                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007

         Operating Leases

         The Company leases facilities and equipment under operating leases
         expiring through 2010. Total rental expense on operating leases for the
         quarters ended June 30, 2008 and 2007 was $124,382 and $171,914,
         respectively. As of June 30, 2008, the future minimum lease payments
         are as follows:

         For the Quarter Ended June 30,               Operating     Capital
         ------------------------------               ---------     -------

          2008                                         $173,069     $ 11,364
          2009                                          224,898       11,364
          2010                                           19,205       11,364
          2011                                               --       11,364
          2012                                               --       11,364
          2013 and thereafter                                --        9,462
                                                       --------     --------
                                                       $417,172     $ 66,282
                                                       ========     ========


10. INCOME TAXES

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

         The Company had available approximately $6,102,600 of unused U.S. net
         operating loss carry-forwards at June 30, 2008, 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 March 31, 2008 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 $4,871,000 of unused Singapore
         tax losses and capital allowance carry-forwards at June 30, 2008, 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.

11. 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.

                                      F-25

<PAGE>



                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007


<TABLE>
<S>     <C>

For the six months                              ENTERTAINMENT     DIGIT GAMING         OTHER          TOTAL
ended June 30, 2008                            --------------    -------------    ------------    --------------

          Revenues from external customers     $     48,169      $ 11,457,693     $         --     $ 11,505,862
          Interest revenue                     $      8,970      $         --     $         --     $      8,970
          Interest  expenses                   $      1,111      $         --     $         --     $      1,111
          Depreciation and amortization        $    776,214      $    149,278     $         --     $    925,492
          Segment profit (loss)                $ (2,082,652)     $    216,254     $         --     $ (1,866,398)
          Segment assets                       $ 46,599,948      $  7,570,622     $     31,469     $ 54,202,039
          Expenditures for segment assets      $     57,765      $         --     $         --     $     57,765
</TABLE>


   Reconciliation:-
     REVENUES
     Total revenues for reportable segments                $ 11,505,862
     Other revenue                                         $         --
                                                           ------------
     Total consolidated revenues                           $ 11,505,862
                                                           ============

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

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

     PROFIT OR LOSS
     Total (loss) for reportable segments                  $ (1,866,398)
     Corporate loss                                        $   (110,588)
     Loss on disposal of investment available for sale     $   (442,051)
     Loss on valuation of held for trading investment      $ (1,385,000)
     Share of loss of equity method investment             $    (12,546)
                                                           ------------
     Loss before income tax                                $ (3,816,583)
                                                           ============

     ASSETS
     Total assets for reportable segments                  $ 54,170,570
     Other assets                                          $     31,469
                                                           ------------
     Total consolidated assets                             $ 54,202,039
                                                           ============


                                      F-26

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007


  EXPENDITURES FOR SEGMENT ASSETS
      Total expenditures for assets for reportable segments     $    57,765
                                                                ===========
<TABLE>
<S>     <C>

For the six months                              ENTERTAINMENT     DIGIT GAMING         OTHER          TOTAL
ended June 30, 2007                            --------------    -------------    ------------    --------------

          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
</TABLE>

   Reconciliation:

            REVENUES
            Total revenues for reportable segments                 $ 25,494,480
            Other revenue                                                    --
                                                                   ------------
                    Total consolidated revenues                    $ 25,494,480
                                                                   ============
            INTEREST REVENUE
            Total interest revenues for reportable segments        $     26,071
            Corporate interest revenue                                       30
                                                                   ------------
                    Total consolidated interest revenue            $     26,101
                                                                   ============

             INTEREST EXPENSES
            Total interest revenues for reportable segments        $        171
            Corporate interest revenue                                       --
                                                                   ------------
                    Total consolidated interest expenses           $        171
                                                                   ============

         PROFIT OR LOSS

            Total profit 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 equity method investment              $    (15,224)
                                                                   ------------
                    Profit 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-27

<PAGE>


                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007




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

<TABLE>
<S>     <C>


   For the six months ended             ASIA PACIFIC    UNITED STATES      OTHER          TOTAL
   June 30, 2008                        ------------    -------------   -----------     -----------

   Revenues from external customers     $11,505,862     $       --      $        --     $11,505,862
   Property and equipment, net          $ 1,210,464     $   157,676     $    95,400     $ 1,463,540



   For the six months ended            ASIA PACIFIC     UNITED STATES      OTHER           TOTAL
   June 30, 2007                       ------------     ------------    -----------     -----------

   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

</TABLE>





                                      F-28



<PAGE>

                          AMARU, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 2008 AND 2007


12. RELATED PARTY TRANSACTIONS

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

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

         During the period, the Group entered into the following transactions
         with the related party:


                     For the six months ended
                   --------------------------
                    JUNE 30,         JUNE 30,
                      2008             2007
                   ---------         -------
    Marketing     $      --          $82,449
                   =========         =======

13. SALE OF IPTV PLATFORM

         In April 2007 the Company through its subsidiary M2B World Holdings
         Limited entered into an agreement to sell its IPTV platform to a
         company in Indonesia (buyer) for $15,000,000. The total amount of the
         consideration was to be received in shares of the buyer and a 50% share
         of a newly incorporated investment holding entity in the British Virgin
         Islands. The Company has received $5,000,000 in cash and
         publicly-traded securities. The balance outstanding receivable of
         $9,500,000 is included as "Receivable from sale of IPTV platform" at
         June 30, 2008 and December 31, 2007, respectively, which comprises of
         two portions: the first portion of $2 million to be settled fully in
         publicly-traded shares of the buyer and the other portion of $7,500,000
         million will be reinvested in the form of joint venture with the buyer
         as stated in the terms of the sale agreement. Management is in the
         process of completing this transaction and has determined that the
         entire amount of $9,500,000 is recoverable and no allowances are
         necessary.

14. PURCHASE OF CBBN HOLDINGS LIMITED

         The Company through its wholly owned subsidiary, Tremax International
         Limited, entered into a sale and purchase agreement dated July 10, 2007
         with Domaine Group Limited. Per the agreement the Company through its
         wholly owned subsidiary, Tremax International Limited would transfer
         5,333,333 shares of the Company valued at $3,733,333 which is included
         as "Prepayment on purchase" at June 30, 2008 and December 31, 2007,
         respectively, in exchange for Domaine Group Limited transferring its
         100% shares in CBBN Holdings Limited, a company incorporated in the
         British Virgin Islands. The transaction has not been consummated and
         the management of the Company is in the process of weighing its options
         under this deal and possibly restructuring it.


15. SUBSEQUENT EVENTS

         As of July 7, 2008 the Company disposed of a further 3,400,000 common
         shares of Auston International Group Ltd at S$0.045 per share for
         2,400,000 shares and of S$0.05 per share for 1,000,000 shares for a
         total of S$158,000 purchase price. The proceeds of the sale were
         deposited into the Company's Singapore Currency bank account.

         As at July 10, 2008 the Company disposed a further 85,000 common shares
         of Auston International Group Ltd at S$0.05 per share for a total
         purchase price of $4,250.

         On July 8, 2008, M2B World Asia Pacific Pte Ltd entered into a
         convertible loan agreement with a company for $2,500,000 over a two
         year period. The loan bears an interest rate of 5% per annum, and the
         Company has the option to convert the loan into shares of M2B World
         Asia Pacific Pte Ltd, of an issue price of $0.942 cents per share at
         the end of the two year period.



                                      F-29


<PAGE>


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

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

General

The Company is in the business of broadband entertainment 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.



                                        1


<PAGE>


 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.

         In fiscal 2007, the business was reorganized under the following
         entities to spearhead the expansion of the Company's business and focus
         on specific growth areas and territories.

         M2B WORLD PTE. LTD.

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

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

         In December 2005, M2B World Pte. Ltd. sold 81% equity interests of its
         wholly-owned subsidiary, M2B Game World Pte. Ltd. to Auston
         International Group Ltd (Auston), a public listed company in Singapore,
         in exchange for 27% equity interest in Auston. On March 13 and 14,
         2007, the Company disposed off 7,000,000 common shares of Auston
         International Group Ltd (Auston) at S$0.08 per share. As of December
         31, 2007, the Company's equity interest in Auston was at 10.40%. As of
         this date of this report, the Company's equity interest in Auston
         shares stands at 2.13%.

         Subsequent to June 30, 2008, the Company disposed 2,400,000 common
         shares of Auston International Group Ltd at S$0.045 per share and a
         further 1,000,000 common shares of Auston International Group Ltd at
         S$0.05 per share.

         M2B WORLD, INC.

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

         This subsidiary oversees the new global Broadband TV (IPTV) service. A
         new server farm was set up in the U.S. in San Jose California in
         December 2005 to expand the broadband streaming infrastructure; in
         order to handle the business in North America and also the global IPTV
         service.


                                        2



<PAGE>


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

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

         M2B WORLD ASIA PACIFIC PTE. LTD.

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

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

         M2B COMMERCE LIMITED

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

         The Company has an agreement with Allsports Limited, a British Virgin
         Islands company to operate, administer, and manage the lottery digit
         games activities in Cambodia, as an extension of the Company's
         entertainment operations.

         The company had entered into an investment agreement on January 12,
         2006, with Khoo Kim Leng, the beneficial owner of Dai Long Co., Ltd,
         which holds a valid casino license and freehold land and intends to
         develop and operate an integrated resort in the Kingdom of Cambodia.
         The resort will feature a hotel, guest house, shopping arcade,
         entertainment and amusement center and some gaming tables. As of
         December 31, 2006, the company had invested $2,402,613 in relation to
         this investment. The resort was completed and is in operation
         subsequent to the balance sheet date. The Company however intends to
         divest its stake in the resort, and has already put up its investment
         for sale in the market, as the investment is not related to the
         Company's core business.

         M2B ENTERTAINMENT, INC.

         M2B Entertainment, Inc. was incorporated on October 27, 2005. This
         subsidiary will oversee the Company's Canadian market. As of June 30,
         2008, this subsidiary is dormant.

         M2B AUSTRALIA PTY LTD

         M2B Australia Pty Ltd was incorporated on June 15, 2005. This
         subsidiary handles and oversees the Company's business in Australia. As
         of June 30, 2008 this subsidiary is dormant.

         M2B WORLD TRAVEL SINGAPORE PTE. LTD.

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

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

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

                                        3
<PAGE>


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

         AMARU HOLDINGS LIMITED AND M2B WORLD HOLDINGS LIMITED

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

         TREMAX INTERNATIONAL LIMITED AND M2B WORLD TRAVEL LIMITED

         Tremax International Limited and M2B World Travel Limited are both
         incorporated in the British Virgin Islands on June 8, 2006 and May 3,
         2005 respectively. Both companies are investment holdings companies.

         On July 10, 2007, 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"),
         which is a broadband service provider incorporated in Taiwan. The
         purchase consideration is satisfied in full by the issuance of
         5,333,333 of common stock of the Company.

         CBN is a company registered in Taiwan, the Republic of China. CBN is an
         internet cum broadband access provider to major residential buildings
         in Taiwan. The Company believes that acquisition of CBN will be
         beneficial to the Company, because CBN has a subscriber base of about
         20,000 homes and should be able to provide the Company with a ready
         subscriber base to roll out its services. In 2006, CBN had a revenue of
         $2.5 millions and fixed assets of $1.8 millions in network and systems
         to enable services to the homes.

         The investment is pending the approval of the regulatory authorities in
         Taiwan, which is a requirement for foreign investments in Taiwan.

         RESULTS OF OPERATIONS

         REVENUE

         Financial Statement

         -    Revenue for the quarter ended June 30, 2008 was $5,877,115
              compared with $20,007,405 for the same period in 2007.

         -    The Company's cash balance was $2,062,908 at June 30, 2008
              compared with $2,322,541 at 31 December, 2007.

         REVENUE

         Revenue for the six months ended June 30, 2008 at $11,505,862 was lower
         than revenue of $25,494,480 for the six months ended June 30, 2007 by
         $13,988,618 (55%). The revenue for the three months ended June 30, 2008
         decreased by $14,130,290 (71%), from $20,007,405 to $5,877,115 for the
         three months ended June 30, 2007 and 2008 respectively.

         Digit gaming revenue for the six months ended June 30, 2008 at
         $11,457,693 was higher than $10,459,791 at June 30, 2007 by $997,902
         (10%). Digit gaming revenue for the three months ended June 30, 2008 at
         $5,863,939 was higher than $4,982,965 at June 30, 2007 by $880,974
         (18%). This was mainly due to increase in lottery sales.

         Entertainment revenue for the six months ended June 30, 2008 at $48,169
         was lower than entertainment revenue of $15,034,689 for the six months
         ended June 30, 2007 by $14,986,520 (99%). Entertainment revenue for the
         three months ended June 30, 2008 at $13,176 was lower than
         entertainment revenue of $15,024,440 for the three months ended June
         30, 2007 by $15,011,264 (99%). The decrease in entertainment was
         significant and is further explained below.

                                        4

<PAGE>

         For the six months and three months ended June 30, 2007, the
         entertainment revenue was attributed to a one-off syndication and
         e-services project which resulted in revenue of $15,000,000. The
         project involved the completion and delivery of an IPTV platform to a
         company in Indonesia. The completion and delivery of the IPTV platform
         comprised of the hardware, software and middleware, and supply and
         programming of content.

         For the six months and three months ended June 30, 2008, the Company
         was involved in the redevelopment of WOWtv, the Company's broadband
         entertainment web TV service. The redevelopment was done to incorporate
         a new social networking service, and a user generated content service.
         These new services, combined with the video streaming services on
         WOWtv, was needed to upgrade the site to attract and sustain higher
         viewership. This in turn would provide the Company with a bigger
         potential for attracting advertising and syndication revenues to WOWtv.
         The new WOWtv is expected to be initially launched in July, 2008, with
         full operation expected by year end.

         The Company's current site was designed with a heavy bias to
         subscription and pay per view services. The current design was not
         optimised for free content supported by advertising revenues. The
         viewership also needed to be expanded in terms of unique visitors, page
         views and hits to attract advertising. The Company focused its efforts
         on redeveloping WOWtv to overcome these setbacks, and to provide it
         with a better potential in the future to attract advertisers. The
         Company felt that it would be a sound business strategy to launch the
         newly designed WOWtv first, and then to focus on obtaining advertising
         revenues in the next six months of the year. The Company was not able
         to secure any significant advertising, content syndication or
         e-services contracts for its broadband entertainment service in the
         first six months and three months ended June 30, 2008.

         Cost of Services

         Cost of services for the six months ended June 30, 2008 was $11,345,549
         which increased by $53,414 (1%) from $11,292,135 for the six months
         ended June 30, 2007. Cost of services for three months ended June 30,
         2008 was $5,757,169 which decreased by $111,465 (2%) from $5,868,634
         for the three months ended June 30, 2007.

         As a proportion of revenue, the cost of services for the six months
         ended June 30, 2008 was 99% (cost of sales at $11,345,549 and revenue
         of $11,505,862) as compared to 44% (cost of sales at $11,292,135 and
         revenue of $25,494,480) for the six months ended June 30, 2007. It was
         98% (cost of sales at $5,757,169 and revenue $5,877,115) as compared to
         29% (cost of sale at $5,868,634 and revenue $20,007,405) for the three
         months ended June 30, 2008 and 2007 respectively.

         The decrease in the cost of services was attributed to the cost cutting
         measures in managing and operating the entertainment segment.

         DISTRIBUTION EXPENSES

         Distribution expenses for the six months ended June 30, 2008 at
         $205,900 were lower by $299,753 (59%) as compared to the amount of
         $505,653 incurred for the six months ended June 30, 2007. Distribution
         expenses for the three months ended June 30, 2007 was $196,006 which
         decreased by $115,036 (59%) from $80,970 for the three months ended
         June 30, 2008.

         The lower distribution expenses were attributed to decreased spending
         for marketing and promotions which decreased by $274,325 (86%), from
         $317,437 for the six months ended June 30, 2007 to $43,112 for the six
         months ended June 30, 2008. Distribution expenses decreased by $101,177
         (90%) from $112,008 for the three months ended June 30, 2007 to $10,831
         for the three months ended June 30, 2008 due to the same reason.

         GENERAL AND ADMINISTRATIVE EXPENSES

         Administration expenses for the six months ended June 30, 2008 at
         $1,941,146 were lower by $1,580,069 (45%) as compared to the amount of
         $3,521,215 incurred for the six months ended June 30, 2007.

         Administration expenses for the three months ended June 30, 2008 at
         $902,644 were lower by $946,275 (51%) as compared to the amount of
         $1,848,919 incurred for the three months ended June 30, 2007.


                                        5

<PAGE>

         The decrease in administrative expenses for the period ended June 30,
         2008 was attributed mainly to the decrease in:

         o        Amortization. License amortization had decreased by $1,040,452
                  (64%), from $1,625,494 for the six months ended June 30, 2007
                  to $585,042 for the six months ended March 31, 2008. It
                  decreased by $534,706 (65%) from $821,613 for the three months
                  ended June 30, 2007 to $286,907 for the three months ended
                  June 30, 2008.The decrease was mainly due to most of the
                  intangible assets being fully depreciated by end of December
                  31, 2007.

         o        Staff costs. Staff costs had decreased by $263,200 (33%), from
                  $788,446 for the six months ended June 30, 2007 to $525,246
                  for the six months ended June 30, 2008. It decreased by
                  $126,158 (33%) from $381,008 for the three months ended June
                  30, 2007 to $254,850 for the three months ended June 30,
                  2008.The decrease was mainly due as a result of cost reduction
                  measures to reduce operating costs

         (LOSS) INCOME FROM OPERATIONS

         The Company incurred a loss from operations of $1,986,773 for the six
         months ended June 30, 2008 as compared to the income from operations of
         $10,175,477 for the six months ended June 30, 2007. For the three
         months ended June 30, 2008, the Company incurred a loss from operations
         of $863,668 as compared to the income from operations of $12,093,846
         for the three months ended June 30, 2007. This was due to the
         significant decrease in the entertainment revenue. This is further
         explained under the revenue segment in the results of operations.

         NET (LOSS) INCOME

         Net loss for the six months ended June 30, 2008, was $2,869,484 which
         decreased by $18,273,106 (119%) from net income of $15,403,622 for the
         six months ended June 30, 2007.

         Net loss for the three months ended June 30, 2008, was $1,467,183 which
         decreased by $16,120,569 (110%) from net income of $14,653,386 for the
         three months ended June 30, 2007.

         The significant decrease in net income for the six months and three
         months ended June 30, 2008 was mainly attributed to the decrease in the
         entertainment business. The decrease was partly attributed to the net
         gain of $4,320,000 as of June 30, 2007 in the fair value of an
         investment (equity securities) held for trading, offset by the net loss
         of $1,385,000 as of June 30, 2008 in the same investment.

         The decrease was also party attributed to the net gain of $2,483,871 as
         of March 31, 2007 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. On January 3, 2007, M2B World Asia
         Pacific Pte. Ltd., issued 7,778,014 shares of common stock through
         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%.
          This net gain was offset by the net loss of $442,051 as of June 30,
         2008 on the disposal of investments available for sale.

         LIQUIDITY AND CAPITAL RESOURCES

         The Company had cash at $2,062,908 at June 30, 2008 as compared to cash
         of $2,322,541 at December 31, 2007.

         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, 2008, 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.


                                        6



<PAGE>



         Cash generated from operations will not be able to cover the Company's
         intended growth and expansion. The Company has plans in 2008 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.


ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The primary objective of our investment activities is to preserve
         principal while concurrently maximizing the income we receive from our
         investments without significantly increasing risk. Some of the
         securities that we may invest in may be subject to market risk. This
         means that a change in prevailing interest rates may cause the
         principal amount of the investment to fluctuate. For example, if we
         hold a security that was issued with a fixed interest rate at the
         then-prevailing rate and the prevailing interest rate later rises, the
         current value of the principal amount of our investment will decline.
         To minimize this risk in the future, we intend to maintain our
         portfolio of cash equivalents and short-term investments in a variety
         of securities, including commercial paper, money market funds,
         high-grade corporate bonds, government and non- government debt
         securities and certificates of deposit. In general, money market funds
         are not subject to market risk because the interest paid on such funds
         fluctuates with the prevailing interest rate. The Company held
         $5,201,225 and $10,237,958 in marketable securities as of June 30, 2008
         and December 31, 2007 respectively.

         The Company does not believe that it faces material market risk with
         respect to its cash and cash equivalents which totaled $2,062,908 and
         $2,322,541 at June 30, 2008 and December 31, 2007, respectively.

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

         ABILITY TO EXPAND CUSTOMER BASE

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

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

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

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

         ABILITY TO ACQUIRE NEW MEDIA CONTENTS

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


                                        7



<PAGE>


         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.


                                        8



<PAGE>


         LAW AND REGULATIONS GOVERNING INTERNET

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

         UNAUTHORIZED USE OF PROPRIETARY RIGHTS

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

         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.


ITEM 4: CONTROLS AND PROCEDURES

           EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

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


                                        9

<PAGE>


           Notwithstanding the issues described below, the current management
           has concluded that the consolidated financial statements for the
           periods covered by and included in the Quarterly Report on Form 10-Q
           for the period ended June 30, 2008 are fairly stated in all material
           respects in accordance with generally accepted accounting principles
           in the United States for each of the periods presented herein.

           MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

           Section 404 of the Sarbanes-Oxley Act of 2002 requires that
           management document and test the Company's internal control over
           financial reporting and include in the Quarterly Report on Form 10-Q
           for the period ended June 30, 2008 a report on management's
           assessment of the effectiveness of our internal control over
           financial reporting.

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

           In connection with the preparation of the Quarterly Report on Form
           10-Q for the period ended June 30, 2008 to evaluate the effectiveness
           of the design and operation of our disclosure controls and procedures
           as of June 30, 2008, the Company's management did not complete the
           assessment of the effectiveness of the Company's internal control
           over financial reporting, implementing the criteria set forth by the
           Committee of Sponsoring Organizations (COSO) of the Treadway
           Commission in "Internal Control-Integrated Framework". Management has
           concluded as a result that its disclosure controls and procedures may
           not be effective at the reasonable assurance level as of June 30,
           2008. Specifically, its control environment possibly may not
           sufficiently promote effective internal control over financial
           reporting through the management structure to prevent a material
           misstatement.

           The Company needs to complete implementing the internal controls
           based on the criteria established in Internal Control -- Integrated
           Framework issued by the COSO. The management is fully committed to
           implement the internal controls based on these criteria in 2008 and
           the management believes that it is taking the steps that will
           properly address any issue.

           Subsequent to June 30, 2008, the Company is in the process of hiring
           a Chief Financial Officer and is utilizing several full time
           accounting contractors serving in senior and staff level accounting
           positions. The Company is actively recruiting high-level competent
           accounting personnel.

           While we are taking immediate steps and dedicating substantial
           resources to implement the internal controls based on the criteria
           established in Internal Control - Integrated Framework issued by the
           COSO, they will not be considered fully implemented until the new and
           improved internal controls operate for a period of time, are tested
           and are found to be operating effectively.

           The Company's registered public accountant has not conducted an audit
           of the Company's controls and procedures regarding internal control
           over financial reporting. Consequently, the registered public
           accounting firm expresses no opinion with regards to the
           effectiveness or implementation of the Company's controls and
           procedures with regards to internal control over financial reporting.

           CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

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

                                       10



<PAGE>


PART II :  OTHER INFORMATION

ITEM 1:  LEGAL PROCEEDINGS

         On April 23, 2007, a company which provided public relations services
         filed a lawsuit against M2B World, Inc. for breach of contract for an
         amount of $72,649, which has been further amended to include Amaru,
         Inc. as a co-defendant. The lawsuit was settled by the parties in
         April, 2008.

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 IS ALSO HOLDING A CONSIDERABLE AMOUNT OF
         QUOTED EQUITY SECURITIES THAT IS AVAILABLE-FOR-SALE OR HELD FOR
         TRADING.

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

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

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

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

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

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

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

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

                                       11



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

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

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


                                       12
<PAGE>


         THE COMPANY DID NOT COMPLETE THE ASSESSMENT OF THE EFFECTIVENESS OF THE
         COMPANY'S INTERNAL CONTROL OVER FINANCIAL REPORTING, SET FORTH BY THE
         COMMITTEE OF SPONSORING ORGANIZATIONS (COSO) OF THE TREADWAY COMMISSION
         IN "INTERNAL CONTROL-INTEGRATED FRAMEWORK".

         Section 404 of the Sarbanes-Oxley Act of 2002 requires that management
         document and test the Company's internal control over financial
         reporting and include in the Annual Report on Form 10-K and this
         Quarterly Report on Form 10-Q report on management's assessment of the
         effectiveness of our internal control over financial reporting.

         In connection with the preparation of the Annual Report on Form 10K and
         this Quarterly Report on Form 10-Q, to evaluate the effectiveness of
         the design and operation of our disclosure controls and procedures as
         of June 30, 2008, the Company's management did not complete the
         assessment of the effectiveness of the Company's internal control over
         financial reporting, implementing the criteria set forth by the
         Committee of Sponsoring Organizations (COSO) of the Treadway Commission
         in "Internal Control-Integrated Framework".

         While the Company is taking immediate steps and dedicating substantial
         resources to implement the internal controls based on the criteria
         established in Internal Control - Integrated Framework issued by the
         COSO, they will not be considered fully implemented until the new and
         improved internal controls operate for a period of time, are tested and
         are found to be operating effectively.

         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.


                                       13


<PAGE>


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

         None


ITEM 3: DEFAULTS UPON SENIOR SECURITIES

         None


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

         None

ITEM 5: OTHER INFORMATION

         Based upon the Company's review of its aggregate worldwide market value
of the voting and non-voting common equity held by non-affiliates of the Company
which is less than $50 million as of the last business day of the second fiscal
quarter ended June 30, 2008, the Company has made a determination that it is
exiting an accelerated filer status and becomes a smaller reporting company,
filer as defined in the Securities Act of 1933 and the Securities Exchange Act
of 1934. The Company chooses to reflect this determination beginning with its
first quarter report on Form 10-Q following this determination pursuant to Rule
12b-2(4)(i) of the Securities Exchange Act of 1934.


ITEM 6: EXHIBITS:

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

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

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

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




                                       14



<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 11, 2008                          /s/ Colin Binny
----------------                         ---------------------------------------
Date                                     President, Chief Executive Officer and
                                         Chief Financial Officer